REG - Norcros PLC - Preliminary Results <Origin Href="QuoteRef">MSTL.L</Origin> <Origin Href="QuoteRef">NXR.L</Origin> - Part 1

MS InternationalAnnouncement

16/07/2015 11:29

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 as reported
% change at constant currency
Revenue
 222.1m
218.7m
+1.5%
+5.0%
Underlying* operating profit
17.0m
16.1m
+5.8%
Underlying* profit before tax
15.8m
14.6m
+8.2%
Profit before tax
11.0m
5.8m
+89.6%
Underlying operating cash flow**
22.9m
20.3m
+12.8%
Net debt
14.2m
26.9m
 -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 22.9m
 Significant improvement in South African performance
 Good progress on legacy issues
 Net debt reduced to 14.2m from26.9m
 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 222.1m. Underlying operating profit at 17.0m, 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 22.9m (2014: 20.3m). 
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 3.8m 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 3.4m, subsequently disposing of this freehold along with our remaining surplus freehold properties for 6.5m. 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 14.2m (2014: 26.9m), 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 70m banking facility with Lloyds Bank plc, Barclays Bank plc and HSBC Bank plc. The agreement also includes a 30m 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, a9.8% 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 420m 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 222.1m (2014: 218.7m) 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 149.1m (2014: 148.0m) 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 13.8m (2014: 14.2m) 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 3.2m (2014: 1.9m) 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 17.0m (2014: 16.1m) 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 14.2m (2014: 26.9 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 itselfthree strategic targets. These are todouble Group revenue to 420m by 2018, to maintain revenue derived outside of the UKat 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 3.8m. We also completed the lease exit and freehold acquisition of the property in Sheffield for 3.4m, subsequently selling it and other surplus property to Clowes Developments (UK) Ltd on 2 March 2015, which resulted in proceeds after costs of 6.1m. 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 andthe 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, themedium-term outlook in South Africa remainspositive 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 onmarket 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
m
2014
m
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
m
2014
m
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
m
2014
m
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% to149.1m (2014: 148.0m). 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 13.8m (2014: 14.2m) 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 52.1m (2014: 51.9m). 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 30.5m for the period (2014: 29.1m), 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 59.7m (2014:61.7m). 
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 6.8m (2014: 5.3m). 
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 73.0m (2014: 70.7m), which was 3.2% higher than prior year. Underlying operating profit for the year improved substantially to 3.2m (2014: 1.9m) despite the weaker Rand adversely impacting Sterling reported profits by approximately 0.3m. 
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 10.3m (2014: 10.6m). 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 17.2m (2014: 17.1m). 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 45.5m (2014: 43.0m). 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 0.3m, 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
m
m
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 222.1m (2014: 218.7m) 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 17.0m (2014: 16.1m). Our UK businesses delivered underlying operating profit of 13.8m (2014: 14.2m), and our South African businesses generated an underlying operating profit of 3.2m (2014: 1.9m). On a constant currency basis the improvement in underlying operating profit in South African businesses was 1.6m. 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 1.7m (2014: 1.4m) 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 2.2m (2014: 0.7m) have been recognised in the year and have increased principally due to a 0.8m higher deferred remuneration charge related to Vado and 0.8m (2014: nil) 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 2.5m (2014: 1.2m) 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
m
m
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 0.4m. In the previous year a surplus facility in South Africa was sold at a profit of 0.5m.
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 2.5m. This property, together with other surplus properties in Tunstall and Boston, were sold to Clowes Developments (UK) Ltd for cash consideration of 6.5m in March 2015 which led to a loss on disposal of 1.5m.
Legal costs of 0.3m (2014: 0.2m) 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 1.7m.
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 10.6m (2014: 12.8m).
Net finance income/(costs) and exceptional finance costs
Net finance income/(costs) decreased by 7.8m to income of 0.8m (2014:7.0m cost), although 7.0m of this increase related to the movement on fair value of foreign exchange contracts. Bank interest payable of 1.2m (2014: 1.5m) 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 0.4m being recognised.
The Group has recognised a 1.1m interest cost in respect of the pension scheme liability (2014: 1.3m) which decreased by0.2m principally due to the lower opening liability.
Profit before tax
Underlying profit before tax was 15.8m (2014: 14.6m), reflecting the increased underlying operating profit of 0.9m noted above and the lower bank interest payable of 0.3m. Underlying profit before tax is reconciled asshown below:
2015
2014
m
m
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 11.0m (2014: 5.8m).
Taxation
The tax charge for the year was 2.9m (2014:credit of 4.3m). In the previous year the remaining unrecognised deferred tax assets in relation to both the UK and South African businesses of 4.4m 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 1.6m relating to this sale was recognised in the year to 31 March 2014, which, together with the results of the year for NIPL of 0.2m, was disclosed within profit/(loss) for the year from discontinued operations. Following the completion of the transaction, the actual loss on disposal was 1.5m meaning that a small profit of 0.1m 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 AnnualGeneral 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
m
m
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 3.7m, which was chiefly due to the sale of the surplus investment property portfolio. Additions in the year were 6.9m (2014: 4.3m).
Deferred tax increased principally as a result of the full recognition of the increase in the pension scheme liability.
Pension schemes
The Group contributed 2.1m (2014: 2.1m) into its UK defined benefit pension scheme during the year. This included deficit recovery contributions of 2.1m (2014: 2.0m) as part of the 2012 deficit recovery plan.
The gross defined benefit pension scheme valuation on the UK scheme showed a deficit of 44.3m compared to a deficit of 21.8m 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 1.7m which has been reflected in the Consolidated Income Statement as an exceptional operating item as follows:
m
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 2.6m (2014: 2.2m). 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 12.7m in the year to 14.2m (2014: 26.9m). A summary of the movement in net debt is shown below.
2015
2014
m
m
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 2.6m higher than in the previous year at 22.9m, 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 1.5m (2014: 2.6m), principally reflecting investment in inventory to improve the in-stock position of products in Tile Africa stores.
Net cash generated from operating activities was 4.1m higher than the previous year at 14.4m, largely due to improved underlying operating cash flow, lower tax and interest payments and lower outflows in respect of exceptional items.
The 0.9m 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 6.1m. A small parcel of land in Braintree was also sold in the first half of the year for 0.4m.
Acquisitions and disposals principally comprises a 3.8m inflow resulting from the sale of the Australian tiles business in May, net of 0.3m deferred consideration paid to the former shareholders of Vado and the 0.2m cost of acquiring the Port Elizabeth franchise store in South Africa.
Capital expenditure at 7.0m (2014: 4.2m) 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 70m revolving credit facility plus a 30m 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 0.2m per annum. As a consequence, non-cash financing costs of 0.4m relating to the old facility were expensed to the income statement as exceptional finance costs. A cash outflow of 0.7m 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 oftheirknowledge:
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 theconsolidation 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
m
m
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 (m)
5
15.8
14.6
Underlying** earnings (m)
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
m
m
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
m
m
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
m
m
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 3.9m (2014: decrease of 0.3m).
Consolidated statement of changes in equity
Year ended 31 March 2015
Ordinary
Retained
share
Share
Translation
earnings/
capital
premium
reserve
(losses)
Total
m
m
m
m
m
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
m
m
m
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 34.2m (2014: 35.9m) 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
m
m
m
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
m
m
Deferred remuneration1
1.1
0.3
Intangible asset amortisation2
0.3
0.4
Staff costs and advisory fees3
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
m
m
Profit on disposal of residual property1
(0.4)
(0.5)
Sheffield lease surrender2
2.5
-
Loss on disposal of property portfolio3
1.5
-
Legal costs4
0.3
0.2
Pension scheme settlement gain5
(1.7)
-
Restructuring costs6
0.3
1.5
2.5
1.2
1 A profit of 0.4m was generated in the year following the sale of a small parcel of land in Braintree, UK, which had a net book value of nil. During the previous year the Group disposed of a residual manufacturing facility in South Africa, generating a profit of 0.5m.
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 3.4m, of which 2.5m was the cost of surrendering the lease and has been recognised as an exceptional operating item. The remaining 0.9m 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 6.1m, being consideration of 6.5m net of 0.4m costs. This transaction included the property in Sheffield, amongst others, and led to a loss on disposal of 1.5m.
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 1.7m in the year, net of costs of 0.7m.
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
m
m
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 costs1
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
m
m
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
m
m
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
m
m
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
m
m
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
m
m
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
m
m
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 4.4m. 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
m
m
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
m
m
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
m
m
m
m
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 
previously
reported 
m 
IAS 19R
administrative
expenses
m 
Deferred
remuneration
m 
Amortisation 
of intangibles
m 
2014 as
restated
m
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.

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