REG - Norcros PLC - Final Results
09/06/2022 07:00
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RNS Number : 2348O Norcros PLC 09 June 2022
9 June 2022
Norcros plc
Results for the year ended 31 March 2022
Record underlying operating profit and strong financial position
Norcros, a market leading supplier of high quality and innovative bathroom and
kitchen products, today announces its results for the year ended 31 March
2022.
Financial Summary
2022 2021 % change 2022 v 2021 2020 % change 2022 v 2020
Revenue £396.3m £324.2m +22.2% £342.0m +15.9%
Revenue constant currency LFL +20.6% +20.9%
Underlying operating profit(1) £41.8m £33.8m +23.7% £32.3m +29.4%
Underlying profit before taxation(1) £39.3m £30.6m +28.4% £28.8m +36.5%
Diluted Underlying EPS(1) 38.2p 31.1p +22.8% 28.2p +35.5%
Underlying operating cash flow(1) £28.6m £65.8m -56.5% £38.4m -25.5%
Operating profit £36.2m £24.9m +45.4% £17.8m +103.4%
Underlying net cash/(debt)(1) £8.6m £10.5m (£36.4m)
Dividend per share 10.0p 8.2p +21.9% 3.1p +222.6%
(1) Definitions and reconciliations of alternative performance measures are
provided in note 5
Highlights
· Robust trading and decisive action taken to counter unprecedented cost
inflation and supply chain challenges
· Strong execution of strategy
· Full year revenue of £396.3m (2021: £324.2m), 20.6% higher than
prior year on a constant currency basis and 20.9% higher than the pre-pandemic
2020 comparator on a constant currency like for like basis (after adjusting
the 2020 comparator period from a 53 to a 52 week period pro-rating)
· Record underlying operating profit of £41.8m, 23.7% higher than
prior year (2021: £33.8m)
· Underlying net cash of £8.6m (2021: net cash of £10.5m)
· Underlying ROCE above strategic target rate at 23.9% (2021: 18.2%)
· Diluted underlying EPS of 38.2p, 22.8% higher than prior year (2021:
31.1p)
· Progressive dividend at 10.0p for the year (2021: 8.2p)
· The acquisition of Grant Westfield completed after the year end, a
compelling strategic fit with the Group
Current trading
· Group revenue in the two months to the end of May 2022 was marginally
ahead of the strong prior year comparator by approximately 1% and
significantly ahead of the pre-pandemic comparator of the two months ended May
2019 by approximately 25%. Whilst market conditions are likely to remain
uncertain, the Board believes that the Group's proven business model and
leading customer service proposition will continue to drive outperformance
leading to further progress and market share gains, in line with its
expectations, for the year to 31 March 2023.
Gary Kennedy, Chair, commented:
"I am pleased to report a record performance for the Group. Norcros has
continued its recovery following the period of exceptional global disruption
and uncertainty caused by the COVID-19 pandemic. Furthermore, the resilience
of the Group's business model and strategy has proven once again to be highly
effective through a period of unprecedented cost inflation and supply chain
challenges."
There will be a presentation today at 9.30 am for analysts at the offices of
Hudson Sandler, 25 Charterhouse Square, London, EC1M 6AE. The supporting
slides will be available on the Norcros website at http://www.norcros.com
(http://www.norcros.com) later in the day.
Enquiries
Norcros plc Tel: 01625 547700
Nick Kelsall, Chief Executive Officer
James Eyre, Chief Financial Officer
Hudson Sandler Tel: 0207 796 4133
Nick Lyon
Sophie Miles
Notes to Editors
Norcros is a market leading supplier of high quality and innovative bathroom
and kitchen products with operations primarily in the UK and South Africa.
· Based in the UK, Norcros operates under eight brands:
· Triton - Market leader in the manufacture and marketing of
showers in the UK
· Merlyn - The UK and Ireland's No.1 supplier of shower enclosures
and trays to the residential, commercial and hospitality sectors
· Vado - A leading manufacturer and supplier of taps, mixer
showers, bathroom accessories and valves
· Croydex - A market leading, innovative designer, manufacturer and
distributor of high quality bathroom furnishings and accessories
· Abode - A leading niche designer and distributor of high
quality kitchen taps, bathroom taps, and kitchen sinks
· Johnson Tiles - The leading manufacturer and supplier of
ceramic tiles in the UK
· Norcros Adhesives - Manufacturer of tile and stone adhesives,
grouts and related products
· Multipanel - Grant Westfield is a leading manufacturer of
high-end waterproof bathroom wall panels
· Based in South Africa, Norcros operates under four brands:
· Tile Africa - Chain of retail stores focused on ceramic and
porcelain tiles, and associated products such as sanitaryware, showers and
adhesives
· Johnson Tiles South Africa - Manufacturer of ceramic and
porcelain tiles
· TAL - The leading manufacturer of ceramic and building
adhesives
· House of Plumbing - Market leading supplier of specialist
plumbing materials
· Norcros is headquartered in Wilmslow, Cheshire and employs around
2,400 people. The Company is listed on the London Stock Exchange. For further
information please visit the Company website: http://www.norcros.com
(http://www.norcros.com)
Chair's Statement
Overview
In my first year as Chair, I am pleased to report a record performance for the
Group. Norcros has continued its recovery following the period of exceptional
global disruption and uncertainty caused by the COVID-19 pandemic. The
resilience of the Group's business model and strategy has proven once again to
be highly effective through a period of unprecedented cost inflation, supply
chain challenges and more recently the Ukraine crisis.
Group revenue for the year was £396.3m (2021: £324.2m), 22.2% higher than
the prior year on a reported basis and 20.6% higher on a constant currency
basis. Against the pre-pandemic 2020 comparator, this represents a 15.9%
increase on a reported basis, 18.6% on a constant currency basis and 20.9% on
a constant currency like for like basis after adjusting the 2020 comparator
period from a 53 to a 52 week period pro-rating.
Underlying operating profit was at a record level of £41.8m (2021: £33.8m),
23.7% ahead of the prior year reflecting the strong progress and market share
gains in both the UK and South Africa.
The Group finished the year with net cash of £8.6m (2021: net cash of
£10.5m), reflecting investment into inventory in the period to optimise our
service and stock availability in the light of the exceptional supply chain
challenges.
Acquisition of Grant Westfield
On 31 May 2022, we completed the acquisition of 100% of the share capital of
Granfit Holdings Limited and its subsidiaries including Grant Westfield
Limited, trading as Multipanel. Grant Westfield is a leading manufacturer of
high-end waterproof bathroom wall panels. The Company has a 140 year track
record and operates under the leading UK bathroom wall panel brand Multipanel.
Headquartered in Edinburgh, Scotland, customers are served from a nationwide
UK distribution network of 8 locations, and a growing presence in Europe from
a distribution hub in Germany. Customers include national and regional
merchants, major buying groups, specification and online customers.
Strategy
Notwithstanding the challenges of COVID-19, we have made strong strategic
progress and our focused growth strategy continues to be valid and relevant.
Our targets to grow Group revenue to £600m by 2025 whilst sustaining a
pre-tax return on underlying capital employed of more than 15% over the
economic cycle continue to govern how we evaluate opportunities and deploy
capital. The Group's performance in the year demonstrates the resilience and
effectiveness of our business model and strategy. Whilst there is still a
significant degree of uncertainty around the post-COVID-19 economic recovery,
supply chain challenges and the Ukraine crisis, we are convinced of the
validity and effectiveness of the strategy and remain committed to these
targets.
Dividend
The Group responded swiftly to the impact of the COVID-19 pandemic and the
need to preserve cash by not paying a final dividend in relation to the year
ended 31 March 2020 nor an interim dividend in relation to the year ended 31
March 2021. Based on the improved trading performance in the second half of
the prior year, the further strengthening of the balance sheet and the
outlook, the Board reinstated the progressive dividend policy with a final
(and total) dividend for 2021 of 8.2p per share. For the year ended 31 March
2022, the Board is recommending a final dividend of 6.9p (2021: 8.2p) per
share. When combined with the interim dividend of 3.1p (2021: nil) per share,
which was paid on 11 January 2022, this will make a total dividend for the
year of 10.0p (2021: 8.2p) per share, a 21.9% increase on the previous year in
line with the growth in earnings albeit maintaining a prudent level of cover.
Pension scheme
The net position relating to our UK defined benefit pension scheme (as
calculated under IAS 19R) has improved to a surplus position of £19.6m at 31
March 2022 from a deficit of £18.3m at 31 March 2021, primarily as a result
of an increase in the discount rate driven by market factors.
The Group has reached agreement with the Trustee on the 2021 triennial
actuarial valuation for the UK defined benefit scheme and on a new deficit
recovery plan. Deficit repair contributions have been agreed at £3.8m per
annum from 1 April 2022 to March 2027 (increasing with CPI, capped at 5%, each
year). Both the Group and the Trustee regard this as an appropriate outcome.
We remain confident that our pension obligations continue to be appropriately
funded and well managed. The Group recognises that the pension scheme is a key
stakeholder and the Group and the Trustee continue to work constructively
together.
Environmental, social and governance (ESG)
The Board remains committed to embedding sustainability within our business
strategy. We recognise that our stakeholders, including employees, investors
and our customers have rising expectations about our environmental and social
impacts and in the way that we operate our business. We are proud of our
history of environmental and social leadership, our achievements in setting
industry leading standards in our products and the support we provide our
communities. This year, we have made enhancements to our emissions and energy
data collection process and are pleased to include in our Annual Report and
Accounts our first report aligned to the recommendations of the Task Force on
Climate-Related Financial Disclosures ("TCFD"), which outlines our approach to
managing climate-related risks and opportunities across the Group. We also
report on the enhanced structure of our ESG management internally which has
helped us develop our framework and improve the management of our impact.
Board changes and senior management appointments
As previously announced, I was appointed as a Non-executive Director and
Non-executive Board Chair on 8 December 2021. I am delighted to join the Board
and be part of the future growth of the Group. I would like to thank David
McKeith who was acting chair for the Group from April 2021 until my
appointment.
As previously reported, James Eyre was appointed to the Board as Chief
Financial Officer with effect from 1 August 2021 following Shaun Smith's
retirement at the end of December 2021. James was our Corporate Development
and Strategy Director and has been a member of the Group's senior team since
2014, responsible for leading our acquisitions. He is a Chartered Accountant
and held senior finance roles at AstraZeneca, Bank of Ireland and Rothschild
& Co prior to joining Norcros.
The Board composition can be found in our Annual Report and Accounts.
As previously announced, Thomas Willcocks was appointed to the Group senior
executive team as Group Business Director - UK, with effect from 1 August
2021. Thomas joined Norcros South Africa in 2006 and was promoted to Managing
Director of Norcros South Africa in 2009. He has overseen the sustained and
profitable growth of our South African business. Kevin Swan succeeded Thomas
as Managing Director of Norcros South Africa, also from 1 August 2021, having
joined Norcros in March 2021. He was previously Chief Executive of Bidvest
Packaging.
The Group executive committee comprises our CEO (Nick Kelsall), CFO (James
Eyre), Group Counsel/Company Secretary (Richard Collins) and Group Business
Director - UK (Thomas Willcocks).
Governance
As Chair, one of my primary responsibilities is to ensure that the Group
continues to operate to the highest standards in all aspects of governance and
risk management. Our aim at Norcros has always been to operate in line with
our values and the "Norcros DNA" which sets us apart from our competitors,
while ensuring that proper operating procedures and internal controls are
maintained at all times. Transparency is central to this objective and you
will find more detail about our approach and progress over the last year in
the Corporate Governance section in our Annual Report and Accounts.
People
The Board continues to regard our employees as our most valuable asset and in
recognition of this the Group aims to create a safe and positive working
environment within an open, transparent and entrepreneurial culture and
de-centralised operating model. On behalf of the Board, I would like to thank
the Group's employees who have helped to deliver on the Group's strategic
objectives and in particular for their dedication and contribution over the
last twelve months. I would also like to warmly welcome the management team
and employees of the Grant Westfield business to the Group.
Current trading
Group revenue in the two months to the end of May 2022 was marginally ahead of
the strong prior year comparator by approximately 1% and significantly ahead
of the pre-pandemic comparator of the two months ended May 2019 by
approximately 25%.
Summary
The Group has delivered a robust performance and a record result despite
challenging market conditions. This demonstrates the effectiveness and
resilience of our Group with its highly experienced management teams, leading
brands, proven business model, leading customer service proposition and strong
financial position. In addition, through the acquisition of Grant Westfield,
the Group has taken a further important step forward in its growth strategy.
Market conditions are likely to remain uncertain and challenging, albeit the
Board is confident that the Group's resilient business model and strong
execution of strategy will continue to deliver outperformance leading to
further progress and market share gains in line with its expectations in the
year ahead.
Chief Executive Officer's Statement
Overview
Norcros has ended the year reporting record levels of revenue and underlying
operating profit and a net cash position.
We have continued to build on last year's strong recovery from the COVID-19
pandemic against a backdrop of unprecedented cost inflation and exceptional
supply chain challenges. It is particularly pleasing to see how well our
businesses in the UK and South Africa responded and adapted to these
challenges and continued to make the strong progress in performance. It is a
testament to our management teams, proven business model, supply chain
infrastructure and our leading customer service proposition.
Group revenue at £396.3m (2021: £324.2m) increased by 22.2% on a reported
basis and by 20.6% on a constant currency basis. Revenue was also 20.9% higher
than the pre-pandemic comparator of 2020 on a constant currency like for like
basis (after adjusting the 2020 comparator period from a 53 to a 52 week
period pro-rating). The strong trading performance in the first half of the
year continued into the second half with further revenue growth in South
Africa and a robust performance in the UK.
Group underlying operating profit for the year increased by 23.7% to a record
of £41.8m (2021: £33.8m) reflecting the increased revenue in the year and an
operating margin slightly ahead of last year at 10.5% (2021: 10.4%).
Management acted decisively to counter unprecedented cost inflation and supply
chain challenges to protect margins through implementing selling price
increases and ensuring superior levels of stock availability and service.
Revenue in the UK was £256.7m for the year (2021: £220.2m), 16.6% higher
than the prior year on a reported basis and 16.1% higher than 2020 on a like
for like basis. Buoyant demand in the RMI sector, market share gains
(supported by excellent stock availability) and increased selling prices to
recover higher input costs, were the key drivers. All businesses apart from
Johnson Tiles (which was relatively more impacted by the slower recovery in
the commercial sector) delivered revenue growth on the pre-pandemic levels in
2020 and all divisions outperformed the prior year.
UK underlying operating profit for the year was a record at £30.9m (2021:
£26.9m) with an underlying operating margin of 12.0%, (2021: 12.2%).
Underlying operating profit growth was driven by a strong performance across
the UK businesses.
Operating cashflow was lower than prior year as a result of investment into
working capital, primarily inventory.
Revenue in South Africa increased by 28.8% on prior year on a constant
currency basis, and 34.2% higher on a Sterling reported basis, to £139.6m
(2021: £104.0m). Revenue was also 30.7% higher than 2020 on a constant
currency like for like basis. All divisions delivered revenue growth on both
prior year and 2020.
Tile Africa, Johnson Tiles and TAL continued to benefit from higher demand and
market share gains in the retail renovation market, while House of Plumbing's
growth from new branch openings was partially offset by subdued activity in
the large-scale commercial building segment.
South African underlying operating profit for the year was at a record level
of £10.9m (2021: £6.9m), largely reflecting strong retail demand and a
£0.2m foreign exchange translation gain from a stronger Rand. Underlying
operating margin was 7.8% (2021: 6.6%).
As in the UK, operating cashflow was lower than prior year as a result of
investment into working capital, primarily inventory.
Acquisition of Grant Westfield
On 31 May 2022 we completed the acquisition of 100% of the share capital of
Granfit Holdings Limited and its subsidiaries including Grant Westfield
Limited, trading as Multipanel. The acquisition was funded through equity and
utilisation of the Group's banking facilities. Grant Westfield is a quality
business with a strong track record of profitability and cash generation run
by an experienced and capable management team. We welcome all the employees to
the Norcros Group and expect the business to make a strong contribution to the
Group through its complementary range of waterproof bathroom wall panels.
Strong financial position
The Group has a strong balance sheet with net cash of £8.6m (2021: net cash
of £10.5m). This position reflects a planned investment into working capital
in the year of £23.6m, particularly inventory, with a resultant underlying
operating cash flow of £28.6m (2021: £65.8m) in the year.
The Group completed a refinancing of its banking facilities in the second half
of the year. The new facility is a £130m multicurrency revolving credit
facility for an initial three year and seven month term, with two further
years as extension options. There is also an uncommitted accordion facility of
£70m. The Group therefore remains well-positioned to progress its growth
strategy.
Following the acquisition of Grant Westfield in May 2022, proforma leverage is
approximately 1.0x EBITDA.
Strategy remains valid
In April 2018 we launched a refreshed strategy for growth and a 2023 vision
for the Group, including an updated set of strategic targets which were: to
increase Group revenue to £600m by 2023; to maintain revenue derived outside
of the UK at approximately 50% of Group revenue; and to sustain a pre-tax
return on underlying capital employed of more than 15% over the economic
cycle. The previous timescale of 2023 was extended to 2025 in the prior year
reflecting the COVID-19 disruption. Notwithstanding the extended timeframe,
the strategy remains valid and we have performed strongly against these
targets as detailed below:
· Group revenue increased by 22.2% to £396.3m (2021: £324.2m;
original 2023 target: £600m).
· On a Sterling reported basis, Group revenue derived outside of
the UK was 43.9% (2021: 41.6%), and in constant currency terms, from when the
targets were set, 47.0% (2021: 45.6%).
· Group underlying return on capital employed was 23.9% on a
pre-IFRS 16 basis (2021: 18.2%) and significantly exceeded our strategic
target of 15%.
The Group's very strong recovery from the COVID-19 pandemic and the decisive
response to the inflationary and supply chain challenges continue to
demonstrate the resilience of our business model and the effectiveness of our
strategy.
The UK bathroom and kitchen product market remains highly fragmented with
significant consolidation opportunities to either broaden our product
portfolio or further consolidate our current offerings. The significant
strength of the balance sheet means the business is well placed to take
advantage of further acquisitions or organic growth opportunities as they
arise.
Sustained investment in new product development will continue to drive organic
growth alongside our market leading brands, customer service and best in class
quality. Our product vitality rate (the percentage of revenue in the period
derived from new products launched in the last three years) remained high at
29% (2021: 28%) but marginally short of our demanding target of 30% mainly due
to the COVID-19 related disruption to supply chains and the temporary closure
of retail showrooms in recent years postponing projects. Our vitality rates
are nonetheless market leading and are expected to increase again as our new
product launches return to pre-COVID-19 levels.
Summary and outlook
The Group has outperformed expectations, recovering very strongly from the
pandemic and then successfully navigating a period of unprecedented cost
inflation and supply chain challenges. Our performance on all fronts is a
testament to our business model and our employees, particularly against the
backdrop of challenging markets as demand continues to adjust to the impact of
the pandemic. It is particularly pleasing to see how well our businesses both
in the UK and South Africa have continued to make strong progress, gain market
share and benefit from their leading brands, supply chain infrastructure and
stock availability.
Whilst the recovery has been strong, the normalisation of consumer spending
patterns in addition to pressure on household disposable incomes will provide
some uncertainty in our markets. In addition, the secondary impacts of the
COVID-19 pandemic and the Ukraine crisis remains difficult to predict.
Notwithstanding these uncertainties, we are confident that our supply chain
infrastructure combined with our local inventory holdings will ensure our
leading competitive position is maintained.
In summary, we have ended the year strongly, outperforming our expectations
and our markets and delivered record levels of revenue and profit and growth
on prior year and the pre-pandemic levels.
Whilst market conditions are likely to remain uncertain, the Board believes
that the Group's proven business model and leading customer service
proposition will continue to drive outperformance leading to further progress
and market share gains, in line with its expectations, for the year to 31
March 2023.
Business performance
2022 2021
£m £m
Revenue 396.3 324.2
Operating profit 36.2 24.9
IAS 19R administrative expenses 1.7 1.4
Acquisition related costs 4.8 3.7
Exceptional operating items (0.9) 3.8
Underlying operating profit 41.8 33.8
2022 2021
£m £m
Revenue - UK 256.7 220.2
Revenue - South Africa 139.6 104.0
Revenue - Group 396.3 324.2
Underlying operating profit - UK 30.9 26.9
Underlying operating profit - South Africa 10.9 6.9
Underlying operating profit - Group 41.8 33.8
Underlying operating profit margin - UK 12.0% 12.2%
Underlying operating profit margin - South Africa 7.8% 6.6%
Underlying operating profit margin - Group 10.5% 10.4%
2022 2021
£m £m
Underlying operating profit 41.8 33.8
Depreciation of right of use assets 4.1 4.0
Lease costs (5.7) (5.3)
Depreciation and underlying amortisation (owned assets) 5.2 5.4
Underlying EBITDA 45.4 37.9
Net working capital movement (23.6) 21.8
Share-based payments 1.1 1.0
Operating profit impact of IFRS 16 1.6 1.3
Depreciation of right of use assets 4.1 4.0
Cash settlement of share options - (0.2)
Underlying operating cash flow 28.6 65.8
2022 2021
Basic underlying earnings per share 38.9p 31.2p
Diluted underlying earnings per share 38.2p 31.1p
Business review - UK
In the UK, full year revenue was 16.6% higher than the prior year on a
reported basis at £256.7m (2021: £220.2m). We have continued to build on
last year's strong recovery from the COVID-19 pandemic, the impact of which
appears to be reducing. Demand was driven by an increase in RMI activity and a
robust private new housebuilding sector, where we enjoy market leading
positions. Exports also performed well in the year. The commercial and local
authority sectors have taken longer to recover but are showing early signs of
improved demand in the year ahead.
Our businesses further capitalised on these market conditions by a planned
reinvestment in inventory levels to help mitigate the significant supply chain
challenges in the period, which benefited from our well-established supplier
infrastructure in China. This targeted investment in inventory, combined with
our experienced and dedicated staff, and a strong new product development
pipeline helped deliver meaningful market share growth over the period in our
chosen markets and segments. Whilst overheads were carefully managed as we
emerged from the disruption of the previous year, we experienced unprecedented
raw material, freight, and energy cost increases. These cost increases were
largely recovered through price increases to our customers and margins
continue to be closely monitored.
Further progress has been made on our ESG initiatives, with the businesses
specifically focused on our Carbon Management Plans. We are particularly proud
of the fact that Triton has achieved The Carbon Trust Standard with a 38%
reduction in CO2 footprint over the assessment period and has now embarked on
becoming net carbon zero as part of our 'cleaner conscience' campaign by 2025.
Further detail is included in our Annual Report and Accounts.
The business and our teams continue to be mindful of the risks associated with
the ongoing COVID-19 pandemic. Whilst the impact of the pandemic appears to be
reducing, we continue to ensure that every reasonable action is being taken to
provide a safe working environment for all our team members. We are proud of
the resilience and agility demonstrated by our teams and partners and are
confident that we are well positioned to continue to profitably grow market
share in the year ahead.
Underlying operating profit for the year grew by £4.0m to a record level of
£30.9m (2021: £26.9m) with an operating margin of 12.0% (2021 12.2%). This
increase in profitability mainly reflected the benefits of the operational
leverage resulting from the significant increase in revenue in the period.
Triton
Revenue at Triton, the UK's market leader in showers, was £60.1m (2021:
£54.5m), 10.3% higher than the prior year and 26.3% higher than the pre-COVID
2020 comparator on a like for like basis.
Triton has benefited from strong retail sales over the last two years by
ensuring product availability and maintaining high customer service levels. As
a result, as competitors struggled to react to the challenging situation,
Triton was able to build on its market leading position taking an increasing
market share in electric and mixer showers which has been retained. Retail
sector revenue increased by 2.9% in the year and by 31.2% in comparison to
2020 on a like for like basis.
Following an initial delay in the recovery of contract, housing and local
authority business, the trade sector revenue has returned strongly. Trade
sector revenue in the year was 22.1% higher than prior year and 21.3% higher
than 2020 on a like for like basis. Export revenue also performed strongly
with 11.0% growth on the prior year and 31.5% growth against 2020 on a like
for like basis.
Proud to be manufactured in Britain for over 45 years and a member of the
"Made in Britain" scheme since 2014, Triton is known as a leader in electric
shower innovation with a focus on its environmental credentials. Our 'cleaner
conscience' TV and press campaigns highlighting the environmental and
financial benefits of showering less have been well received. Further
initiatives were introduced in the year such as 100% recycled bags for
shipping, 30%+ recycled content plastic packaging, carbon neutral paper for
all production (such as installation instructions) and electric vehicles
within the fleet.
During the year Triton continued to work with The Carbon Trust with the target
to be net carbon zero by the end of 2025, Triton's 50th anniversary year.
New products continue to be a key driver in maintaining Triton's long-term
leading market position where ongoing investment and new product launches have
proven successful. Notable revenue growth in the year was delivered from the
Omnicare Ultra, a shower range for the care and adaptations segment. Triton's
Enrich electric shower won an award in the year as the product of choice by
installers and, overall Triton was awarded the Feefo Platinum Trusted Service
award for demonstrating outstanding service to customers.
Triton again delivered a high level of underlying operating profit ahead of
the prior year combined with good cash conversion.
Merlyn
Merlyn, the UK and Ireland's no. 1 supplier of shower enclosures and trays to
the residential, commercial and hospitality sectors, performed strongly and
recorded revenue of £58.3m (2021: £43.3m), growth of 34.6% on the prior year
and 39.8% against 2020 on a like for like basis. The business continued to
grow its market share, leveraging its leading position in the UK through its
quality product offering, stock availability and customer service.
UK revenue grew by 35.8% on prior year and 41.7% on 2020 on a like for like
basis, with a particularly strong performance in the trade sector where
revenue grew by 56.3% against prior year and 65.8% against 2020 on a like for
like basis. This was driven by growth across a number of existing customers in
addition to a number of new contracts including Sanctuary Housing and St
Modwen Homes. The retail sector revenue increased by 21.3% against prior year
and 25.2% against 2020 on a like for like basis representing an increased
share of showroom spend. Exports increased by 26.0% in the year and 26.0%
against 2020 on a like for like basis reflecting growth in Ireland and France.
New product development remains a core component of Merlyn's growth strategy
with the launches of Arysto luxury shower enclosures and slip resistant trays
during the year. The future pipeline includes an Arysto range extension, a
next generation of shower trays, further storage options and products with
improved glass cleaning properties. Our focus on our customers was reflected
in Merlyn winning the Fortis Overall Supplier of the Year and the Wetroom
Supplier of the Year and the Neville Lumb Overall Supplier of the Year and
also attaining the Gold Standard in Excellence through People.
Merlyn has continued to progress its environmental credentials during the year
and has launched an eco-packaging solution developed last year to eliminate
the use of single-use plastics with fully recyclable alternatives. All new
product launches will incorporate eco-packaging.
Notwithstanding substantial increases in input and sea freight costs, Merlyn
recorded a strong underlying operating profit performance. Cash conversion
remained strong in the period.
Vado
Vado, our leading manufacturer of taps, mixer showers, bathroom accessories
and valves, recorded revenue of £43.9m for the year (2021: £38.2m), 14.9%
higher than the prior year and 5.8% higher than 2020 on a like for like basis.
In the UK, our retail sector revenue showed strong growth, up on prior year by
23.8% and 12.0% up on 2020 on a like for like basis on the back of a vibrant
new product development programme and excellent stock availability.
The trade sector was more challenging, with revenue up 6.3% on prior year but
4.5% lower than 2020 on a like for like basis. This was in part driven by the
lack of availability of building materials and labour which resulted in slower
than planned build programmes at key customers.
Export revenue was 16.5% ahead of both prior year and 2020 on a like for like
basis on the back of strong growth in Europe and the Middle East.
The business continued to invest in NPD with further market leading launches
planned to follow the successful launches of the Knurled X Fusion and Omika
Noir ranges this year. Our NPD programme has a strong environmental and
sustainability focus, with the launch of our EcoTurn range of cold start taps
last year reinforcing Vado's position as an on-trend and sustainable brand.
Vado generated an underlying operating profit ahead of last year and a strong
level of cash conversion in the period.
Croydex
Croydex, our market leading, innovative designer, manufacturer, and
distributor of high-quality bathroom furnishings and accessories, recorded
revenue of £27.0m (2021: £24.1m) for the period, 12.0% higher than the prior
year and 15.9% higher than 2020 on a like for like basis.
Retail sector revenue was marginally ahead of prior year and 14.0% up on 2020
on a like for like basis. Retail and E-Commerce sales slowed in the second
half of the year as customers returned to physical stores and activity
returned to more normal levels. The business continues to develop its digital
strategy and has secured further listings with Home Depot.com, Lowes, Walmart
and Amazon, providing a sound base for both our export and online growth
plans.
Trade sector revenue was up 28.4% on the prior year and up 16.9% against 2020
on a like for like basis, with the toilet seat category including Croydex's
patented fixing system performing especially well.
Export sales were in line with prior year and 18.2% up on 2020 on a like for
like basis, mainly driven by new business in Italy, offset by a slowdown in
Germany.
Croydex's ongoing new product development programme has played a major role in
driving new sales opportunities, particularly through new patented solutions
within the shower rod, toilet seat and medicine cabinet categories.
Hygiene-focused products with anti-bacterial and anti-viral surfaces and
non-touch taps were also introduced. The packaging policy was developed
further in the year to reduce the environmental impact and Eco-design was
integrated into all products. Croydex has worked with the FSC on timber
certification and BEIS, DEFRA, BMA and UWL regarding the proposed water
efficiency labelling scheme.
Underlying operating profit was ahead of the prior year albeit cash conversion
was significantly lower than prior year reflecting investment into inventory
to support stock availability and service.
Abode
Abode, our leading designer and distributor of high quality hot water taps,
bathroom mixers, kitchen sinks and taps, recorded revenue of £18.9m for the
year (2021: £15.0m), a 26.0% increase on prior year and a 30.3% increase
against 2020 on a like for like basis.
The business continued to benefit from its strong market positions with key
customers, a well planned and executed NPD programme and timely investment in
additional inventory. The business has grown market share over the period and
remains focused on developing sustainable products that provide customers with
'water the way you want it'.
Retail growth has been supported by an 'Approved Retailer' scheme and
investment in point-of-sale display aids to drive market share growth in our
premium Distinctly Abode ranges. Growth in the specification sector has
benefited from the Pronteau and ProTrad hot water taps with further
initiatives planned in the year ahead. Both taps have been awarded WRAS
approval, a pre-requisite for new build markets.
Our focus on our products and customers will see further market leading
product launches in the year ahead that will further benefit the growth of the
business.
Underlying operating profit was higher than prior year with cash conversion
lower than prior year reflecting the investment into inventory.
Johnson Tiles
Johnson Tiles, our UK market leading ceramic tile manufacturer and a market
leader in the supply of both own manufactured and imported tiles, recorded
revenue of £34.2m (2021: £32.8m), 4.3% higher than the prior year but 16.4%
lower than 2020 on a like for like basis. We have accelerated the process of
repositioning Johnson Tiles and specifically exited a number of lower margin
products as part of this plan resulting in a more focused business.
Trade sector revenue was up 17.6% on the prior year but 5.7% down on 2020 on a
like for like basis, with the second half recording a 2.0% decrease on 2020 on
a like for like basis. The house developer sector continued its strong
performance during the year but commercial specifications, which are driven by
the hospitality and retail sectors, continued to operate significantly below
pre-COVID levels. The social housing refurbishment market continues to be
impacted by the overhang from the Grenfell cladding issue. Johnson Tiles'
strong relationships with the national house developers continued, including
Barratt, David Wilson, Persimmon, Charles Church, Redrow and Countryside.
Retail sector revenue was down 9.9% on prior year and 28.9% down on 2020 on a
like for like basis driven primarily by the planned exit of lower margin
product categories. This has freed up resources for our growing focus on small
format niche product ranges.
In 2021 Johnson Tiles celebrated both its 120th year as a UK manufacturer of
tiles and its heritage as a designer and innovator in tiles, with the business
winning a Product of the Year award for the South Bank range at the Mix
Interiors 2022 Mixology Awards.
Export revenue was 11.1% below prior year and 22.6% below 2020 on a like for
like basis due mainly to lower revenues to France.
Johnson Tiles has developed a market leading position on sustainability over
many years focusing strongly on recycling energy, water and waste and will
pursue further initiatives to progress the reduction in our carbon footprint
in the year ahead.
In the past year, while the business made encouraging progress, the
performance was impacted by the significant increase in input costs and in
particular energy. These cost increases have now been passed through to our
customers by a series of phased selling price increases, albeit with some lag
effect. The underlying operating loss was lower than the previous year and the
level of cash generation reflected an investment into inventory.
Norcros Adhesives
Norcros Adhesives, our UK manufacturer and supplier of tile and stone
adhesives and ancillary products recorded revenue of £14.3m (2021: £12.3m),
16.3% higher than prior year and 23.3% higher than 2020 on a like for like
basis.
Retail sector revenue was 70.5% ahead of prior year and 73.3% above 2020 on a
like for like basis, reflecting significant growth of our product lines into
some of our larger customers combined with a displacement of competitor
products.
Trade sector revenue was 29.1% below prior year and 4.9% below 2020 on a like
for like basis reflecting a slower recovery in the larger private and public
commercial specification projects and an increased focus on the retail sector.
The Middle Eastern operations were closed at the end of the previous financial
year, and as a result, there were no revenues in the year.
Norcros Adhesives maintained the 'Gold Standard' from the Supply Chain
Sustainability School and the business remains committed to making further
progress, especially in the areas of packaging and recycling.
Raw material and transport costs both increased significantly in the year and
impacted margins as the recovery through selling price increases lagged the
increase in operating costs. Norcros Adhesives made a small underlying
operating loss in line with the prior year.
Business review - South Africa
Revenue for the year increased by 28.8% on prior year on a constant currency
basis and increased by 34.2% on a Sterling reported basis to £139.6m (2021:
£104.0m).
The prior year's performance was materially impacted by the COVID-19 related
nationwide lockdown, which saw revenue decline sharply caused by the temporary
suspension of manufacturing and closure of retail operations in the first
quarter. Market activity returned in the year with Tile Africa, Johnson Tiles
and TAL continuing to benefit from the higher demand and market share gains in
the retail renovation market. House of Plumbing revenues benefited from the
opening of new branches but were held back by the lack of large-scale
commercial building activity.
The business continued to prioritise staff wellness during the year and
proactively supported all employees with full access to our Wellness Centre
that extended to all aspects of wellbeing, including independent psychological
support. The third and fourth COVID-19 waves were safely navigated by focusing
on the well-practised protocols and continuing to shield our vulnerable staff.
Staff are encouraged but not forced to vaccinate against COVID-19 and the
business has provided four internal free vaccination drives in addition to the
private sector and government offerings. During the year, 828 employees
undertook a COVID-19 test, many at the onsite Wellness Centre at
Olifantsfontein, with 259 positive cases reported. There were no cases of work
transmission and thankfully, only a small number of employees required
hospitalisation in the year.
Underlying operating profit for the year was at a record level at £10.9m
(2021: £6.9m) and a substantial increase over 2021, reflecting the strong
retail demand for our products and a £0.2m translation exchange gain from a
stronger Rand. Cash generation was good, reflecting investment in capital
expenditure and the planned increase in our stock holding mitigating the
supply chain challenges and delays in imported raw material and finished
goods. The business finished the year in a very strong financial and
competitive position, well placed to continue to gain market share and grow in
its respective markets.
Johnson Tiles South Africa
Johnson Tiles South Africa, our tile manufacturing business, recorded revenue
of £16.5m (2021: £12.5m), a 32.0% increase on a reported basis and 26.9%
higher on a constant currency basis. Revenue was 27.9% higher than 2020 on a
constant currency like for like basis.
Record levels of manufacturing output were achieved during the year as
productivity and efficiency initiatives were successfully delivered. Together
with targeted plant investments during the period, this focus helped to drive
improved throughput and product quality, enabling the business to meet the
increased demand from housing renovations, commercial housebuilders and in the
latter part of the year from the recovering commercial sector, particularly
the corporate renovation segment. A lack of big build construction activity
remains.
Products were specified and installed in leading developments across the
country, in quality, entry-level residential developments such as Thaba
Village, The Reeds and Greenpark in Johannesburg, The Blyde and Greencreek in
Pretoria, The Huntsman, Fynbos and Greenbay in Cape Town and Ballito Hills in
Durban.
During the year, the manufactured tile range was consolidated, reducing the
complexity of the portfolio to further improve in-stock and customer service
levels whilst increasing the depth of some ranges.
Underlying operating profit was ahead of the prior year.
Tile Africa
Tile Africa, our leading retailer of wall and floor tiles, sanitaryware and
bathroom fittings, recorded revenue of £75.5m (2021: £54.9m), a 37.5%
increase on a reported basis and 32.0% higher on a constant currency basis.
Revenue was 45.5% higher than 2020 on a constant currency like for like basis.
The substantial growth on prior year was driven by buoyant retail demand from
increased renovation activity, significantly improved operating disciplines,
and superior stock availability.
The successful, exclusive Evox range of bathroomware and sanitaryware was
expanded with several new bath and tap ranges, and an exclusive upmarket
range, Nuvo, was launched in the second half of the year. An appealing range
of bathroom furniture was also added.
The commercial contracts sector however remains subdued with lower overall new
build activity. Despite this, several retail floor covering installations for
Pick n Pay, Boxer and Spar were completed.
Tile Africa currently operates from thirty-three owned stores and two
franchise stores. The temporary Wynberg pop-up clearance store was closed
during the year, and a new store opened in Thohoyandou. The dual Tile Africa
HOMEXPRESS value-for-money brand is being trialled in this store.
Ongoing capital investment continues, mirroring the successful flagship
Greenstone store and Ballito store concepts, incorporating a bathroom
store-within-a-store format and a bespoke alternative floorcoverings offer.
Tile Africa's underlying operating profit was significantly ahead of prior
year, with strong cashflow partially offset by the investment into inventory.
This investment enabled the business to both support the revenue growth and
ensure our customer service and stock availability was maintained
notwithstanding the supply chain challenges and extended import lead times.
TAL
TAL, our market leading adhesives business, recorded revenue of £22.5m (2021:
£19.1m), a 17.8% increase on a reported basis and a 13.1% increase on a
constant currency. Revenue was 11.4% higher than 2020 on a constant currency
like for like basis.
Large commercial new build projects remained limited, which impacted demand
for the business's high specification rapid setting adhesives and
system-driven construction products. Export retail demand remained solid
despite competitors re-opening plants in neighbouring countries.
Notwithstanding market conditions, TAL remains the leading supplier, with the
business supplying market-leading products and technical expertise to several
construction projects during the year, including The Blyde Residential
Development, Babylonstoren Spa, Ford Motor Company's new manufacturing
facility, Dr Pixley Kaseme Hospital, The Hilton Hotel, Hilton Towers and The
Arch.
Investment in new product development continued during the period with the
launch of products in the waterproofing category as well as barrier and keying
compounds. Ongoing development of novel fixing systems for coverings outside
our traditional tile market continues.
TAL's underlying operating profit and cash generation were ahead of the prior
year.
House of Plumbing
House of Plumbing, our market leading supplier of specialist plumbing
materials into the specification and commercial segments, recorded full year
revenue of £25.1m (2021: £17.5m), 43.4% higher than the prior year on a
reported basis and 37.2% higher on a constant currency basis. Revenue was
15.1% higher than 2020 on a constant currency like for like basis.
The large commercial projects traditionally supplied by House of Plumbing are
yet to recover post-COVID-19. However, additions to the branch network
contributed to increased revenues compared to the prior year. During the
period, four new branches were added, in Nelspruit, Secunda, City Deep and
Durban South, focused on the civils product ranges used in infrastructure,
mining, engineering, and irrigation projects in addition to the traditional
commercial plumbing offering.
House of Plumbing now operates eight branches. The focus is on providing
expert technical advice and consistent stock availability with the business
planning to continue to extend its geographical expansion and further
establish a national footprint.
During the year, House of Plumbing supplied several landmark projects,
including Redhill School, Ford Silverton, Coca Cola Midrand, SAB Alrode, Rand
Airport, N2 Woodhill shopping mall and Netcare Hospital Alberton.
House of Plumbing's underlying operating profit was marginally higher than
prior year, with cashflow reflecting the investment into inventory and new
branches.
Financial overview
2022 2021
£m £m
Revenue 396.3 324.2
Underlying operating profit 41.8 33.8
IAS 19R administrative expenses (1.7) (1.4)
Acquisition related costs (4.8) (3.7)
Exceptional operating items 0.9 (3.8)
Operating profit 36.2 24.9
Net finance costs (3.2) (6.4)
Profit before taxation 33.0 18.5
Taxation (7.3) (3.5)
Profit for the year 25.7 15.0
Revenue
Group revenue at £396.3m (2021: £324.2m) increased by 22.2% on a reported
basis and by 20.6% on a constant currency basis. Group revenue was 20.9%
higher than 2020 on a constant currency like for like basis, after adjusting
the 2020 comparator period from a 53 to a 52 week period pro-rating.
Underlying operating profit
Underlying operating profit increased by 23.7% to £41.8m (2021: £33.8m). Our
UK businesses recorded an underlying operating profit of £30.9m (2021:
£26.9m), and our South African businesses an underlying operating profit of
£10.9m (2021: £6.9m). Group underlying operating profit margin was 10.5%
(2021: 10.4%).
IAS 19R administrative costs
These costs represent the costs incurred by the Trustee of administering the
UK defined benefit pension scheme and are reflected in the Income Statement
under IAS 19R. Costs of £1.7m are higher than prior year largely as a result
of the fees relating to the triennial actuarial valuation (2021: £1.4m).
Acquisition related costs
A cost of £4.8m (2021: £3.7m) has been recognised in the year and is
analysed as follows:
2022 2021
£m £m
Intangible asset amortisation 3.7 3.7
Advisory fees 1.1 -
4.8 3.7
The advisory fees relate to the costs incurred in relation to acquisition
activity.
Exceptional operating items
A net exceptional operating credit of £0.9m (2021: charge of £3.8m) has been
recognised in the year.
2022 2021
£m £m
Release of UK property provision (0.9) -
COVID-19 related restructuring - 3.8
(0.9) 3.8
The UK property provision related to the only remaining surplus and legacy
onerous property lease at Groundwell, Swindon. In the year, the Group reached
agreement with the landlord to exit the lease early. A cash settlement payment
of £1.3m including dilapidation obligations was made in the period. The
remaining £0.9m of the related provision has been released as an exceptional
operating item.
During the prior year an exceptional charge of £3.8m was incurred in relation
to restructuring programmes implemented by the Group as a result of COVID-19.
Finance costs
2022 2021
£m £m
Interest payable on bank borrowings 0.8 1.5
Interest on lease liabilities 1.7 1.7
Movement on fair value of derivative financial instruments - 2.0
Discounting of property lease provisions 0.1 -
Amortisation of costs of raising debt finance 0.2 0.2
Finance costs 2.8 5.4
IAS 19R finance cost 0.4 1.0
Total finance costs 3.2 6.4
Net finance costs for the year of £3.2m compares to £6.4m in 2021. This
decrease is mainly due to the movement in the fair value of foreign exchange
contracts which was a £2.0m cost in the prior year in relation to expired
forward foreign exchange contracts. Forward foreign exchange contracts are now
accounted for under IFRS 9 hedge accounting, with the movement in fair value
recognised in the Consolidated Statement of Comprehensive Income.
The Group has recognised a £0.4m interest cost in respect of the UK defined
benefit pension scheme liability (2021: £1.0m) which decreased by £0.6m
principally reflecting the lower deficit throughout the year.
Underlying profit before tax
Underlying profit before tax was £39.3m (2021: £30.6m), mainly reflecting
the increase in underlying operating profit noted above.
Taxation
The tax charge for the year of £7.3m (2021: £3.5m) represents an effective
tax rate for the year of 22.1% (2021: 18.9%). The increase in the effective
tax rate mainly relates to a higher proportion of the Group's taxable profits
being generated in South Africa and the non-deductible acquisition related
costs in 2022.
The standard rates of corporation tax in the UK, South Africa and Ireland in
the period were 19% (2021: 19%), 28% (2021: 28%) and 12.5% (2021: 12.5%)
respectively.
Dividends
The Group responded swiftly to the impact of the COVID-19 pandemic and the
need to preserve cash by not paying a final dividend in relation to the year
ended 31 March 2020 or an interim dividend in relation to the year ended 31
March 2021. The Group's dividend policy, which takes into account the Group's
growth strategy, the interests of other key stakeholders, the Group's
cash-generative characteristics and its earnings growth, was reinstated in the
second half of the prior year. The Board recommends a final dividend of 6.9p
per share (2021: 8.2p). This, combined with the interim dividend of 3.1p per
share (2021: nil) results in a total dividend of 10.0p per share (2021: 8.2p).
The total dividend is equivalent to a dividend cover of 3.8 times, consistent
with the year ended 31 March 2021. The cash cost of the total dividend is
£8.7m.
This final dividend, if approved at the Annual General Meeting, will be
payable on 29 July 2022 to shareholders on the register on 24 June 2022. The
shares will be quoted ex-dividend on 23 June 2022. Norcros plc operates a
Dividend Reinvestment Plan (DRIP). If a shareholder wishes to use the DRIP the
latest date to elect for this in respect of this final dividend is 8 July
2022.
Balance sheet
The Group's balance sheet is summarised below.
2022 2021
£m £m
Property, plant and equipment 29.0 28.0
Right of use assets 19.9 19.6
Goodwill and intangible assets 90.3 93.6
Deferred tax (9.4) (0.5)
Net current assets excluding cash and borrowings 68.2 44.0
Pension scheme surplus/(liability) 19.6 (18.3)
Lease liabilities (24.0) (24.2)
Other non-current assets and liabilities (1.9) (4.3)
Net cash 8.6 10.5
Net assets 200.3 148.4
Total net assets increased by £51.9m to £200.3m (2021: £148.4m). Net
current assets increased by £24.2m reflecting the significant cash investment
into working capital, particularly inventory.
Property, plant and equipment increased by £1.0m to £29.0m and included
additions of £5.3m (2021: £2.5m). The depreciation charge was £5.1m (2021:
£5.2m) and foreign exchange gains were £0.8m (2021: gain of £1.7m).
Right of use assets increased by £0.3m to £19.9m (2021: £19.6m), reflecting
the small difference between additions or renewals and right of use asset
depreciation in the year. Lease liabilities of £24.0m (2021: £24.2m)
decreased by £0.2m.
The deferred tax liability increased by £8.9m to a liability of £9.4m (2021:
liability of £0.5m). The increase is mainly the result of a movement in the
pension scheme position from a deficit at 31 March 2021 to a surplus at 31
March 2022.
Pension schemes
On an IAS 19R accounting basis, the gross defined benefit pension scheme
valuation of the UK scheme showed a surplus of £19.6m compared to a deficit
of £18.3m last year. The present value of scheme liabilities decreased by
£47.8m primarily due to an increase in the discount rate to 2.75% (31 March
2021: 2.05%) and benefit payments made in the period. The value of scheme
assets decreased by £9.9m largely due to benefit payments made in the period
partially offset by asset returns.
During the year, the Group reached agreement with the Trustee on the 2021
triennial actuarial valuation for the UK defined benefit scheme and on a new
deficit recovery plan. The actuarial deficit at 31 March 2021 was £35.8m
(2018: £49.3m). Deficit repair contributions have been agreed at £3.8m per
annum from 1 April 2022 to March 2027 (increasing with CPI, capped at 5%, each
year).
The Group's contributions to its defined contribution pension schemes were
£3.7m (2021: £3.0m).
Cash flow and net debt
Underlying operating cash flow was £37.2m lower than in the prior year at
£28.6m (2021: £65.8m).
2022 2021
£m £m
Underlying operating profit 41.8 33.8
Depreciation and amortisation 5.2 5.4
Net working capital movement (23.6) 21.8
IFRS 2 charge add-back 1.1 1.0
Depreciation of right of use assets 4.1 4.0
Cash settlement of share options - (0.2)
Underlying operating cash flow 28.6 65.8
The main driver of the reduction in the underlying operating cash flow was a
significant cash investment into working capital, particularly inventory, to
optimise our service and stock availability proposition in the light of
exceptional supply chain challenges. Underlying operating cash conversion in
the year was 63% of underlying EBITDA (2021: 174%).
2022 2021
£m £m
Underlying operating cash flow 28.6 65.8
Cash flows from exceptional items and acquisition related costs (1.7) (2.5)
Pension fund deficit recovery contributions (3.3) (3.3)
Cash flow generated from operations 23.6 60.0
Net interest paid (2.5) (3.2)
Taxation (6.5) (3.5)
Net cash generated from operating activities 14.6 53.3
Capital expenditure (5.4) (2.8)
Dividends (9.1) -
Share transactions 0.1 0.3
Principal element of lease payments (4.7) (4.3)
Exchange movement 1.6 0.6
Movement in costs of raising finance 1.0 (0.2)
Net cash (spent)/generated (1.9) 46.9
Opening net cash/(debt) 10.5 (36.4)
Closing net cash 8.6 10.5
Cash generated from operating activities was £38.7m lower than the prior year
at £14.6m, largely due to the £37.2m reduction in underlying operating cash
flows.
Cash flows from exceptional items and acquisition related costs in the current
year primarily relate to the settlement of the surplus legacy lease at
Groundwell of £1.3m.
Capital expenditure at £5.4m (2021: £2.8m) represents an increase against
COVID-19 levels and includes investment in new product programmes, new stores
and upgrades, IT systems and manufacturing facilities.
The Group ended the year with net cash of £8.6m (2021: net cash of £10.5m)
on a pre-IFRS 16 basis after a net cash outflow of £1.9m. Net debt inclusive
of IFRS 16 lease liabilities was £15.4m (2021: £13.7m).
Funding and liquidity
The Group agreed a new multicurrency revolving credit facility with four
lenders in the second half of the year. The Group now has committed banking
facilities of £130m (plus a £70m uncommitted accordion) with a maturity date
of the facility of October 2025 with two further years as extension options.
Principal Risks and Uncertainties
Risk management remains a priority for the Group to help sustain the success
of the business in the future. There is a range of potential risks and
uncertainties which could have a material impact on the Group's performance.
The objective of our risk management framework is to support the business in
meeting its strategic and operational objectives through the identification,
monitoring and mitigation of risks within clearly defined risk appetite levels
for each risk category.
The Board has carried out a robust assessment of the principal risks and taken
them into consideration when assessing the long-term viability of the Company.
The principal risks are listed below and they do not comprise all the risks
that the Group may face, and are not listed in any order of priority.
· Strategic risks, include the risks associated with the Coronavirus
(COVID-19) pandemic, future acquisitions, and the Environmental, Social and
Governance (ESG) agenda.
· People risks, include the risks associated with staff retention and
recruitment.
· Commercial risks, include risks associated with market conditions,
the loss of key customers and competition.
· Operational risks include the risks associated with the reliance on
production facilities, the loss of a key supplier and cyber security.
· Financial risks, include the risks associated with maintaining a
suitable level of funding and liquidity and those associated with managing the
defined benefit pension scheme.
Further details on the principal risks including detailed descriptions and
mitigating actions are presented in the Annual Report and Accounts.
Responsibility Statement
Each of the directors, whose names and functions are listed below, confirms
that, to the best of their knowledge:
· The consolidated financial statements, prepared in accordance with
the applicable United Kingdom law and in conformity with UK-adopted
international accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Group and the
undertakings included in the consolidation taken as a whole; and
· The business review includes a fair review of the development and
performance of the business and the position of the Group and the undertakings
included in the consolidation taken as a whole; and
· There have been no significant individual related party transactions
during the year.
Directors: Gary Kennedy (Chair), Nick Kelsall (Chief Executive Officer),
James Eyre (Chief Financial Officer), David McKeith (Non-Executive Director)
and Alison Littley (Non-Executive Director).
Nick Kelsall
Chief Executive Officer
James Eyre
Chief Financial Officer
Consolidated income statement
Year ended 31 March 2022
Notes 2022 2021
£m £m
Continuing operations
Revenue 2 396.3 324.2
Underlying operating profit 41.8 33.8
IAS 19R administrative expenses (1.7) (1.4)
Acquisition related costs 3 (4.8) (3.7)
Exceptional operating items 3 0.9 (3.8)
Operating profit 36.2 24.9
Finance costs 4 (2.8) (5.4)
IAS 19R finance cost (0.4) (1.0)
Profit before taxation 33.0 18.5
Taxation (7.3) (3.5)
Profit for the year to equity holders of the Company 25.7 15.0
Earnings per share attributable to equity holders of the Company
Basic earnings per share:
From profit for the year 6 31.8p 18.6p
Diluted earnings per share:
From profit for the year 6 31.2p 18.6p
Weighted average number of shares for basic earnings per share (millions) 80.9 80.6
Alternative performance measures
Underlying profit before taxation (£m) 5 39.3 30.6
Underlying earnings (£m) 5 31.5 25.1
Basic underlying earnings per share 6 38.9p 31.2p
Diluted underlying earnings per share 6 38.2p 31.1p
Consolidated statement of comprehensive income
Year ended 31 March 2022
2022 2021
£m £m
Profit for the year 25.7 15.0
Other comprehensive income and expense:
Items that will not subsequently be reclassified to the Income Statement
Actuarial gains on retirement benefit obligations 27.5 24.1
Items that may be subsequently reclassified to the Income Statement
Cash flow hedges - fair value gain/(loss) in year 3.0 (1.5)
Foreign currency translation of foreign operations 3.6 5.3
Other comprehensive income for the year 34.1 27.9
Total comprehensive income for the year attributable to equity holders of the 59.8 42.9
Company
Items in the statement are disclosed net of tax.
Consolidated balance sheet
At 31 March 2022
2022 2021
£m £m
Non-current assets
Goodwill 61.2 60.8
Intangible assets 29.1 32.8
Property, plant and equipment 29.0 28.0
Pension scheme asset 19.6 -
Right of use assets 19.9 19.6
158.8 141.2
Current assets
Inventories 100.6 78.1
Trade and other receivables 71.1 64.6
Derivative financial instruments 1.6 -
Cash and cash equivalents 27.4 28.3
200.7 171.0
Current liabilities
Trade and other payables (102.4) (95.4)
Lease liabilities (5.7) (5.4)
Current tax liabilities (2.7) (1.0)
Derivative financial instruments - (2.3)
(110.8) (104.1)
Net current assets 89.9 66.9
Total assets less current liabilities 248.7 208.1
Non-current liabilities
Financial liabilities - borrowings (18.8) (17.8)
Pension scheme liability - (18.3)
Lease liabilities (18.3) (18.8)
Deferred tax liabilities (9.4) (0.5)
Other non-current liabilities (0.3) (0.3)
Provisions (1.6) (4.0)
(48.4) (59.7)
Net assets 200.3 148.4
Financed by:
Share capital 8.1 8.1
Share premium 30.3 30.2
Retained earnings and other reserves 161.9 110.1
Total equity 200.3 148.4
Consolidated cash flow statement
Year ended 31 March 2022
Note 2022 2021
£m £m
Cash generated from operations 7 23.6 60.0
Income taxes paid (6.5) (3.5)
Interest paid (2.5) (3.2)
Net cash generated from operating activities 14.6 53.3
Cash flows from investing activities
Purchase of property, plant and equipment and intangible assets (5.4) (2.8)
Net cash used in investing activities (5.4) (2.8)
Cash flows from financing activities
Proceeds from issue of ordinary share capital 0.1 0.3
Principal element of lease payments (4.7) (4.3)
Drawdown of borrowings 25.0 -
Repayment of borrowings (23.0) (66.0)
Dividends paid to the Company's shareholders (9.1) -
Net cash used in financing activities (11.7) (70.0)
Net decrease in cash at bank and in hand and bank overdrafts (2.5) (19.5)
Cash at bank and in hand and bank overdrafts at the beginning of the year 28.3 47.2
Exchange movements on cash and bank overdrafts 1.6 0.6
Cash at bank and in hand and bank overdrafts at the end of the year 27.4 28.3
Consolidated statement of changes in equity
Year ended 31 March 2022
Ordinary Share Treasury Hedging Translation Retained Total
share premium reserve reserve reserve earnings equity
capital £m £m £m £m £m £m
£m
At 1 April 2020 8.1 29.9 (0.4) - (21.7) 88.5 104.4
Comprehensive income:
Profit for the year - - - - - 15.0 15.0
Other comprehensive (expense)/income:
Actuarial gain on retirement benefit obligations - - - - - 24.1 24.1
Fair value loss on cash flow hedges - - - (1.5) - - (1.5)
Foreign currency translation adjustments - - - - 5.3 - 5.3
Total other comprehensive (expense)/income for the year - - - (1.5) 5.3 24.1 27.9
Transactions with owners:
Shares issued - 0.3 - - - - 0.3
Dividends paid - - - - - - -
Settlement of share option schemes - - 0.3 - - (0.5) (0.2)
Value of employee services - - - - - 1.0 1.0
At 31 March 2021 8.1 30.2 (0.1) (1.5) (16.4) 128.1 148.4
Comprehensive income:
Profit for the year - - - - - 25.7 25.7
Other comprehensive income:
Actuarial gain on retirement benefit obligations - - - - - 27.5 27.5
Fair value gain on cash flow hedges - - - 3.0 - - 3.0
Foreign currency translation adjustments - - - - 3.6 - 3.6
Total other comprehensive income for the year - - - 3.0 3.6 27.5 34.1
Transactions with owners:
Shares issued - 0.1 - - - - 0.1
Dividends paid - - - - - (9.1) (9.1)
Value of employee services - - - - - 1.1 1.1
At 31 March 2022 8.1 30.3 (0.1) 1.5 (12.8) 173.3 200.3
Notes to the preliminary statement
Year ended 31 March 2022
1. Basis of preparation
The principal activities of Norcros plc ("the Company") and its subsidiaries
(together "the Group") are the design, manufacture and distribution of a range
of high quality and innovative bathroom and kitchen products mainly in the UK
and South Africa. The Company is a public limited company which is listed on
the premium segment of the London Stock Exchange market of listed securities
and is incorporated and domiciled in the UK. The address of its registered
office is Ladyfield House, Station Road, Wilmslow, SK9 1BU.
The financial information presented in this preliminary statement is extracted
from, and is consistent with, the Group's audited financial statements for the
year ended 31 March 2022. The financial information set out above does not
constitute the Company's statutory financial statements for the periods ended
31 March 2022 or 31 March 2021 but is derived from those financial statements.
Statutory financial statements for 2022 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 UK-adopted International
Accounting Standards.
Going concern
In adopting the going concern basis for preparing the financial statements,
the Directors have considered the Group's business activities and the
principal risks and uncertainties including current macroeconomic factors in
the context of the current operating environment. The Group, in acknowledging
its TCFD requirements, has also considered climate risks in the financial
statements.
A going concern financial assessment was developed on a bottom-up basis by
taking the output of the annual budgeting process built up by individual
businesses and then subjected to review and challenge by the Board. The
acquisition of Grant Westfield was also reflected in the assessment. The
financial model was then stress tested by modelling the most extreme but
plausible scenario, that being further national lockdowns as a result of a
resurgent COVID-19 pandemic. This has been based on the actual impact of the
COVID-19 pandemic on the Group, which at its peak saw a revenue reduction of
25% on the prior year over a 6 month period. The scenario also incorporates
management actions the Group has at its disposal including a number of cash
conservation and cost reduction measures including capital expenditure
reductions, dividend decreases and restructuring activities.
The Group continues to exhibit sufficient and prudent levels of liquidity
headroom against our key banking financial covenants during the 12-month
period under assessment. Reverse stress testing has also been applied to the
financial model, which represents a further decline in sales compared with the
reasonable worst case. Such a scenario, and the sequence of events which could
lead to it, is considered to be implausible and remote.
As a result of this detailed assessment, the Board has concluded that the
Company is able to meet its obligations when they fall due for a period of at
least 12 months from the date of this report. For this reason, the Company
continues to adopt the going concern basis for preparing the Group financial
statements. In forming this view, the Board has also concluded that no
material uncertainty exists in its use of the going concern basis of
preparation.
2. Segmental reporting
Year ended 31 March 2022
UK South Group
£m Africa £m
£m
Revenue 256.7 139.6 396.3
Underlying operating profit 30.9 10.9 41.8
IAS 19R administrative expenses (1.7) - (1.7)
Acquisition related costs (4.6) (0.2) (4.8)
Exceptional operating items 0.9 - 0.9
Operating profit 25.5 10.7 36.2
Finance costs (3.2)
Profit before taxation 33.0
Taxation (7.3)
Profit for the year 25.7
Net cash 8.6
Segmental assets 252.9 106.6 359.5
Segmental liabilities (116.9) (42.3) (159.2)
Additions to property, plant and equipment 2.9 2.4 5.3
Depreciation and amortisation 8.0 5.0 13.0
Year ended 31 March 2021
UK South Group
£m Africa £m
£m
Revenue 220.2 104.0 324.2
Underlying operating profit 26.9 6.9 33.8
IAS 19R administrative expenses (1.4) - (1.4)
Acquisition related costs (3.5) (0.2) (3.7)
Exceptional operating items (3.6) (0.2) (3.8)
Operating profit 18.4 6.5 24.9
Finance costs (6.4)
Profit before taxation 18.5
Taxation (3.5)
Profit for the year 15.0
Net cash 10.5
Segmental assets 221.4 90.8 312.2
Segmental liabilities (125.6) (38.2) (163.8)
Additions to property, plant and equipment 1.6 0.9 2.5
Depreciation and amortisation 8.5 4.6 13.1
The split of revenue by geographical destination of the customer is below:
2022 2021
£m £m
UK 222.4 189.4
Africa 141.9 105.8
Rest of World 32.0 29.0
396.3 324.2
No one customer had revenue over 10% of total Group revenue (2021: none).
3. Acquisition related costs and exceptional operating items
An analysis of acquisition related costs and exceptional operating items is
shown below:
Acquisition related costs 2022 2021
£m £m
Intangible asset amortisation1 3.7 3.7
Advisory fees(2) 1.1 -
4.8 3.7
1 Non-cash amortisation charges in respect of acquired intangible
assets.
2 Professional advisory fees incurred in connection with the Group's
business combination activities
Exceptional operating items 2022 2021
£m £m
COVID-19 related restructuring1 - 3.8
Release of UK Property Provision2 (0.9) -
(0.9) 3.8
1 Exceptional costs of £3.8m were incurred in the prior year in
relation to COVID-19 related restructuring programmes across the Group as a
result of the impact of COVID-19 on the economies we trade in.
2 The UK property provision related to the only remaining surplus and
legacy onerous property lease at Groundwell, Swindon. In the year, the Group
reached agreement with the landlord to exit the lease early. A cash settlement
payment of £1.3m including dilapidation obligations was made in the period.
The remaining £0.9m of the related provision has been released as an
exceptional operating item.
4. Finance costs
2022 2021
£m £m
Interest payable on bank borrowings 0.8 1.5
Interest on lease liabilities 1.7 1.7
Movement on fair value of derivative financial instruments - 2.0
Property lease discount 0.1 -
Amortisation of costs of raising debt finance 0.2 0.2
Finance costs 2.8 5.4
5. Alternative performance measures
The Group makes use of a number of alternative performance measures to assess
business performance and provide additional useful information to
shareholders. Such alternative performance measures should not be viewed as a
replacement of, or superior to, those defined by Generally Accepted Accounting
Principles (GAAP). Definitions of alternative performance measures used by the
Group and, where relevant, reconciliations from GAAP-defined reporting
measures to the Group's alternative performance measures are provided below.
The alternative performance measures used by the Group are:
Measure Definition
Underlying operating profit Operating profit before IAS 19R administrative expenses, acquisition related
costs and exceptional operating items.
Underlying profit before taxation Profit before taxation before 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.
Underlying taxation Taxation on underlying profit before tax.
Underlying earnings Underlying profit before tax less underlying taxation.
Underlying capital employed Capital employed on a pre-IFRS 16 basis adjusted for business combinations
where relevant and the average impact of exchange rate movements.
Underlying operating margin Underlying operating profit expressed as a percentage of revenue.
Underlying return on capital employed (ROCE) Underlying operating profit on a pre-IFRS 16 basis expressed as a percentage
of the average of opening and closing underlying capital employed.
Basic underlying earnings per share Underlying earnings divided by the weighted average number of shares for basic
earnings per share.
Diluted underlying earnings per share Underlying earnings divided by the weighted average number of shares for
diluted earnings per share.
Underlying EBITDA Underlying EBITDA is derived from underlying operating profit before
depreciation and amortisation excluding the impact of IFRS 16 in line with our
banking covenants.
Underlying operating cash flow Cash generated from continuing operations before cash outflows from
exceptional items and acquisition related costs and pension fund deficit
recovery contributions.
Underlying net debt/cash Underlying net debt/cash is the net of cash, capitalised costs of raising
finance and total borrowings. IFRS 16 lease commitments are not included in
line with our banking covenants.
Pro-forma underlying EBITDA An annualised underlying EBITDA figure used for the purpose of calculating
banking covenant ratios.
Pro-forma leverage Net debt expressed as a ratio of pro-forma underlying EBITDA.
Underlying profit and underlying earnings per share measures provide
shareholders with additional useful information on the underlying performance
of the Group. This is because these measures are those principally used by the
Directors to assess the performance of the Group and are used as the basis for
calculating the level of the annual bonus and long-term incentives earned by
the Directors. Underlying ROCE is one of the Group's strategic key performance
indicators and is therefore provided so that shareholders can assess the
Group's performance in relation to its strategic targets. Underlying EBITDA
and underlying operating cash flow are also used internally by the Directors
in order to assess the Group's cash generation. The term 'underlying' is not
recognised under IFRS and consequently the Group's definition of underlying
may differ from that used by other companies.
Reconciliations from GAAP-defined reporting measures to the Group's
alternative performance measures
Consolidated Income Statement
(a) Underlying profit before taxation and underlying earnings
2022 2021
£m £m
Profit before taxation 33.0 18.5
Adjusted for:
- IAS 19R administrative expenses 1.7 1.4
- acquisition related costs (see note 3) 4.8 3.7
- exceptional operating items (see note 3) (0.9) 3.8
- amortisation of costs of raising finance 0.2 0.2
- net movement on fair value of derivative financial instruments - 2.0
- property lease discount 0.1 -
- IAS 19R finance cost 0.4 1.0
Underlying profit before taxation 39.3 30.6
Taxation attributable to underlying profit before taxation (7.8) (5.5)
Underlying earnings 31.5 25.1
(b) Underlying EBITDA
2022 2021
£m £m
Operating profit 36.2 24.9
Adjusted for:
- depreciation and amortisation (owned assets) 5.2 5.4
- depreciation of leased assets 4.1 4.0
- lease costs (5.7) (5.3)
- IAS 19R administrative expenses 1.7 1.4
- acquisition related costs 4.8 3.7
- exceptional operating items (see note 3) (0.9) 3.8
Underlying EBITDA (pre-IFRS 16) 45.4 37.9
Consolidated Cash Flow Statement
(a) Underlying operating cash flow
2022 2021
£m £m
Cash generated from operations (see note 7) 23.6 60.0
Adjusted for:
- cash flows from exceptional items and acquisition related costs (see note 7) 1.7 2.5
- pension fund deficit recovery contributions 3.3 3.3
Underlying operating cash flow 28.6 65.8
Consolidated Balance Sheet
(a) Underlying capital employed and underlying return on capital employed
2022 2021
£m £m
Net assets 200.3 148.4
Adjusted for:
- pension scheme (asset)/liability (net of associated tax) (14.7) 14.8
- right of use assets (IFRS 16) (19.9) (19.6)
- lease liabilities (IFRS 16) 24.0 24.2
- Onerous lease provision (IFRS 16) - (0.8)
- cash and cash equivalents (27.4) (28.3)
- financial liabilities - borrowings 18.8 17.8
181.1 156.5
Foreign exchange adjustment (1.7) 0.8
Underlying capital employed 179.4 157.3
Average underlying capital employed 168.3 178.9
Underlying operating profit (pre-IFRS 16) 40.2 32.5
Underlying return on capital employed 23.9% 18.2%
6. Earnings per share
Basic EPS is calculated by dividing the profit attributable to shareholders by
the weighted average number of ordinary shares in issue during the year,
excluding those held in the Norcros Employee Benefit Trust.
For diluted EPS, the weighted average number of ordinary shares in issue is
adjusted to assume conversion of all potential dilutive ordinary shares. At 31
March 2022 the potential dilutive ordinary shares amounted to 1,504,604 (2021:
201,781) as calculated in accordance with IAS 33.
The calculation of EPS is based on the following profits and numbers of
shares:
2022 2021
£m £m
Profit for the year 25.7 15.0
2022 2021
Number Number
Weighted average number of shares for basic earnings per share 80,887,240 80,575,242
Share options 1,504,604 201,781
Weighted average number of shares for diluted earnings per share 82,391,844 80,777,023
2022 2021
Basic earnings per share:
From profit for the year 31.8p 18.6p
Diluted earnings per share:
From profit for the year 31.2p 18.6p
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.
2022 2021
£m £m
Underlying earnings (see note 5) 31.5 25.1
2022 2021
Basic underlying earnings per share 38.9p 31.2p
Diluted underlying earnings per share 38.2p 31.1p
7. Consolidated cash flow statement
(a) Cash generated from operations
The analysis of cash generated from operations is given below:
Continuing operations
2022 2021
£m £m
Profit before taxation 33.0 18.5
Adjustments for:
- IAS 19R administrative expenses included in the Income Statement 1.7 1.4
- acquisition related costs included in the Income Statement 4.8 3.7
- exceptional items included in the Income Statement (0.9) 3.8
- finance costs included in the Income Statement 2.8 5.4
- IAS 19R finance cost included in the Income Statement 0.4 1.0
- cash flows from exceptional items (1.7) (2.5)
- settlement of share options - (0.2)
- depreciation of property, plant and equipment 5.1 5.2
- underlying amortisation 0.1 0.2
- depreciation of right of use asset 4.1 4.0
- pension fund deficit recovery contributions (3.3) (3.3)
- IFRS 2 charges 1.1 1.0
Operating cash flows before movement in working capital 47.2 38.2
Changes in working capital:
- (increase)/decrease in inventories (22.7) 3.8
- increase in trade and other receivables (5.1) (5.0)
- increase in trade and other payables 4.2 23.0
Cash generated from operations 23.6 60.0
(b) Analysis of underlying net cash/(debt)
Cash Current Non-current Underlying
£m borrowings borrowings net cash/(debt)
£m £m £m
At 1 April 2020 47.3 (0.1) (83.6) (36.4)
Cash flow (19.6) 0.1 66.0 46.5
Non-cash finance costs - - (0.2) (0.2)
Other non-cash movements - - - -
Exchange movement 0.6 - - 0.6
At 31 March 2021 28.3 - (17.8) 10.5
Cash flow (2.5) - (2.0) (4.5)
Non-cash finance costs - - 1.0 1.0
Other non-cash movements - - - -
Exchange movement 1.6 - - 1.6
At 31 March 2022 27.4 - (18.8) 8.6
Non-cash finance costs relate to the movement in the costs of raising debt
finance in the year.
8. Post balance sheet event
On 31 May 2022 the Group acquired Granfit Holdings Limited and subsidiaries, a
market leading designer, manufacturer and supplier of waterproof bathroom
panels in the UK. As part of the acquisition of 100% of the share capital of
Granfit Holdings Limited, provisional net assets of £10m were acquired for
consideration of £80m with an additional potential earnout of up to £12m
based on certain performance criteria. The acquisition was funded through an
equity placing and utilisation of the Group's banking facilities. At the date
of approval of these financial statements, due to the proximity of the
acquisition to the reporting date, a fair value exercise has not yet been
completed, and so these values remain provisional.
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