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Norcros releases trading update

Tile Africa store

Norcros, the leading supplier of branded showers, taps, bathroom accessories, tiles and adhesives will announce its preliminary results for the year ended 31 March 2017 on 14 June 2017. In advance of this, the Group is providing the following trading update. 

Trading Update

Group underlying operating profit1 for the year is expected to be in line with the Board's expectations reflecting a robust performance and demonstrating the Group's resilience.

Group revenue for the year is expected to be in the region of £271m (2016: £235.9m), 14.9% higher than the prior year, 10.6% higher on a constant currency basis, and 4.0% higher on a constant currency like for like basis2. 

 

Reported

Constant

Currency

Constant Currency LFL2

 

FY

FY

H1

H2

FY

UK

+11.7%

+11.7%

( 5.0)%

8.3%

1.8%

South Africa

+22.1%

+ 8.4%

10.0%

7.0%

8.4%

Group

+14.9%

+10.6%

( 0.2)%

7.9%

4.0%

UK revenue for the year was 11.7% higher than the prior year reflecting a stronger performance in the second half of the year and the success of the Group's acquisition strategy. Abode which was acquired on 31 March 2016 has integrated well into the Group and performed in line with the Board's expectations in the year.  Vado and Croydex, acquired in March 2013 and June 2015 respectively, also continued to make good progress. On a like for like basis2, UK revenue was 1.8% higher than the prior year reflecting a strong recovery in all segments in the second half (+8.3%) following softer conditions in the first half of the year (-5.0%).

Our South African business again delivered strong revenue growth, 8.4% higher than the prior year on a constant currency basis and 22.1% higher on a reported basis, continuing the sustained progress of recent years.  

Reorganisation

In order to improve operating performance and better align capacity with demand, in March 2017, the Group commenced a restructuring of its UK tiles business. The reorganisation will increase Johnson Tiles' manufacturing flexibility, reduce inventory and involve the loss of around 90 jobs. This will result in a charge of around £2.3million, to be treated as an exceptional operating item and recognised in the financial year ended 31 March 2017 with the subsequent cash outflow occurring in the first half of 2017/18. It is expected that the restructuring will pay back in cash terms within twelve months. 

Financial position

Closing year end net debt is expected to be around £24m (2016: £32.5m), due to continued good cash generation in the second half of the year. 

Outlook

Despite the widely documented challenging markets, the Group has achieved another year of growth and is in a strong financial position with a well managed pension situation. The Board is confident that the Group is well placed to make further progress.  

Nick Kelsall, Group Chief Executive, commented 

"The Group expects to deliver its eighth consecutive year of revenue and underlying operating profit growth during a period of variable trading conditions. This demonstrates the success and resilience of the Group's business portfolio and operating model. 

The Group continues to focus on growth, both organically and via acquisitions. It is particularly pleasing to note the strong performances from our South African operations and the acquired businesses of Vado, Croydex and Abode. We continue to actively pursue complementary opportunities in line with our stated strategy. 

We closely monitor market conditions and accordingly, proactively manage our cost base and our deployment of capital.

We are pleased with our performance over the year, and the Board believes the Group remains well positioned to make further progress." 

Underlying operating profit excludes IAS 19R administrative expenses, acquisition related costs and exceptional operating items

2 LFL / like for like excludes Abode revenues (acquired 31 March 2016) and Croydex quarter one revenues (acquired 25 June 2015)

Source: Norcros Press Release

12 April 2017

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