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Norcros Continues To Outperform The Market

Triton shower bath and sink 725 x 500

Norcros plc ("Norcros" or the "Group"), a market leading supplier of high quality and innovative bathroom and kitchen products, will announce its interim results for the 26-week period ended 3 October 2021 on 11 November 2021. In advance of this, the Group is providing the following trading update. 

Trading

The Group's outperformance of the market experienced in the second half of the prior year has continued in the first half of this year, reflecting both increased activity in the UK and SA RMI markets and the strength of our customer proposition. 

Group revenue for the 26 week period is expected to be approximately £200m (2020: £135.3m; 2019: £181.2m), 49% higher on a reported basis than the COVID-19 impacted prior year (2020) and 18% higher than 2019 on a constant currency like for like basis. 

 

H1 LFL2 revenue increase on

 

     2020               2019   

UK

40%

18%

South Africa

69%

11%

South Africa (at CC1)

53%

20%

Group

49%

15%

Group (at CC1)

44%

18%

Our UK business has continued to perform strongly, with revenue for the 26 week period 18% higher than in 2019 on a like for like basis reflecting increased demand in the RMI sector and market share gains, with Triton and Merlyn continuing to perform extremely well.

Our South African business has also continued to outperform, with revenue for the 26 week period 20% higher than in 2019 on a constant currency like for like basis, with Tile Africa continuing to benefit from higher demand and market share gains in the retail renovation market.

Financial Position

The balance sheet remains very strong with net cash of approximately £1.0m (pre-IFRS16) compared to net cash of £10.5m as at 31 March 2021. During the period the Group has replenished inventory levels and paid the prior year declared dividend. 

Outlook and FY22 Upgrade

Our market outperformance in the first half of this financial year reflects the strength of our focussed operating model, our market leading brands, broad distribution channels, well-developed supply chain infrastructure and stock availability. The strength of our leading customer proposition has resulted in an excellent performance, and we expect to report an underlying operating profit in the first half of the year of no less than £21m (2020: £12.8m, 2019 £17.4m). 

As previously referenced, supply chain challenges, increased energy costs, inflationary cost pressure and a normalisation of consumer spending patterns mean that uncertain market conditions are likely to prevail during the remainder of the financial year. Notwithstanding these factors, and based on the excellent first half performance and the Group's strong revenue momentum, we expect underlying operating profit for the year to 31 March 2022 to be significantly ahead of the board's previous expectations. 

1. CC refers to constant currency basis  

2. LFL (like for like) adjusts 2019 revenue from a 27 to a 26 week period pro-rating

Source : Norcros

Comment

Toby Thorrington, Director, Industrials, at Edison Group, comments: "In a pre-close statement, Norcros has flagged a strong H122 trading period with outperformance of strong renovation markets in both its UK and South African operations. Expected group revenue of c £200m for the period is 15% higher than the pre-COVID H120 (+18% in local currency terms). Based on an indicated £21m EBIT – which we believe is a record first half for the group - the margin performance of 10.4%+ compares favourably to historic H1 levels.

In the UK, LFL revenues were 18% ahead of H120 (and +40% versus H121) with Triton (showers) and Merlyn (shower enclosures) continue to perform very well, taking market share and contributing to the strong EBIT group performance. South African operations (which account for around one third of revenue and one fifth of group operating profit) also saw LFL revenue progress of 20% in local currency terms (+11% in sterling) compared to H120 with retail-oriented Tile Africa again leading the way.

Norcros successfully de-geared during the COVID-affected FY21 and despite taking steps to prudently rebuild inventory levels and pay the FY21 final dividend, the balance sheet is still modestly cash positive at the end of H122.

Notwithstanding some well-rehearsed and widely heard market challenges (including supply chain strains, cost inflation and demand normalising) the Norcros management team is flagging strong revenue momentum and has raised guidance to significantly above its previous expectations."

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14 October 2021

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