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Norcros Reports Marked Recovery In UK & South African Business

Triton shower bath and sink.JPG

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 4 October 2020 on 12 November 2020. In advance of this, the Group is providing the following trading update. 

Trading

Since the AGM update in July, the strong trading momentum has continued with a marked recovery in demand in the second quarter in both the UK and South African businesses. This has resulted in the Group delivering a sustained level of profitability in the second quarter combined with excellent cash generation as our pre COVID-19 inventory levels continued to satisfy customer demand. Group revenue for the second quarter (13 weeks: 2019 14 weeks) is expected to be 105% of prior year on a constant currency like for like2 basis reflecting market share gains in our major channels.

Group revenue for the 26-week first half (2019: 27 weeks) is expected to be approximately £135.3m (2019: £181.2m), 75% of prior year revenue on a reported basis, 80% on a constant currency basis and 83% on a constant currency like for like2 basis.    

 

Revenue % of prior year

First

Quarter

Second Quarter

Second Quarter (LFL2)

Half

Year

Half

Year

 (LFL2)

UK

62%

96%

104%

81%

84%

South Africa

42%

81%

87%

63%

66%

South Africa (at CC1)

50%

99%

106%

76%

79%

Group

55%

91%

98%

75%

78%

Group (at CC1)

58%

97%

105%

80%

83%

 1CC refers to constant currency basis  
2LFL (like for like) adjusts prior year revenue for 27 to 26 week period pro-rating

Our UK business has continued to perform strongly and we expect to report H1 revenue of approximately £93.7m (2019: £115.6m), with second quarter revenue at 104% and half year revenue at 84% on a like for like2 basis. Merlyn, Triton and Vado experienced a marked recovery in the second quarter with revenue ahead of prior year on a like for like2 basis benefiting from their leading market positions, stock availability and superior service.   

Our South African business also continued to make good progress and we expect to report H1 revenue of approximately £41.6m (2019: £65.6m), with second quarter revenue at 106% and half year revenue at 79% of the same period last year on a constant currency like for like2 basis. The performance reflects a strong recovery in the Tile Africa business in the retail renovation market. 

Financial Performance and Position

Reflecting the strong recovery in trading in the second quarter and the decisive actions taken to deal with the unprecedented impact of COVID-19 it is pleasing that the Group is expected to report a pre-IFRS 16 underlying operating profit of approximately £12m for the first half (2019: £17.1m), underlining the resilience of the Group's business model, the strength of its market leading positions and its well established supply chains. 

As a result of the strong recovery in trading and the continued focus on cost alignment and cash preservation it is expected that Group net debt will have reduced to circa £8.0m at the half year (2019: £41.1m). This is a significant reduction on the £36.4m reported at the year end and in leverage with Net Debt: LTM EBITDA of approximately 0.2 times compared to 0.9 times at the year end. 

Dividend

The Board recognises the importance of dividends but does not expect to declare an interim dividend when it publishes its results on 12 November 2020. However, the Board will consider recommending a final dividend for the full year subject to the Group's continued strong trading performance, financial position and outlook. 

Outlook

Our businesses have adapted swiftly to ensure that they operate safely and cost effectively and have recovered strongly from the initial impact of the pandemic. Notwithstanding the ongoing uncertainty as governments seek to control COVID-19, Norcros continues to be in a very strong competitive and financial position. Given this, its leading market positions, established brands, broad distribution channels and experienced management team the Group remains well positioned to sustain the strong progress and recovery of the second quarter.

Source : Norcros PLC

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15 October 2020

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