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Norcros Reports Strong Recovery

Triton shower bath and sink 725 x 500

Norcros, a market leading supplier of high quality and innovative bathroom and kitchen products, today announces its results for the year ended 31 March 2021, advising of a very strong recovery from a period of unprecedented uncertainty.

Financial Summary 

 

20212

2020

% change as reported

% change constant

currency like for like3

Revenue

£324.2m

£342.0m

-5.2%

+0.7%

Underlying operating profit1

£33.8m

£32.3m

+4.6%

 

Underlying profit before taxation1

£30.6m

£28.8m

+6.3%

 

Diluted Underlying EPS1

31.1p

28.2p

+10.3%

 

Underlying operating cash flow1

£65.8m

£38.4m

+71.4%

 

Operating profit

£24.9m

£17.8m

+39.9%

 

Underlying net cash/(debt)1

£10.5m

(£36.4m)

 

 

Dividend per share

8.2p

3.1p

 

 

1 Definitions and reconciliations of alternative performance measures are provided in note 5

2 Year to 31 March 2021: 52 weeks (Year to 31 March 2020: 53 weeks)

3 Like for like adjusts prior year revenue for period pro-rating of number of weeks

Highlights

  • Very strong recovery from a period of unprecedented uncertainty with second half revenue growth of 19.5% on a constant currency like for like basis

  • Full year revenue of £324.2m (2020: £342.0m). 0.7% higher than prior year on a constant currency like for like basis

  • Underlying operating profit of £33.8m, 4.6% higher than prior year (2020: £32.3m

  • Operating profit of £24.9m (2020: £17.8m)

  • Strong cash generation in the year of £46.9m has significantly strengthened the balance sheet with net cash of £10.5m (2020: net debt of £36.4m)

  • Underlying ROCE above strategic target rate at 18.2% (2020: 16.4%)

  • Diluted underlying EPS of 31.1p, 10.3% higher than prior year (2020: 28.2p)

  • Reinstatement of dividend at 8.2p for the year (2020: 3.1p)

Current trading 

  • Strong trading momentum has continued into April and May 2021 with Group revenue ahead of the comparable period in 2019 by approximately 23% 

David McKeith, Acting Chair, commented:

"Norcros has recovered very strongly from a period of unprecedented global disruption and uncertainty caused by the COVID-19 pandemic. The resilience of the Group's business model and strategy is proving to be highly effective; this was particularly evident in the last financial year as we outperformed the market in the most unpredictable trading environment we have ever experienced. The Board is confident that this outperformance can be sustained."

Chief Executive Officer's Statement:

"Norcros has ended the year reporting constant currency like for like revenue growth, underlying operating profit growth and a net cash position after having successfully navigated the most turbulent trading environment in recent memory. 

"The unprecedented COVID-19 pandemic led to national lockdowns in the first quarter in our two main markets significantly reducing the demand for our products during which time we mothballed our facilities, operating our businesses effectively with a skeleton staff working predominantly from their homes where possible. Since the first lockdowns have eased, the resilience and flexibility of our business model including our well established supply chains and experienced management teams enabled the business to take full benefit from the upturn in repair, maintenance and improvement activity, and rapidly return to growth and increase our market share. 

"Group revenue at £324.2m (2020: £342.0m) decreased by 5.2% on a reported basis, by 1.2% on a constant currency basis, and increased 0.7% on a constant currency like for like basis after adjusting the prior year for period pro-rating (53 weeks versus 52). First quarter revenue was 58% of prior year on a constant currency like for like basis due to the prevalent national lockdowns and closure of our facilities. As our businesses reopened second quarter revenue recovered to 97% of prior year on a constant currency like for like basis, leaving the first half 17.3% lower than the prior year on a similar basis. Revenue in the second half was 19.5% higher than prior year on a constant currency like for like basis as the market recovery strengthened further driven by improved RMI and home renovation activity and our market share gains.

"Group underlying operating profit for the year increased by 4.6% to £33.8m (2020: £32.3m) reflecting the significant profit impact of the COVID-19 disruption in the first quarter partially offset by £4.3m of Government job retention support and the strong recovery in trading in the second half of the year.

"Revenue in the UK was £220.2m for the year (2020: £225.4m), 2.3% lower than the prior year on a reported basis and 0.4% lower on a like for like basis. Revenue was significantly impacted in the first quarter, down 37.6% on prior year on a like for like basis, due to the impacts of the COVID-19 pandemic associated lockdowns and facility closures. Revenue recovered in the second quarter and was 3.5% higher than prior year on a like for like basis as our businesses benefitted from an uplift in RMI activity leading to strong growth in the retail and online channels. During the second half revenue grew further, 15.2% higher than prior year on a like for like basis as we benefited from our brand leading market positions, broad distribution channels, supply chain infrastructure and  stock availability, enabling us to capitalise on the strong rebound in demand and to grow our market share further.

"In the UK, Triton and Merlyn performed very strongly in terms of revenue, operating profit and cash generation and gained further market share. Triton, the UK's market leader in showers, recorded revenue 14.3% higher than the prior year on a like for like basis having quickly adapted to the changes in both supply and demand conditions ensuring product availability and maintaining superior customer service levels. Merlyn, the UK and Ireland's No. 1 supplier of shower enclosures and trays grew revenue by 3.8% on the prior year on a like for like basis as it continued to enhance its market leading position in the UK through its quality product offering and customer centric service.

"Further to the COVID-19 impact on demand, our UK businesses saw significant disruption to global logistics networks in part related to Brexit, but more significantly a result of global sea freight container shortages with containers being stuck in UK and other ports globally resulting in container shortages in Asia. This had a significant impact on product delivery times and freight costs in the final quarter. Brexit related disruptions and cost impacts had been well planned for by our businesses and to date have not significantly impacted our trading. We remain vigilant on the progress of the EU-UK separation and continue to manage the risks associated with any new or amended regulations or changes in duty regimes as they arise. 

"UK underlying operating profit for the year was £26.9m (2020: £24.4m), largely reflecting the strong recovery in the second quarter, continued revenue growth in the second half of the year and £3.5m of coronavirus job retention support from the UK and Irish governments. The underlying operating margin for the year was 12.2% (2020:10.8%).

"Revenue in South Africa increased by 3.2% on prior year on a constant currency like for like basis, though lower by 10.8% on a Sterling reported basis, to £104.0m (2020: £116.6m). The first quarter performance was materially impacted by the COVID-19 related nationwide lockdown and associated closure of our facilities, with resultant revenue at 50% of the prior year on a constant currency like for like basis. Our businesses recovered strongly in the second quarter as our operations reopened and lockdowns ended with revenue at 106.2% of the prior year on a constant currency like for like basis, benefitting from the timely reopening of our facilities in a COVID-19 safe and secure manner ahead of many of our competitors, an improved export performance and excellent supply chain management. These management actions enabled the businesses to grow revenue further in the second half, increasing 29.2% against prior year on a constant currency like for like basis, as volumes reflected strong retail renovation demand and increased commercial housebuilder activity.

"Tile Africa, our leading retailer of wall and floor tiles, sanitaryware and bathroom fittings, grew annual revenue by 11.8% on a constant currency like for like basis driven by higher retail demand from increased renovation activity in the market and significantly improved operating disciplines and superior stock availability.

"South African underlying operating profit for the year was £6.9m (2020: £7.9m), largely reflecting the translational effect of the weaker Rand, the impact of COVID-19 on first quarter trading, partially offset by the receipt of £0.8m of coronavirus job retention support from the South African government, and the recovery in revenue in the second half." 

Directorate Change

Norcros plc, a market leading supplier of high quality and innovative bathroom and kitchen products today announces that Shaun Smith, Chief Financial Officer, has notified the Board of his intention to retire as a director of the Company to pursue a non-executive director career, which the Board has accepted with effect from 31 July 2021. Mr Smith will remain an employee of the Company during the handover period to his successor and his retirement from the Company will take effect on 31 December 2021.

Norcros has concluded a thorough recruitment process with the decision to appoint James Eyre as successor. James has been the Group's Director of Corporate Development and Strategy, leading acquisitions at Norcros since 2014 and will assume the role of Chief Financial Officer effective 1 August 2021. James is a Chartered Accountant and has held senior finance roles at AstraZeneca, Bank of Ireland and N M Rothschild prior to joining Norcros.

Commenting on these changes, Nick Kelsall, Chief Executive Officer, said:

"We have accepted Shaun's decision to retire with considerable regret and I would like to put on record the Board's appreciation of his valued contribution as CFO of Norcros since 2016.  We are delighted to promote James Eyre as our new CFO who I know will provide both strong continuity and financial stewardship given his experience and deep knowledge of our Group. I wish James every success in his new role and Shaun best wishes for the future."

Source : Norcros

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10 June 2021

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