Norcros : Results for the six months ended 30 September 2022

9 November 2022

Norcros plc

Results for the six months ended 30 September 2022

'Resilient performance reflecting strength of business model.'

Norcros, a market leading supplier of high quality and innovative bathroom and kitchen products, today announces its results for the six months ended 30 September 2022.

Financial Summary

	Six months	Six months	Six months	% change	% change
	ended	ended	ended	2022 Vs.	2022 Vs.
	30	30	30	2021	20192
	September	September	September
	2022	2021	2019
	26 Weeks	26 Weeks	27 Weeks2
Revenue	£219.9m	£200.9m	£181.2m	9.5%	21.4%
Revenue - constant currency like for like3				1.1%	19.8%
Underlying operating profit1	£22.0m	£22.0m	£17.4m	-	26.4%
Underlying profit before taxation1	£19.9m	£20.9m	£15.6m	(4.8%)	27.6%
Diluted underlying EPS1&4	17.8p	20.0p	15.1p	(11.0%)	17.9%
Operating profit	£16.1m	£19.2m	£14.3m	(16.1%)	12.6%
Underlying net (debt)/cash1	(£58.9m)	£1.0m	(£41.1m)
Interim dividend per share	3.4p	3.1p	3.1p

1. Definitions and reconciliations of alternative performance measures are provided in note 3
2. 2019 period data presented to provide a more meaningful pre-COVID-19 baseline for performance comparisons
3. LFL (like for like) excludes Grant Westfield acquired 31 May 2022 and adjusts 2019 revenue from a 27 to a 26 week basis
4. Reflects the increase in share capital to part fund the Grant Westfield acquisition

Highlights

• Resilient performance with record first half revenue. An increase compared to the pre-pandemic 2019 comparative period of 19.8% on a constant currency like for like3 basis; above the prior year by 9.5% on a reported basis and 1.1% on a constant currency like for like basis3
• The Group benefited from its geographical spread, market share gains and trade channel resilience, offset by softer retail demand and customer destocking
• Underlying operating profit increased by 26.4% against 2019 to a record equalling £22.0m, in line with the record result in 2021
• Grant Westfield acquisition completed and seamlessly integrated in the period
• Strong financial position - low leverage and £130m of committed banking facilities maturing October 2025; significant liquidity and funding headroom
• Interim dividend of 3.4p per share, reflecting the Board's confidence in the Group's prospects

Nick Kelsall, Chief Executive Officer, commented:

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"We have again delivered a resilient first half performance against a challenging macroeconomic backdrop. Whilst activity levels normalised following the exceptional post pandemic demand in 2021, the Board remains confident that the Group's successful strategy, proven business model, leading brands, excellent service proposition and its commitment to new product introductions will continue to offer strong differentiation and deliver further progress in line with the Board's expectations for the year to 31 March 2023."

There will be a presentation today at 9.30 am for analysts via a conference call. The supporting slides will be available on the Norcros website at http://www.norcros.comlater in the day.

Enquiries
Norcros plc	Tel: [phone]
Nick Kelsall, Chief Executive Officer
James Eyre, Chief Financial Officer
Hudson Sandler	Tel: [phone]
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
  • Multipanel - Grant Westfield is a leading manufacturer of high-end waterproof bathroom wall panels
  • 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 & hot water 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
• 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

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Overview of Results

The Board is pleased to record a resilient performance for the six months ended 30 September 2022, once again reflecting the strength of the Group's strategy, its focussed business model, geographical spread, market leading brands, broad distribution channels, well-developed supply chain infrastructure and financial strength.

Our UK business performed well with revenue of £142.8m (2021: £130.8m, 2019: £115.6m), 9.2% above the prior year, and 13.5% above 2019 on a like for like basis. Domestic market revenue was 12.9% above the prior year and 16.3% ahead of 2019 on a like for like basis. Merlyn and Triton delivered a marked increase in revenue relative to 2019, benefitting from their leading market positions, stock availability and superior service. Grant Westfield has now been seamlessly integrated into the Group and contributed revenue of £16.5m in the four months following acquisition.

Our South African business continued to make strong progress with revenue of £77.1m (2021: £70.1m,

2019: £65.6m), 10.0% above prior year on a reported basis and 31.8% above 2019 on a constant currency like for like basis. The business continued to benefit from its strong competitive and financial position leading to further market share gains in the period.

We achieved a record level of underlying operating profit of £22.0m for the period (2021: £22.0m, 2019: £17.4m), equal to the record result in the prior year.

Results

Group revenue for the 26-week first half was £219.9m (2021: £200.9m, 2019: £181.2m) (2021: 26 weeks,

2019: 27 weeks), a 9.5% increase on the prior year on a reported basis. It was 1.1% above prior year on a constant currency like for like basis and a 19.8% increase on a 2019 constant currency like for like basis adjusting from a 27 week to a 26-week period. The performance reflected the strength of our customer proposition over the period and the benefits of our geographical exposure and breadth of distribution channels.

Underlying operating profit was £22.0m (2021: £22.0m, 2019: £17.4m) reflecting the increased revenue in the period and the recovery of increased input costs, principally through the management of selling prices. The underlying operating profit margin was 10.0% (2021: 11.0%, 2019: 9.6%).

Operating profit was £16.1m (2021: £19.2m, 2019: £14.3m) after deducting acquisition related costs of

£4.9m (2021: £1.9m, 2019: £2.2m). Acquisition related costs represent amortisation of acquired

intangibles of £2.8m (2021: £1.9m, 2019: £1.9m) which has increased as a result of the acquisition of

Grant Westfield, acquisition related advisory fees of £1.5m (2021: nil, 2019: nil) and deferred remuneration

of £0.3m (2021: nil, 2019: £0.3m). IFRS 19R administration expenses were £1.0m (2021: £0.9m, 2019: £0.9m) in the period.

Underlying profit before taxation was £19.9m (2021: £20.9m, 2019: £15.6m) reflecting the increase in bank

interest costs to £1.2m (2021: £0.3m, 2019: £0.9m) due to an increase in bank borrowings in the period and higher bank base rates. IFRS 16 interest costs in the period on lease liabilities were £0.9m (2021: £0.8m, 2019: £0.9m). The application of IFRS 16 had a nil impact on underlying profit before taxation (2021: reduction of £0.1m, 2019: reduction of £0.6m).

Profit before taxation was £14.0m (2021: £17.7m, 2019: £13.3m). During the period there were no

exceptional costs (2021: nil, 2019: nil).

Diluted underlying earnings per share were 17.8p (2021: 20.0p, 2019: 15.1p), reflecting the reduction in underlying profit before taxation and the increased share capital following the £18.1m (8.1m shares) equity placing to part fund the Grant Westfield acquisition.

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The Group generated an underlying operating cash inflow of £16.1m (2021: £8.0m, 2019: £20.0m) post a

working capital outflow of £11.0m (2021: £19.3m outflow, 2019: £3.1m outflow), reflecting investment into inventory and the revenue growth in the period. Capital expenditure was £3.3m in the first half (2021: £2.5m, 2019: £3.1m), reflecting our commitment to investing in our overall proposition and a return to pre- pandemic levels.

Financial Position

Group net debt (pre-IFRS 16) was £58.9m at the half year (31 March 2022: £8.6m net cash) following the acquisition of Grant Westfield in May 2022. Inclusive of IFRS 16 lease liabilities, net debt was £84.3m (31 March 2022: £15.4m). IFRS 16 has no impact on cash flow nor on the Group's existing bank covenants. The Group continues to be in a strong financial position with significant headroom within its committed £130m RCF financing facility maturing October 2025.

Pension Scheme

The gross surplus relating to our UK defined benefit pension scheme as calculated under IAS 19R has decreased from £19.6m at 31 March 2022 to £8.2m. This decrease in the surplus is primarily due to an increase in the discount rate to 5.25% (31 March 2022: 2.75%), offset by a reduced value of assets. Notwithstanding the recent volatility in financial markets, and in particular the movement in gilt yields, the Group's UK defined benefit pension scheme obligations continue to be well managed.

Dividend

The Board is declaring an interim dividend of 3.4p per share reflecting the strong first half performance and its confidence in the Group's prospects. The dividend is payable on 10 January 2023 to shareholders on the register on 25 November 2022. The shares will be quoted ex-dividend on 24 November 2022.

Environment, social and governance

The Board is committed to high standards of corporate responsibility, employee engagement and sustainability. We continue to prioritise a number of activities that look to reduce the Group's impact on the environment and support the communities in which we operate, and we strive to provide our employees with a safe and positive working environment. During the first half of the year we have completed our first annual ESG report and TCFD disclosures and established an ESG Forum of key sustainability leaders across our business to work on our ESG strategy. We have started work on our Net Zero Transition Plan which will include setting baselines and targets for our Scope 1, 2 and 3 carbon footprint. We have been working across the business on our wider ESG framework which will develop the KPIs and management information we will use to drive our ESG strategy. We continue to deliver our "Project Yes" (Youth Employment Service) initiative in South Africa to provide work experience for unemployed young people. Within the Group, Triton and Croydex have achieved accreditation with Carbon Trust, Croydex have become the latest of our businesses to achieve ISO14001 in July 2022 and Triton won the Screwfix Sustainable 2022 Award for Product of the Year.

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Operating Review

UK

Our UK businesses achieved first half revenue of £142.8m (2021: £130.8m, 2019: £115.6m), representing growth of 13.5% against 2019 on a like for like basis reflecting the growth in RMI activity over that period, market share gains and selling price increases to recover higher input costs.

Against the strong prior year, total revenue was 3.4% lower on a like for like basis with domestic market revenue 0.9% lower. Trade sector revenue proved particularly resilient, offsetting the combination of softer retail demand and destocking in some of our larger retail customers. Export revenue was significantly lower reflecting softer demand in many of our export markets. Grant Westfield grew revenue on a like for like basis and contributed revenue of £16.5m in the four months following acquisition.

Underlying operating profit for the first half was £16.3m (2021: £17.0m, 2019: £12.5m), the improvement on 2019 largely reflecting the contribution of Grant Westfield and the operational leverage resulting from the significant growth in revenue. The reduction in profit compared to prior year is largely due to the normalisation of retail channel activity levels following the exceptional pandemic related peaks in 2021, partly offset by the contribution of Grant Westfield. Operating cash conversion was ahead of the prior year but below 2019 reflecting the investment into inventory to support service levels.

Triton

Triton, the UK's market leader in showers, recorded revenue for the first half of £30.0m (2021: £30.9m,

2019: £24.5m), 2.9% below the prior year but 27.7% up against 2019 on a like for like basis. The business grew its overall market share, particularly in the trade sector but was impacted by a normalisation of demand across the retail channel. Triton continued to secure market share gains, driven by excellent customer service and market leading products.

Retail sector revenue in the first half was up 38.4% on 2019 on a like for like basis, benefitting from a significant uplift in demand for DIY, home renovation and maintenance projects over the last three years. Destocking from some of the larger retail customers and softer retail demand resulted in a year on year reduction of 8.7% against the strong prior year comparator.

Trade sector revenue in the first half was 28.0% higher than 2019 on a like for like basis (up 14.3% on prior year) with the business continuing to particularly benefit from the return of contract, social housing and local authority business.

As in the UK retail channel, export market revenue also performed strongly versus 2019 through the first half and was 10.6% higher on a like for like basis, albeit this was 17.5% below prior year, impacted by the destocking by some export customers and a general retail slowdown.

During the first half of the year Triton introduced a number of new products, including the new DuElec Shower which gives overhead and/or hand shower options, and won the inaugural Screwfix sustainability award for its Enrich electric shower range. Triton also launched its "Every Drop Makes A Difference" campaign which raises awareness about the efficiency of electric showers. This included a Good Morning Britain advertisement that reached almost 21 million consumers.

Triton delivered a strong underlying operating profit performance ahead of 2019, albeit behind prior year.

Merlyn

Merlyn, the UK and Ireland's No. 1 supplier of shower enclosures and trays to the residential, commercial and hospitality sectors, continued to perform strongly during the first half recording revenue of £28.5m (2021: £29.1m, 2019: £21.9m), 2.1% below prior year but a 35.1% increase on 2019 on a like for like basis.

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