Results for the year ended 31 March 2016

RNS Number : 0653B

Norcros PLC

14 June 2016

 

14 June 2016

Norcros plc

Results for the year ended 31 March 2016

'Further steps towards achieving our strategic goals.'

Norcros, the market leading supplier of innovative branded showers, taps, bathroom accessories, tiles and adhesives, today announces its results for the year ended 31 March 2016.

Financial Summary

	2016	2015	% change as reported	% change at constant currency
Revenue	£235.9m	£222.1m	+6.3%	+11.0%
Underlying* operating profit	£21.3m	£17.0m	+25.7%
Underlying* profit before tax	£20.4m	£15.8m	+29.1%
Profit before tax	£15.4m	£11.0m	+40.2%
Underlying* diluted EPS	27.8p	21.1p	+31.8%
Underlying operating cash flow**	£20.4m	£22.9m	-10.9%
Net debt	£32.5m	£14.2m	+128.9%
Dividend per share***	6.6p	5.6p	+17.9%

     *Underlying is before IAS 19R administrative expenses, acquisition related costs and exceptional operating items and, where relevant, before non-cash     

       finance costs and after attributable tax

   **Underlying operating cash flow is cash generated from continuing operations before exceptional cash out flows and pension fund deficit recovery

       contributions

 ***Restated for the 10:1 share consolidation completed on 29 September 2015

 Highlights

·  Seventh consecutive year of growth

·  Underlying operating profit up 25.7% at £21.3m (2015: £17.0m)

·  Underlying diluted earnings per share increased by 31.8%

·  Acquisitions of Croydex and Abode - further progress towards strategic growth target

·  Underlying ROCE at 18.3% - ahead of strategic target

·  Full year dividend increased by 17.9%

·  Agreement with pension Trustee on scheme valuation and recovery plan

Martin Towers, Chairman, commented:

"I am delighted to announce that Norcros has recorded its seventh year of revenue and underlying operating profit growth.  In addition, we have taken further steps towards achieving our strategic goals with the acquisitions of Croydex and Abode. The result reflects the successful acquisition strategy and the sustained focus on driving organic growth through market share gain, investment in new products, operational efficiency programmes and geographic expansion. The recent acquisitions, together with our developing pipeline, give me confidence that we can achieve our medium-term strategic objectives."

There will be a presentation today at 9.30 am for analysts at the offices of Hudson Sandler, 29 Cloth Fair, London, EC1A 7NN. The supporting slides will be available on the Norcros website at http://www.norcros.com later in the day.

Enquiries

Norcros plc	Tel: [phone]
Nick Kelsall, Group Chief Executive
Shaun Smith, Group Finance Director
Hudson Sandler	Tel: [phone]
Nick Lyon
Charlie Jack
Bertie Berger

Notes to Editors

·     Norcros is a leading supplier of high quality and innovative showers, taps, bathroom accessories, ceramic wall and floor tiles and adhesive products with operations primarily in the UK and South Africa.

·     Based in the UK, Norcros operates under six brands:

·    Triton Showers - Market leader in the manufacture and marketing of showers in the UK

·    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 taps, bathroom taps, and  kitchen sinks

·    Johnson Tiles - A leading manufacturer and supplier of ceramic tiles in the UK

·    Norcros Adhesives - Manufacturer of tile & stone adhesives, grouts and related products

·     Based in South Africa, Norcros operates under three brands:

·   Tile Africa - Chain of retail stores focused on ceramic and porcelain tiles, and associated products such as sanitary ware, showers and adhesives

·    Johnson Tiles South Africa - Manufacturer of ceramic and porcelain tiles

·    TAL - The leading manufacturer of ceramic and building adhesives

·     Norcros is headquartered in Wilmslow, Cheshire and employs around 2,000 people. The Company is listed on the London Stock Exchange. For further information please visit the Company website: http://www.norcros.com/

 

Chairman's Statement

Overview

I am delighted to announce that Norcros has recorded its seventh year of revenue and underlying operating profit growth, with the result achieved in the year being marginally ahead of market expectations.  The Group has also made good progress towards its strategic objectives with the acquisitions of Croydex and Abode in the year.

Group revenue for the year was £235.9m, 6.3% higher than the prior year on a reported basis, 11.0% higher on a constant currency basis and 2.9% higher on a like for like constant currency basis. Underlying operating profit at £21.3m was 25.7% higher than prior year, reflecting a significantly improved performance in Johnson Tiles UK, continued progress in our South African businesses, and a first time contribution from Croydex which was acquired in June 2015. This led to an increase in underlying diluted earnings per share of 31.8% to 27.8p (2015: 21.1p).

The acquisition of Croydex, our market leading, innovative designer, manufacturer and distributor of high quality bathroom furnishings and accessories, was a further key step towards achieving our strategic goals, and I have been encouraged by its seamless integration into the Norcros Group and the strong trading performance since being acquired. The acquisition of Abode, a leading niche designer and distributor of high quality kitchen taps, bathroom taps and kitchen sinks, was completed just before the end of the financial year. I am confident that Abode is an excellent strategic fit and that we can further grow and develop it alongside our current portfolio. The Board expects the Abode acquisition to be earnings enhancing immediately.

The Group is in a sound financial position, with strong cash generation in the year. Following the £23.6m investment in acquisitions during the year, net debt at £32.5m (2015: £14.2m) represents pro-forma leverage of 1.2 times EBITDA.

Dividend

The Board is recommending a final dividend for the year of 4.4p (2015 restated: 3.75p) per share. When added to the interim dividend of 2.2p (2015 restated: 1.85p) per share which was paid on 7 January 2016, this will make a total dividend for the year of 6.6p (2015 restated: 5.6p) per share, a 17.9% increase on the previous year.

Pension

I am pleased to report that we reached agreement with the pension scheme Trustee on the 2015 actuarial valuation and recovery plan. The actuarial deficit at £73.5m (2012: £61.9m) reflects the impact of historically low gilt yields and the recovery plan of £2.5m per annum plus CPI for the next ten years represents a satisfactory outcome in the light of that valuation and the previous plan of £2.1m plus CPI per annum.

People

Our employees are undoubtedly our most important asset and I am certain that for all our businesses, including those newly acquired, the opportunities for long-term growth within the Group will ensure that they find Norcros a place where they will continue to enjoy rewarding careers. On behalf of the Board I welcome those employees joining the Group from our newly acquired Croydex and Abode businesses and congratulate all employees for delivering another year of strong progress.

Board changes

As previously announced, Shaun Smith succeeded Martin Payne as Group Finance Director on 4 April 2016 and following a handover Martin stepped down from the Board on 12 May 2016. I would like to welcome Shaun to Norcros and wish him well in his role. I also thank Martin for his valued contribution during his tenure. 

Summary

The Group has delivered another very strong performance notwithstanding mixed market conditions and currency headwinds, reflecting the successful acquisition strategy and the sustained focus on driving organic growth through market share gain, investment in new products, operational efficiency programmes and geographic expansion.

In addition, we have taken further steps towards achieving our strategic goals with the acquisitions of Croydex and Abode during the year, both of which will extend our product offering and provide opportunities to drive revenue and procurement synergies for the Group within our chosen sectors and geographies. These recent acquisitions, together with our developing pipeline, give me confidence that we can achieve our medium-term strategic objectives.

Group Chief Executive's Statement

Overview

Following another year of solid progress, Group revenue for the year increased by 6.3% to £235.9m (2015: £222.1m) and by 11.0% on a constant currency basis.

The UK market has continued to be mixed, with new house build and housing transactions remaining robust, but with a noticeable slowdown in public sector spending during the second half of the year as government spending cuts began to bite. Furthermore, fragile consumer confidence and specific sector challenges impacted performance in the DIY retail channel. UK revenue for the year at £163.0m (2015: £149.1m) was 9.3% ahead of the prior year and 2.2% lower on a like for like basis excluding the contribution from the Croydex business. The like for like decline reflected a more challenging trading environment in the DIY retail channel driving lower revenue in both Triton and Johnson Tiles. This offset strong revenue growth at Vado and Norcros Adhesives. Notwithstanding the mixed market, UK underlying operating profit for the year was 25.3% higher than the prior year at £17.2m (2015: £13.8m) with operating margins significantly ahead at 10.6% (2015: 9.2%). This strong improvement in profitability in the year reflected the first time contribution from Croydex, a return to profitability at Johnson Tiles, largely reflecting resolution of last year's production inefficiencies, and good profit progression at Vado. Triton maintained its strong profitability although lower retail revenue and additional marketing investment in its South American markets resulted in profits being below the prior year.

I am also pleased to report the sustained improvement in performance in our South African business, where revenue was 15.0% higher on a constant currency basis albeit broadly flat on a reported basis due to the weakening of the Rand. Underlying operating profit for the year increased by 27.8% to £4.1m (2015: £3.2m) despite the weaker Rand adversely impacting profit translation by £0.6m, resulting in operating margins advancing to 5.6% from 4.4% in the prior year. Again, all three businesses contributed to the improvement, with the benefits of the self-help initiatives and the investment programmes beginning to be realised. In Johnson Tiles South Africa, the strong progress in the first half was sustained resulting in a Sterling underlying operating profit for the year. In TAL, another year of double digit constant currency revenue growth and manufacturing efficiency improvements helped deliver an improved financial performance, and in Tile Africa, the benefits of the new CX store format and logistics improvements contributed to a much improved retail performance.

Group underlying operating profit at £21.3m (2015: £17.0m) was 25.7% higher than prior year, with Group underlying operating margins also substantially ahead of last year at 9.0% (2015: 7.6%). Underlying operating cash remained strong at £20.4m (2015: £22.9m) although cash conversion was lower than last year reflecting working capital investment in a number of our businesses. Acquisition related outflows of £23.6m resulted in closing net debt of £32.5m (2015: £14.2m), and pro-forma leverage of 1.2 times EBITDA (2015: 0.6 times). The Group is in a sound financial position with funding available through a £100m unsecured debt facility (including a £30m accordion) until July 2019. This leaves the Group well positioned to respond to further opportunities as they arise.

Strategy

As previously reported, the Board has three strategic targets, to double Group revenue to £420m by 2018, to maintain revenue derived outside of the UK at approximately 50% of Group revenue, and to sustain a pre-tax return on underlying capital employed of 12% to 15% over the economic cycle. We remain committed to these targets and have made good progress towards achieving them in the year.

In pursuit of its growth strategy the Group has acquired three material and complementary businesses in the last three years.  Vado, which was acquired in March 2013, has been an outstanding success with revenue growth of 9.7% p.a. and underlying operating profits growing 22.6% p.a. since acquisition. Croydex, acquired in June 2015, has also performed strongly with revenue and underlying profits in line with our expectations and demonstrating strong like for like growth. Both Vado and Croydex also strongly contributed towards the Group achieving an underlying return on capital employed of 18.3% which is ahead of our Group target.  We have achieved meaningful revenue and procurement synergies benefiting the performance of the Vado business and we are pursuing a series of similar programmes with the Croydex and Abode businesses. The recently acquired businesses have similar operating characteristics and provide a compelling fit with our current portfolio and the Group's strategy. Croydex and Abode collectively will add c. £33m to Group revenue on an annualised basis and, like Vado, will enhance earnings, complement our existing businesses, and provide good growth prospects.  

On a Sterling reported basis, Group revenue derived outside of the UK was 41.6% (2015: 44.6%).  Our progress in relation to this strategic target has been impacted by the significant depreciation of the Rand/Sterling exchange rate since the objective was established. However, expressed in constant currency, we have achieved our target this year at 50% and remain committed to growing our current overseas markets and developing new ones to support this important strategic intent.

Our track record in acquiring attractive businesses in our chosen sectors and geographies together with the increased resources committed to our growth objectives, our well-developed pipeline of opportunities combined with our strong financial position gives me confidence that we will continue to execute this strategy. Whilst organic Sterling revenue growth has been held back by a weakening Rand, I am encouraged by the organic growth opportunities in our existing businesses including the synergy opportunities available to the enlarged Group.

Summary and outlook

The Group has made good progress towards its strategic targets during the year. Whilst the outlook for the market in the UK is somewhat variable in the short term, with general uncertainty caused by the UK's EU referendum exacerbated by challenges in our DIY retail sector, improved RMI spend and increased housebuilding activity in the medium term should benefit the Group with good growth opportunities. Our South African businesses have continued to perform strongly, and, despite recent political and economic concerns, the medium-term outlook in South Africa remains positive, providing opportunities for the Group to gain added momentum. With our leading market positions, portfolio of strong brands, continued new product investment and self-help initiatives focused on market share gain, the Board remains confident that the Group should continue to make further progress for the year ending 31 March 2017.

Business performance

	2016	2015
	£m	£m
Revenue	235.9	222.1
Operating profit	16.7	10.6
IAS 19R administrative expenses	1.7	1.7
Acquisition related costs	5.2	2.2
Exceptional operating items	(2.3)	2.5
Underlying operating profit	21.3	17.0

	2016	2015
	£m	£m
Revenue - UK	163.0	149.1
Revenue - South Africa	72.9	73.0
Revenue - Group	235.9	222.1
Underlying operating profit - UK	17.2	13.8
Underlying operating profit - South Africa	4.1	3.2
Underlying operating profit - Group	21.3	17.0
Underlying operating profit margin - UK	10.6%	9.2%
Underlying operating profit margin - South Africa	5.6%	4.4%
Underlying operating profit margin - Group	9.0%	7.6%

	2016	2015
	£m	£m
Underlying operating profit	21.3	17.0
Depreciation	5.5	6.0
Underlying EBITDA	26.8	23.0
Net working capital movement	(7.7)	(1.5)
Share-based payments	1.2	1.3
Other non-cash items	0.1	0.1
Underlying operating cash flow	20.4	22.9

Business review - UK

In the UK, revenue increased in the year by 9.3% to £163.0m (2015: £149.1m). This includes a nine-month contribution of £17.2m from our newly acquired Croydex business, leaving UK like for like revenue 2.2% lower than prior year. The results do not include any contribution from the Abode business, which was acquired on 31 March 2016. Continued progress in Vado and another strong performance in Norcros Adhesives were more than offset by lower revenue in Johnson Tiles and Triton. This performance reflects the mixed market conditions, with gains in our trade and specification markets despite significantly reduced public RMI spend in the second half and a continued challenging environment in some of our UK retail channels and export markets. Notwithstanding these mixed conditions, underlying operating profit increased by 25.3% to £17.2m (2015: £13.8m) with margins substantially ahead at 10.6% (2015: 9.2%). A return to profit at Johnson Tiles following abnormal production inefficiencies last year, together with the continued strong progress at Vado and the first time contribution from Croydex, all contributed to this substantial improvement in profitability. 

Triton Showers

Revenue at Triton Showers, our market leading UK domestic shower business, was 2.8% lower at £50.6m (2015: £52.1m). Despite an improvement in the UK trade sector, performance in the UK DIY market segment was weak, leading to the UK shower market being quite challenging during the last year overall.

UK revenue was 3.4% lower than the prior year. Despite this, new products, such as the new thermostatic version of the market leading T80 Fast Fit, and continued dedicated focus on specification sales, together with strong marketing and promotional activity within the national merchant and electrical wholesale sectors, helped drive trade revenue 3.9% higher than the prior year. Retail sector revenue was however 9.4% lower than the prior year reflecting the combined impact of aggressive competitor activity, initiatives to reduce store numbers and stock holding, and a move away from promotional pricing strategies to everyday low pricing.

Notwithstanding the challenging DIY sector, Triton grew its overall share of the branded UK shower market in both the electric and mixer shower segments.

After significant growth in the prior year, export revenue, which represents approximately 15% of overall revenue, was 0.8% higher compared to the prior year. Growth in new overseas markets such as South America offset a slight decline in the established Irish market. New premium and thermostatic electric showers helped drive revenues together with the launch of a new low pressure electric shower range which has enabled entry into the large South American markets.

Triton again delivered strong underlying operating profits and good cash conversion although lower than the prior year, with lower revenue and additional marketing investment associated with development of the South American market holding back year on year progression.

Vado

Vado, our leading manufacturer of taps, mixer showers, bathroom accessories and valves recorded revenue of £33.1m for the period (2015: £30.5m), 8.4% higher than the prior year. Excellent progress in the UK, particularly in the trade and specification sectors of the market, was partly offset by more challenging export markets in the first half of the year.

UK revenue was 13.7% higher than the prior year with strong performance in all sectors. UK trade sector revenue grew by an impressive 18.5% against the prior year, which itself had shown similar growth in the prior year. Increasing build programmes and share gain within existing housebuilding customers together with new contracts won with major housebuilders such as Miller Homes, Cala Homes and Stewart Milne all contributed to this performance. Vado also continued to build on its success in the hotel sector, achieving a full product listing with Hilton Worldwide. UK retail revenue was 9.8% ahead of last year with the investment in sales resource driving greater penetration into both new and existing accounts. Vado has continued to see good growth with its new buying groups and as a mark of its success was awarded the supplier of the year accolade by the Fortis buying group.

Export revenue was 2.0% lower than the prior year although encouragingly revenue in the second half of the year was 2.9% higher than the same period last year. Vado took back direct control of distribution of its PEX range of products in the Middle East in order to better service its end customers. Although this caused some disruption in the early part of the year as the previous distributor de-stocked, direct shipments commenced towards the end of the year. More generally, currency fluctuations and lack of liquidity in some African markets also held back progress.

Work on realising synergies with other Group companies has progressed well and of particular note is the utilisation of Triton's existing network of service engineers who are now able to also service Vado customers. Operationally Vado expanded warehousing capacity to cope with the strong revenue growth it has experienced in the year.

Underlying operating profit was in line with expectations and ahead of last year.

Croydex

Croydex, our market leading, innovative designer, manufacturer and distributor of high quality bathroom furnishings and accessories, recorded revenue of £17.2m for the nine months since acquisition in June 2015, in line with the Board's expectations. For the twelve-month period to 31 March 2016, including the relevant periods prior to Norcros ownership, Croydex grew revenue by 6.5% compared to the prior year.

UK revenue was 4.1% higher compared to the prior year, with retail sector revenue 4.7% ahead and trade sector revenue 2.8% higher. Export revenue, which accounts for 5% of revenue doubled in the year, with new listings in Germany and the USA.

The key to success in the business is the sustained focus on new product introductions ensuring the range is refreshed and innovative. During the year a number of new product ranges were launched spanning branded and customer bespoke variants. New category entrants in toilet flushing and fill valves position Croydex into the replacement plumbing parts sector adding to the water economy products already within the portfolio. There has been further development of existing IP protected technologies, FlexiFix and StickNLock, to extend the features of these technologies to new categories including StickNLock shower rods, FlexiFix shower baskets and slide bars kits. These new product developments have already gained additional customer listings in both UK and export markets.  As part of our programme to reduce water consumption additional water saving products have been introduced into the shower range and higher visibility of the Water Label has been included on packaging to help customers and consumers make informed choices on water efficient products.

Investment in a new website, of which phase one has gone live, together with several digital enhancement initiatives to support our key customers' and trading partners' digital objectives, will roll out during 2016.

The business has been successfully integrated into the Norcros Group and is working with other Group companies to drive synergy benefits, particularly around joint sourcing opportunities and specification leads.

Underlying operating profit performance was excellent and ahead of last year, with strong cash conversion.

Johnson Tiles

Johnson Tiles, the UK market leading ceramic tile manufacturer and a market leader in the supply of both own manufactured and imported tiles, recorded revenue 9.4% lower at £54.1m (2015: £59.7m).

UK revenue was 7.8% lower overall, largely driven by a weak performance in the DIY retail sector which broadly reflected the same issues in this channel as experienced by Triton. Consequently, UK retail revenue was 12.5% lower than the prior year. Notwithstanding this we continued to make good progress in the specialist tile retail channel with customers such as Topps Tiles, where we have enjoyed notable success with a number of new ranges.

UK trade sector revenue was 2.6% lower than the prior year, although excluding the one-off WW1 commemorative poppies project revenue in the prior year, revenue was 0.5% higher. Performance reflected a marked slowdown in the social housing refurbishment market in the second half of the year which was exacerbated by distributor de-stocking as they also experienced the effect of this slowing. Despite this, Johnson Tiles continues to be the number one ceramic tile provider in this sector and continues to supply both private and public sector contracts such as Trafalgar Place at Elephant and Castle, Mercure London Bridge Hotel, Holiday Inn in Manchester, and the refurbishment of the Olympic Stadium for West Ham United FC.

Export revenue, which represents approximately 11% of overall revenue, was 20.2% lower than the prior year, driven by a combination of a very strong prior year comparative in Leroy Merlin in France and a significant slowdown in the French market which affected Leroy Merlin's own sales. Export revenue excluding France was in line with the prior year.

It is encouraging to report that the improved manufacturing performance in the last two months of the prior year following significant efficiency issues noted in last year's report was sustained throughout this year. This was the key contributor to a significantly improved financial performance, bringing Johnson Tiles back into underlying operating profit in the year and reversing the small underlying operating loss recorded last year.

Norcros Adhesives

Norcros Adhesives, our UK manufacturer and supplier of tile and stone adhesives and ancillary products, achieved further revenue growth and maintained the strong momentum of previous years with revenue 18.5% higher than the prior year at £8.0m (2015: £6.8m).

UK trade sector revenue grew significantly in the year, reflecting further penetration of key specialist tile distributors and fixing contractors together with a number of smaller retail accounts that are now serviced through distribution.

There has been investment in a small sales operation and legal entity in Dubai which has been established during the year to better exploit growth opportunities in the Middle East market. A product range sourced from a local manufacturer using our technical know-how has been developed. Revenue traction is gaining momentum as we have secured a number of specifications for large commercial projects in the region (e.g. Lapita Hotel, Bulgari Resort). Turnover is expected to grow as specification wins convert to invoiced revenue. The business is working closely with both Johnson Tiles and Vado with the objective of achieving joint specifications throughout the region.

Our product development activity has been sustained with focus on a new range of levelling products for both the domestic and Middle East markets.  In the UK, a fast track levelling system was launched, Pro 30 Fast Track Eco, which can be tiled on after 45 minutes.  This product also benefits from the inclusion of recycled glass within its composition to partially replace quarried sand, reinforcing Norcros Adhesives' environmental credentials.

Another year of strong revenue growth and improved operational efficiencies in the UK has resulted in higher underlying operating profits in the UK, although revenue investment in the Middle East operation left overall underlying operating profit for the business in line with the prior year.

Business Review - South Africa

Our South African business recorded its second successive year of double digit constant currency growth with revenue 15.0% higher than last year. The Rand depreciated against Sterling during the year with the average exchange rate for the year 15.0% weaker at ZAR 20.50 (2015: ZAR 17.82), resulting in full year reported revenue broadly in line with prior year at £72.9m (2015: £73.0m). Underlying operating profit for the year improved by 27.8% to £4.1m (2015: £3.2m) despite the weaker Rand adversely impacting Sterling reported profits by approximately £0.6m, representing a return on sales of 5.6% (2015: 4.4%), a substantial increase on last year.

Johnson Tiles South Africa

Johnson Tiles South Africa, our tile manufacturing business in South Africa, sustained its turnaround, building on last year's break-even performance, by recording its first Sterling underlying operating profit since the change programme was launched in 2012. This was despite some disruption from electricity load shedding in the early part of the year.

Independent sector revenue grew 9.6% in the year on a constant currency basis, albeit 4.6% lower on a Sterling reported basis at £9.8m (2015: £10.3m). The full year benefits of the new inkjet ranges launched in the prior year contributed to this performance, combined with margin improvements through a higher value added product mix and particularly encouraging growth in our newly launched rectangular formats.

The business is now operating at near full capacity and, with future growth in demand still forecast, capacity expansion options are being considered which will require significant capital investment in this business.  

TAL

TAL, our market leading adhesives business in South Africa, delivered a second successive year of double digit constant currency growth with constant currency independent sector revenue increasing 19.9% compared to prior year or 4.2% on a reported Sterling basis to £17.9m (2015: £17.2m). This strong revenue growth reflected both market share gain in the domestic market as well as strong growth in exports to Sub-Saharan Africa with export revenue outside of South Africa now accounting for 16.8% of independent sector revenue.

The business has continued to invest in manufacturing equipment and skills in order to support growth and drive efficiencies. Ongoing investment in these two areas, together with excellent work in our supply chain, helped offset some of the higher imported raw material costs experienced in the year.

Sterling underlying operating profit for the year was ahead of last year with good cash conversion in the business.

Tile Africa

Tile Africa, our leading retailer of wall and floor tiles, adhesives, showers, sanitaryware and bathroom fittings, also delivered its second successive year of double digit constant currency growth with revenue 14.4% higher on a constant currency basis, albeit 0.5% lower on a Sterling reported basis, to £45.2m (2015: £45.5m).

Revenue growth was encouraging in both the retail and commercial divisions. Retail growth was driven by the improved consistency of our offer as we continued to invest in both our supply chain and store presentation. Our new CX store model has been well received and key learnings are being retrofitted across our existing estate. Particularly pleasing was the growth in our bathroomware sales category, which grew in excess of 20% after the launch of our new store-within-a-store concept, as well as our directly sourced private label Evox brassware range, made possible by Vado's supply chain infrastructure in China. Our contracts business continued to benefit from a clearly directed strategy and improved range offering and has consolidated a market leading position in the fast food and retail segments.

A new store at Boksburg was opened in March 2016, meaning the business now has 30 owned stores, of which 26 have been upgraded to date, and four franchise stores. A further new store is expected to open in Southgate in the second half of the current year, and further selected store opening opportunities are currently being evaluated.

Sterling underlying profit showed good progress and was ahead of last year.

Financial overview

	2016	2015
Continuing operations	£m	£m
Revenue	235.9	222.1
Underlying operating profit	21.3	17.0
IAS 19R administrative costs	(1.7)	(1.7)
Acquisition related costs	(5.2)	(2.2)
Exceptional operating items	2.3	(2.5)
Operating profit	16.7	10.6
Net finance (costs)/income	(1.3)	0.8
Exceptional finance costs	-	(0.4)
Profit before taxation	15.4	11.0
Taxation	(2.4)	(2.9)
Profit for the year from continuing operations	13.0	8.1
Profit for the year from discontinued operations	-	0.1
Profit for the year	13.0	8.2

Revenue

Group revenue at £235.9m (2015: £222.1m) increased by 6.3% on a reported basis, 11.0% on a constant currency basis, and 2.9% on a constant currency like for like basis excluding Croydex, which was acquired in June 2015.

Underlying operating profit

Underlying operating profit increased by 25.7% to £21.3m (2015: £17.0m). Our UK businesses delivered underlying operating profit of £17.2m (2015: £13.8m), and our South African businesses generated an underlying operating profit of £4.1m (2015: £3.2m). On a constant currency basis the improvement in underlying operating profit in the South African businesses was £1.5m. Group underlying operating profit margins improved to 9.0% (2015: 7.6%).

IAS 19R administrative costs

These costs represent the costs incurred by the Trustee of administering the UK pension schemes and are reflected in the Income Statement under IAS 19R. Costs of £1.7m (2015: £1.7m) are in line with the prior year.

Acquisition related costs

A cost of £5.2m (2015: £2.2m) has been recognised in the year and is analysed as follows:

	2016	2015
	£m	£m
Deferred remuneration	2.5	1.1
Intangible asset amortisation	0.9	0.3
Staff costs and advisory fees	1.8	0.8
	5.2	2.2

In accordance with IFRS 3R, a proportion of deferred consideration payable to the former shareholders of Vado and Croydex is required to be treated as remuneration and, accordingly, is expensed to the Income Statement as incurred. Included in the amount for the year to 31 March 2016 is the final charge for deferred remuneration in connection with the Vado acquisition. Non-cash amortisation charges in respect of intangible assets increased by £0.6m following the acquisition of Croydex in June 2015. Staff costs and advisory fees increased by £1.0m in the year, of which £0.8m and £0.2m were in connection with the acquisitions of Croydex and Abode respectively.

Exceptional operating items

A net exceptional operating credit of £2.3m (2015: £2.5m charge) was recorded as analysed in the table below. These are items of expense or income which arose from transactions which occurred outside of the Group's normal operations.

	2016	2015
	£m	£m
Legal claim	(1.9)	0.3
Pension scheme settlement gain	(0.4)	(1.7)
Profit on disposal of residual property	-	(0.4)
Sheffield lease surrender	-	2.5
Loss on disposal of property portfolio	-	1.5
Restructuring costs	-	0.3
	(2.3)	2.5

The legal claim relating to the land at the Highgate site in Tunstall, UK, was settled in the year.  Under the terms of the settlement with Wm Morrison Supermarkets plc, the Group received a payment of £2.0m.  Costs in connection with the claim of £0.1m were incurred in the year (2015: £0.3m). In 2015 the Group undertook a number of liability management exercises in connection with its principal UK defined benefit pension scheme.  The net impact of these exercises in 2015 was to reduce the net deficit by £1.7m with a further £0.4m reduction arising in 2016.

Operating profit for the year was £16.7m (2015: £10.6m).

Net finance (costs)/income and exceptional finance costs

Net finance costs for the year of £1.3m (2015: £0.8m income) rose mainly due to the £2.1m change relating to the movement on fair value of foreign exchange contracts. Bank interest payable of £0.9m (2015: £1.2m) was lower than last year and reflects the lower interest margins agreed as part of the new banking facility completed in July 2014.

The Group has recognised a £1.4m interest cost in respect of the pension scheme liability (2015: £1.1m) which increased by £0.3m principally due to the higher opening liability.

Profit before tax

Underlying profit before tax was £20.4m (2015: £15.8m), reflecting the increased underlying operating profit of £4.3m noted above and the £0.3m lower bank interest payable. Underlying profit before tax is reconciled as shown below:

	2016	2015
	£m	£m
Profit before taxation from continuing operations	15.4	11.0
Adjusted for:
- IAS 19R administrative expenses	1.7	1.7
- acquisition related costs	5.2	2.2
- exceptional operating items	(2.3)	2.5
- amortisation of costs of raising finance	0.2	0.1
- amortisation of costs of raising finance - exceptional	-	0.4
- net movement on fair value of derivative financial instruments	(1.2)	(3.3)
- discount on property lease provisions	-	0.1
- IAS 19R finance cost	1.4	1.1
Underlying profit before taxation	20.4	15.8

The Group reported profit before tax of £15.4m (2015: £11.0m).

Taxation

The tax charge for the year of £2.4m (2015: £2.9m) represents an effective tax rate for the year of 15.5% (2015: 26.6%). A further restructuring of the financing of our South African operations crystallised the remaining foreign exchange losses on historic intra-Group loans, which, whilst eliminated on consolidation, gave rise to a tax benefit in the UK which had not previously been recognised as a deferred tax asset. The effect of this was to reduce the tax charge in the year by £1.4m. Adjusting for this, the tax rate would have been 24.5%, more in line with the prior year and in line with expectations taking into account the geographic mix of profits and permanent differences. The standard rate of UK corporation tax reduced to 20% from 1 April 2015. In South Africa the standard rate of tax is 28%, unchanged from 2015.

Profit from discontinued operations

On 30 May 2014, the Company completed a transaction to dispose of 100% of the issued share capital of Norcros Industry (Pty) Limited (NIPL), which owned its Australian tiles business, to Kim Hin Industries Berhad (KHIB).

Following the completion of the transaction a small profit of £0.1m was recognised in the year to 31 March 2015. There were no financial impacts from these discontinued operations in the year to 31 March 2016.

Restatement of prior year results

On 29 September 2015 the Company undertook an exercise to consolidate its existing 1p ordinary shares into new 10p ordinary shares, and the new shares began to be traded on the London Stock Exchange on 30 September.  Prior year share information has been restated to adjust for this consolidation, so that earnings per share and dividends per share information can be presented on a comparable basis.

Dividends

As previously announced it is the Board's intention to continue a progressive yet prudent dividend policy subject to the Group's earnings, cash flow and Balance Sheet position. As such the Board is recommending a final dividend of 4.4p (2015 restated: 3.75p) per share, which, if approved, together with the interim dividend of 2.2p (2015: 1.85p), makes a total dividend of 6.6p (2015: 5.6p) in respect of the year ended 31 March 2016.

This final dividend, if approved at the Annual General Meeting, will be payable on 28 July 2016 to shareholders on the register on 24 June 2016. The shares will be quoted ex-dividend on 23 June 2016.

Balance Sheet

The Group's Balance Sheet is summarised below.

	2016	2015
	£m	£m
Property, plant and equipment	38.2	37.6
Goodwill and intangible assets	44.7	26.9
Deferred tax	10.5	13.8
Net current assets excluding cash and borrowings	48.7	37.6
Pension scheme liability	(55.7)	(44.3)
Other non-current assets and liabilities	(6.3)	(4.7)
Cash and borrowings	(32.5)	(14.2)
Net assets	47.6	52.7

Property, plant and equipment increased by £0.6m overall, and included additions of £6.2m (2015: £6.9m) and acquisitions of £2.0m (2015: £nil).  Disposals were £0.1m (2015: £0.1m), the depreciation charge was £5.5m (2015: £6.0m) and exchange differences were £2.0m (2015: £nil).

Deferred tax reduced principally as a result of the utilisation of tax losses of £2.2m, the reversal of timing differences of £1.2m and acquisitions of £0.8m, net of an increase attributable to the rise in the pension deficit of £1.1m.

Pension schemes

The Group made deficit recovery contributions of £2.1m (2015: £2.1m) into its UK defined benefit pension scheme during the year as part of the 2012 deficit recovery plan.

The gross defined benefit pension scheme valuation on the UK scheme showed a deficit of £55.7m compared to a deficit of £44.3m last year. Although the present value of scheme liabilities has reduced primarily due to a higher discount rate of 3.55% (2015: 3.30%), this has been more than offset by reduced assets due to lower than expected returns, with both equity and bond markets performing below what was expected.

The plan undertook a number of liability management exercises during the prior year which resulted in a number of benefits being settled and some changes to pension increases in payment. A number of further settlements took place as a result of that exercise in the current year. The net impact of these exercises was to reduce the net deficit by £0.4m (2015: £1.7m) which has been reflected in the Consolidated Income Statement as an exceptional operating item.

The March 2015 triennial actuarial valuation process for the Group's UK defined benefit pension scheme has now been completed and shows a deficit of £73.5m (2012: £61.9m) representing an 84% funding level (2012: 85%). The increased deficit is driven predominantly by historically low gilt yields.  A revised deficit recovery plan has been agreed with the Scheme Trustee, with a cash contribution of £2.5m per annum starting in April 2016, and increasing with CPI, replacing the existing agreement to pay £2.1m plus CPI per annum.  This is payable over the next ten years and thereby provides a greater degree of certainty around future deficit recovery contributions.

The Group's contributions to its defined contribution pension schemes were £2.7m (2015: £2.6m).

Cash flow and net debt

Net debt increased by £18.3m in the year to £32.5m (2015: £14.2m). A summary of the movement in net debt is shown below.

Underlying operating cash flow was £2.5m lower than in the prior year at £20.4m, with higher operating profits being offset by increased working capital. This represents cash conversion of 76.1% of underlying EBITDA (2015: 99.6%). The Group's working capital outflow was £7.7m (2015: £1.5m), principally reflecting investment in inventory to support growth in Vado, Croydex and South Africa.

Despite this, net cash generated from operating activities was £2.3m higher than the previous year at £18.5m, largely due to improved cash flows from exceptional items and acquisition related costs, with a £1.9m inflow from the resolution of the legal dispute with Wm Morrison Supermarkets plc offsetting cash outflows associated with acquisitions.

	2016	2015
	£m	£m
Underlying operating cash flow	20.4	22.9
Cash flows from exceptional items and acquisition related costs	0.2	(4.7)
Pension fund deficit recovery contributions	(2.1)	(2.1)
Cash generated from discontinued operations	-	0.1
Cash flow generated from operations	18.5	16.2
Net interest paid	(0.9)	(1.3)
Taxation	(1.0)	(0.5)
Net cash generated from operating activities	16.6	14.4
Capital expenditure	(6.6)	(7.0)
Purchase of investment property	-	(0.9)
Proceeds from sale of investment property	-	6.5
Acquisitions and disposals	(23.6)	3.3
Dividends	(3.6)	(3.1)
Costs of raising debt finance	-	(0.7)
Issue of share capital	0.1	0.2
Other items	(1.2)	-
Movement in net debt	(18.3)	12.7
Opening net debt	(14.2)	(26.9)
Closing net debt	(32.5)	(14.2)

Acquisitions and disposals comprise outflows of £19.3m and £3.1m in respect of the acquisitions of Croydex and Abode respectively, together with £1.2m paid to the former shareholders of Vado under the earn-out arrangement.  In the previous year it was made up of a £3.8m inflow resulting from the sale of NIPL, net of £0.3m deferred consideration paid to the former shareholders of Vado and the £0.2m cost of acquiring the Port Elizabeth franchise store in South Africa.

Capital expenditure at £6.6m (2015: £7.0m) included back-up diesel generators at Johnson Tiles South Africa to mitigate the risk of power outages, and the new Boksburg store for Tile Africa and other store upgrades, chiefly at Lenasia and Witbank. In the UK, there were two new selection lines and kiln improvements at Johnson Tiles, a new ERP system at Norcros Adhesives and continued investment in tooling for new products at Triton Showers.

Bank funding

In July 2014 the Group agreed an unsecured £70m revolving credit facility plus a £30m accordion facility with Lloyds Bank plc, Barclays Bank plc and HSBC Bank plc. The banking facility matures in July 2019.

Responsibility Statement

Each of the directors, whose names and functions are listed below, confirms that, to the best of their knowledge:

The consolidated financial statements, prepared in accordance with the applicable United Kingdom law and in conformity with IFRS, as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole; and  

The business review includes a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole.

Directors:  Martin Towers (Chairman), Nick Kelsall (Group Chief Executive), Shaun Smith (Group Finance Director), David McKeith (Non-Executive Director) and Jo Hallas (Non-Executive Director).

Nick Kelsall

Group Chief Executive

Shaun Smith

Group Finance Director

Consolidated income statement

Year ended 31 March 2016

		2016	2015*
	Notes	£m	£m
Continuing operations
Revenue	2	235.9	222.1
Underlying** operating profit		21.3	17.0
IAS 19R administrative expenses		(1.7)	(1.7)
Acquisition related costs	3	(5.2)	(2.2)
Exceptional operating items	3	2.3	(2.5)
Operating profit		16.7	10.6
Finance costs	4	(1.1)	(1.4)
Exceptional finance costs	4	-	(0.4)
Total finance costs	4	(1.1)	(1.8)
Finance income	4	1.2	3.3
IAS 19R finance cost		(1.4)	(1.1)
Profit before taxation		15.4	11.0
Taxation		(2.4)	(2.9)
Profit for the year from continuing operations		13.0	8.1
Profit for the year from discontinued operations		-	0.1
Profit for the year		13.0	8.2
Earnings per share attributable to equity holders of the Company
Basic earnings per share:
From continuing operations	6	21.4p	13.6p
From discontinued operations	6	-	0.2p
From profit for the year	6	21.4p	13.8p
Diluted earnings per share:
From continuing operations	6	20.8p	13.1p
From discontinued operations	6	-	0.2p
From profit for the year	6	20.8p	13.3p
Weighted average number of shares for basic earnings per share (millions)	6	60.6	59.2
Non-GAAP measures:
Underlying** profit before taxation (£m)	5	20.4	15.8
Underlying** earnings (£m)	5	17.3	13.0
Basic underlying** earnings per share	6	28.5p	21.9p
Diluted underlying** earnings per share	6	27.8p	21.1p

*    The prior year comparatives have been restated where required to reflect the 10:1 share consolidation completed on 29 September 2015.

** Underlying is before IAS 19R administrative expenses, acquisition related costs and exceptional operating items and, where relevant, before non-cash finance costs less attributable taxation.

Consolidated statement of comprehensive income and expense

Year ended 31 March 2016

		2016	2015
		£m	£m
Profit for the year		13.0	8.2
Other comprehensive income and expense:
Items that will not subsequently be reclassified to the Income Statement
Actuarial losses on retirement benefit obligations		(9.7)	(18.8)
Items that may be subsequently reclassified to the Income Statement
Foreign currency translation adjustments		(6.1)	(0.6)
Other comprehensive expense for the year		(15.8)	(19.4)
Total comprehensive expense for the year		(2.8)	(11.2)
Attributable to equity shareholders arising from:
Continuing operations		(2.8)	(11.4)
Discontinued operations		-	0.2
		(2.8)	(11.2)

Items in the statement are disclosed net of tax.

Consolidated balance sheet

At 31 March 2016

		2016	2015
		£m	£m
Non-current assets
Goodwill		32.5	22.2
Intangible assets		12.2	4.7
Property, plant and equipment		38.2	37.6
Deferred tax assets		10.5	13.8
		93.4	78.3
Current assets
Inventories		60.1	52.2
Trade and other receivables		50.9	40.5
Derivative financial instruments		2.5	2.1
Cash and cash equivalents		5.9	5.6
		119.4	100.4
Current liabilities
Trade and other payables		(64.7)	(54.9)
Derivative financial instruments		(0.1)	(1.0)
Current tax liabilities		-	(1.3)
Financial liabilities - borrowings		(2.8)	(1.4)
		(67.6)	(58.6)
Net current assets		51.8	41.8
Total assets less current liabilities		145.2	120.1
Non-current liabilities
Financial liabilities - borrowings		(35.6)	(18.4)
Pension scheme liability		(55.7)	(44.3)
Other non-current liabilities		(3.0)	(1.4)
Provisions		(3.3)	(3.3)
		(97.6)	(67.4)
Net assets		47.6	52.7
Financed by:
Share capital		6.1	6.0
Share premium		1.1	1.0
Retained earnings and other reserves		40.4	45.7
Total equity		47.6	52.7

Consolidated cash flow statement

Year ended 31 March 2016

		2016	2015
	Notes	£m	£m
Cash generated from operations	7	18.5	16.2
Income taxes paid		(1.0)	(0.5)
Interest paid		(0.9)	(1.3)
Net cash generated from operating activities		16.6	14.4
Cash flows from investing activities
Proceeds from sale of investment property		-	6.1
Proceeds from sale of property, plant and equipment		-	0.4
Purchase of investment property		-	(0.9)
Purchase of property, plant and equipment and intangible assets		(6.6)	(7.0)
Acquisition of subsidiary undertakings (including payment of deferred consideration) net of cash acquired		(23.6)	(0.5)
Disposal of subsidiary undertakings net of cash divested		-	3.8
Net cash (used in)/generated from investing activities		(30.2)	1.9
Cash flows from financing activities
Net proceeds from issue of ordinary share capital		0.1	0.2
Drawdown/(repayment) of borrowings		17.0	(12.1)
Costs of raising debt finance		-	(0.7)
Dividends paid to the Company's shareholders		(3.6)	(3.1)
Net cash generated from/(used in) financing activities		13.5	(15.7)
Net (decrease)/increase in cash at bank and in hand and bank overdrafts		(0.1)	0.6
Cash at bank and in hand and bank overdrafts at the beginning of the year		4.2	3.7
Exchange movements on cash and bank overdrafts		(1.0)	(0.1)
Cash at bank and in hand and bank overdrafts at the end of the year		3.1	4.2

The net change in cash at bank and in hand and bank overdrafts in the year from discontinued operations included in the above was £nil (2015: increase of £3.9m).

Consolidated statement of changes in equity

Year ended 31 March 2016

	Ordinary				Retained
	share	Share	Treasury	Translation	earnings/
	capital	premium	reserve	reserve	(losses)	Total
	£m	£m	£m	£m	£m	£m
At 1 April 2014	5.8	0.9	-	(8.5)	67.3	65.5
Comprehensive income:
Profit for the year	-	-	-	-	8.2	8.2
Other comprehensive expense:
Actuarial loss on retirement benefit obligations	-	-	-	-	(18.8)	(18.8)
Foreign currency translation adjustments	-	-	-	(0.6)	-	(0.6)
Total other comprehensive expense	-	-	-	(0.6)	(18.8)	(19.4)
Transactions with owners:
Shares issued	0.2	0.1	(0.1)	-	-	0.2
Dividends paid	-	-	-	-	(3.1)	(3.1)
Share option schemes and warrants	-	-	-	-	1.3	1.3
At 31 March 2015	6.0	1.0	(0.1)	(9.1)	54.9	52.7
Comprehensive income:
Profit for the year	-	-	-	-	13.0	13.0
Other comprehensive expense:
Actuarial loss on retirement benefit obligations	-	-	-	-	(9.7)	(9.7)
Foreign currency translation adjustments	-	-	-	(6.1)	-	(6.1)
Total other comprehensive expense	-	-	-	(6.1)	(9.7)	(15.8)
Transactions with owners:
Shares issued	0.1	0.1	(0.1)	-	-	0.1
Dividends paid	-	-	-	-	(3.6)	(3.6)
Share option schemes and warrants	-	-	0.2	-	1.0	1.2
At 31 March 2016	6.1	1.1	-	(15.2)	55.6	47.6

 

Notes to the preliminary statement

Year ended 31 March 2016

1. Basis of preparation

Norcros plc ("the Company") and its subsidiaries (together "the Group") principal activities are the development, manufacture and marketing of home consumer products in the UK and South Africa. The Company is a public limited company which is listed on the London Stock Exchange market of listed securities is incorporated and domiciled in the UK. The address of its registered office is Ladyfield House, Station Road, Wilmslow, SK9 1BU.

The financial information presented in this preliminary announcement is extracted from, and is consistent with, the Group's audited financial statements for the year ended 31 March 2016. The financial information set out above does not constitute the Company's statutory financial statements for the periods ended 31 March 2016 or 31 March 2015 but is derived from those financial statements. Statutory financial statements for 2016 will be delivered following the Company's annual general meeting. The auditors have reported on those financial statements; their report was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

The Group's results have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.

2. Segmental reporting

The Group operates in two main geographical areas: the UK and South Africa. All inter-segment transactions are made on an arm's length basis. The chief operating decision maker (being the Board) assesses performance and allocates resources based on geography and accordingly segments have been determined on this basis. Corporate costs are allocated to segments on the basis of external turnover.

Continuing operations - year ended 31 March 2016

		South
	UK	Africa	Group
	£m	£m	£m
Revenue	163.0	72.9	235.9
Underlying operating profit	17.2	4.1	21.3
IAS 19R administrative expenses	(1.7)	-	(1.7)
Acquisition related costs	(5.2)	-	(5.2)
Exceptional operating items	2.3	-	2.3
Operating profit	12.6	4.1	16.7
Finance costs (net)			(1.3)
Profit before taxation			15.4
Taxation			(2.4)
Profit for the year from continuing operations			13.0
Net debt			(32.5)
Segmental assets	163.1	49.7	212.8
Segmental liabilities	(149.3)	(15.9)	(165.2)
Additions to property, plant and equipment	3.8	2.4	6.2
Loss on disposal of property, plant and equipment	(0.1)	-	(0.1)
Depreciation	3.8	1.7	5.5

Revenues of £31.4m (2015: £34.2m) are derived from a single customer. These revenues are attributable to the UK segment.

Continuing operations - year ended 31 March 2015

		South
	UK	Africa	Group
	£m	£m	£m
Revenue	149.1	73.0	222.1
Underlying operating profit	13.8	3.2	17.0
IAS 19R administrative expenses	(1.7)	-	(1.7)
Acquisition related costs	(2.2)	-	(2.2)
Exceptional operating items	(2.3)	(0.2)	(2.5)
Operating profit	7.6	3.0	10.6
Finance costs (net)			0.4
Profit before taxation			11.0
Taxation			(2.9)
Profit for the year from continuing operations			8.1
Net debt			(14.2)
Segmental assets	124.3	54.4	178.7
Segmental liabilities	(110.8)	(15.2)	(126.0)
Additions to property, plant and equipment	3.8	3.1	6.9
Proceeds from disposals of property, plant and equipment	0.4	-	0.4
Proceeds from disposals of property, plant and equipment	6.1	-	6.1
Loss on disposal of property, plant and equipment	(0.1)	-	(0.1)
Depreciation	4.0	2.0	6.0

3. Acquisition related costs and exceptional operating items

An analysis of acquisition related costs and exceptional operating items is shown below.

	2016	2015
Acquisition related costs	£m	£m
Deferred remuneration1	2.5	1.1
Intangible asset amortisation2	0.9	0.3
Staff costs and advisory fees3	1.8	0.8
	5.2	2.2

1     In accordance with IFRS 3R, a proportion of deferred consideration payable to the former shareholders of Vado and Croydex is required to be treated as remuneration, and, accordingly, is expensed to the Income Statement as incurred.

2     Non-cash amortisation charges in respect of intangible assets recognised following the acquisitions of Vado and Croydex.

3     Costs of maintaining an in-house acquisitions department and professional advisory fees incurred in connection with the Group's business combination activities.  In the year to 31 March 2016 this included £0.8m and £0.2m in connection with the acquisitions of Croydex and Abode respectively.

	2016	2015
Exceptional operating items	£m	£m
Legal claim1	(1.9)	0.3
Pension scheme settlement gain2	(0.4)	(1.7)
Profit on disposal of residual property3	-	(0.4)
Sheffield lease surrender4	-	2.5
Loss on disposal of property portfolio5	-	1.5
Restructuring costs6	-	0.3
	(2.3)	2.5

1     A legal claim relating to the land at the Highgate site in Tunstall, UK, was settled in the year.  Under the terms of the settlement with Wm Morrison Supermarkets plc, the Group received a payment of £2.0m.  Costs in connection with the claim of £0.1m were incurred in the year (2015: £0.3m).

2     In 2015 the Group undertook a number of liability management exercises in connection with its principal UK defined benefit pension scheme.  The net impact of these exercises in 2015 was to reduce the net deficit by £1.7m with a further £0.4m reduction arising in 2016.

3     A profit of £0.4m was generated in the prior year following the sale of a small parcel of land in Braintree, UK, which had a net book value of £nil.

4     The Group acquired the freehold and exited its onerous lease in connection with the Orgreave Drive, Sheffield, property in November 2014 for total consideration of £3.4m, of which £2.5m was the cost of surrendering the lease.

5     In March 2015, the Group's remaining freehold surplus property portfolio was sold to Clowes Developments (UK) Ltd for net proceeds of £6.1m, being consideration of £6.5m net of £0.4m costs. This transaction included the property in Sheffield, amongst others, and led to a loss on disposal of £1.5m.

6     Restructuring costs related to redundancies and asset write-downs following the implementation of a programme of restructuring initiatives throughout the Group's business units.

 

4. Finance income and costs

	2016	2015
	£m	£m
Finance costs
Interest payable on bank borrowings	0.9	1.2
Amortisation of costs of raising debt finance	0.2	0.1
Unwind of discount on property lease provisions	-	0.1
Finance costs	1.1	1.4
Exceptional finance costs1	-	0.4
Total finance costs	1.1	1.8
Finance income
Movement on fair value of derivative financial instruments	(1.2)	(3.3)
Net finance income	(0.1)	(1.5)

1     Following the refinancing of the Group's UK banking facilities in July 2014, the unamortised costs relating to the previous facility were written off in full.

5. Non-GAAP measures

Consolidated Income Statement

The Directors believe that underlying profit before taxation and underlying earnings provide shareholders with additional useful information on the underlying performance of the Group. Underlying profit before taxation is defined as profit before taxation, IAS 19R administrative expenses, acquisition related costs, exceptional operating items, amortisation of costs of raising finance, net movement on fair value of derivative financial instruments, discounting of property lease provisions and finance costs relating to pension schemes.

	2016	2015
	£m	£m
Profit before taxation from continuing operations	15.4	11.0
Adjusted for:
- IAS 19R administrative expenses	1.7	1.7
- acquisition related costs (see note 3)	5.2	2.2
- exceptional operating items (see note 3)	(2.3)	2.5
- amortisation of costs of raising finance	0.2	0.1
- amortisation of costs of raising finance - exceptional	-	0.4
- net movement on fair value of derivative financial instruments	(1.2)	(3.3)
- discount on property lease provisions	-	0.1
- IAS 19R finance cost	1.4	1.1
Underlying profit before taxation	20.4	15.8
Taxation attributable to underlying profit before taxation	(3.1)	(2.8)
Underlying earnings	17.3	13.0

EBITDA is a measure commonly used by investors and financiers to assess business performance. Underlying EBITDA has been provided which reflects EBITDA as adjusted for IAS 19R administrative expenses, acquisition related costs and exceptional operating items. The Directors consider that this measure provides shareholders with additional useful information on the performance of the Group.

	2016	2015
	£m	£m
Operating profit from continuing operations	16.7	10.6
Adjusted for:
- depreciation	5.5	6.0
- IAS 19R administrative expenses	1.7	1.7
- acquisition related costs (see note 3)	5.2	2.2
- exceptional operating items (see note 3)	(2.3)	2.5
Underlying EBITDA	26.8	23.0

Consolidated Cash Flow Statement

Underlying operating cash flow is defined as cash generated from continuing operations before cash outflows from exceptional items and acquisition related costs and pension fund deficit recovery contributions. The Directors believe that underlying operating cash flow provides shareholders with additional useful information on the underlying cash generation of the Group.

	2016	2015
	£m	£m
Cash generated from continuing operations (see note 7)	18.5	16.1
Adjusted for:
- cash flows from exceptional items and acquisition related costs (see note 7)	(0.2)	4.7
- pension fund deficit recovery contributions (see note 7)	2.1	2.1
Underlying operating cash flow	20.4	22.9

Consolidated Balance Sheet

Underlying capital employed is used to calculate underlying return on capital employed, one of the Group's key performance indicators, and reflects the value of the assets used to generate underlying operating profit from continuing operations. Consequently, adjustments are made to remove assets and liabilities that do not impact underlying operating profit from continuing operations and to remove the average impact of exchange rate movements.

	2016	2015
	£m	£m
Net assets	47.6	52.7
Adjusted for:
- pension scheme liability (net of associated tax)	45.7	35.4
- cash and cash equivalents	(5.9)	(5.6)
- financial liabilities - borrowings	38.4	19.8
Capital employed	125.8	102.3
- adjustment for acquisitions	(3.1)	9.7
- foreign exchange adjustment	0.6	(2.8)
Underlying capital employed	123.3	109.2

6. Earnings per share

Basic and diluted earnings per share

Basic EPS is calculated by dividing the profit attributable to shareholders by the weighted average number of ordinary shares in issue during the year, excluding those held in the Norcros Employee Benefit Trust.  The prior year comparatives have been restated to reflect the 10:1 share consolidation which took place on 29 September 2015.

For diluted EPS, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potential dilutive ordinary shares. At 31 March 2016 the potential dilutive ordinary shares amounted to 1,639,137 (2015: 2,303,299 as restated) as calculated in accordance with IAS 33.

The calculation of EPS is based on the following profits and numbers of shares:

	2016	2015
	£m	£m
Profit for the year from continuing operations	13.0	8.1
Profit for the year from discontinued operations	-	0.1
Profit for the year	13.0	8.2

	2016 Number	2015 Number (restated)
Weighted average number of shares for basic earnings per share	60,590,559	59,223,135
Share options and warrants	1,639,137	2,303,299
Weighted average number of shares for diluted earnings per share	62,229,696	61,526,434

	2016	2015 (restated)
Basic earnings per share:
From continuing operations	21.4p	13.6p
From discontinued operations	-	0.2p
From profit for the year	21.4p	13.8p
Diluted earnings per share:
From continuing operations	20.8p	13.1p
From discontinued operations	-	0.2p
From profit for the year	20.8p	13.3p

Basic and diluted underlying earnings per share

Basic and diluted underlying earnings per share has also been provided which reflects underlying earnings from continuing operations divided by the weighted average number of shares set out above.

	2016	2015
	£m	£m
Underlying earnings (see note 5)	17.3	13.0

	2016	2015 (restated)
Basic underlying earnings per share	28.5p	21.9p
Diluted underlying earnings per share	27.8p	21.1p

7. Consolidated cash flow statement

(a) Cash generated from operations

The analysis of cash generated from operations split by continuing and discontinued operations is given below.

Continuing operations

	2016	2015
	£m	£m
Profit before taxation	15.4	11.0
Adjustments for:
- IAS 19R administrative expenses included in the Income Statement	1.7	1.7
- acquisition related costs included in the Income Statement	5.2	2.2
- exceptional items included in the Income Statement	(2.3)	2.5
- finance costs included in the Income Statement	1.1	1.8
- finance income included in the Income Statement	(1.2)	(3.3)
- IAS 19R finance cost included in the Income Statement	1.4	1.1
- cash flows from exceptional items and acquisition related costs	0.2	(4.7)
- depreciation	5.5	6.0
- pension fund deficit recovery contributions	(2.1)	(2.1)
- loss on disposal of property, plant and equipment	0.1	0.1
- share-based payments	1.2	1.3
Operating cash flows before movement in working capital	26.2	17.6
Changes in working capital:
- increase in inventories	(7.2)	(2.0)
- increase in trade and other receivables	(4.9)	(1.4)
- increase in trade and other payables	4.4	1.9
Cash generated from continuing operations	18.5	16.1

Discontinued operations

	2016	2015
	£m	£m
Profit before taxation	-	-
Adjustments for:
- depreciation	-	-
Operating cash flows before movement in working capital	-	-
Changes in working capital:
- decrease in inventories	-	0.4
- increase in trade and other receivables	-	(0.1)
- decrease in trade and other payables	-	(0.2)
Cash generated from discontinued operations	-	0.1
Cash generated from operations	18.5	16.2

(b) Outflow related to exceptional items and acquisition related costs

This includes expenditure charged to exceptional provisions relating to onerous lease costs, acquisition related costs (excluding deferred remuneration) and other business rationalisation and restructuring costs.

(c) Analysis of net debt

	Cash included
	within assets
	held-for-sale	Net cash	Borrowings	Net debt
	£m	£m	£m	£m
At 1 April 2014	0.5	3.2	(30.6)	(26.9)
Cash flow	(0.5)	1.1	12.1	12.7
Other non-cash movements	-	-	0.1	0.1
Exchange movement	-	(0.1)	-	(0.1)
At 31 March 2015	-	4.2	(18.4)	(14.2)
Cash flow	-	(0.1)	(17.0)	(17.1)
Other non-cash movements	-	-	(0.2)	(0.2)
Exchange movement	-	(1.0)	-	(1.0)
At 31 March 2016	-	3.1	(35.6)	(32.5)

Other non-cash movements principally relate to the movement in the costs of raising debt finance in the year.

 

END

 

 

FR UOUBRNSANAAR