Trading Update

RNS Number : 0570C

Norcros PLC

11 April 2013

 



11 April 2013

("Norcros", the "Group" or the "Company")

Trading update

Norcros, the market leading supplier of innovative branded showers, taps, bathroom accessories, tiles and adhesives, will announce its preliminary results for the year ended 31 March 2013 on Thursday 13 June 2013. In advance of entering the close period, the Group is providing the following trading update.

Trading Overview

The financial year ended in line with market expectations.

Group revenue for the year is expected to be in the region of £210m (2012: £200.3m) which represents year on year growth of 5% on a reported basis and 10% on a constant currency basis. Group underlying¹ operating profit is expected to be approximately £13.0m (2012: £12.1m) and underlying¹ profit before taxation is expected to be approximately £11.7m (2012: £10.7m).

Our UK businesses overall have performed well in the year despite continued tough markets, with year on year revenue growth of 5%. Whilst Triton has seen revenue 4.5% lower than the prior year, this still represents market share gain and reflects a stronger performance in the second half of the year. Johnson Tiles and Norcros Adhesives have continued to deliver good growth throughout the year.

Our South African businesses have had another year of strong growth with revenue up 19% on a constant currency basis with all three businesses contributing to this performance. A weaker Rand compared to last year means that on a Sterling reported basis revenue growth will be 5% higher than the prior year. The manufacturing performance in our Johnson Tiles South Africa business has improved significantly over the year, although continued energy price increases have limited the margin benefits from this improvement.

Group revenue in the last eight weeks of the year was 3.4% higher on a constant currency basis and was impacted by the poor weather conditions in the UK and a lower than expected seasonal recovery in construction activity levels in South Africa.

Acquisition of Eurobath International Ltd.

As announced on 2 April 2013, on 31 March 2013 the Group completed the acquisition of 100% of the share capital of Eurobath International Ltd trading as Vado ("Vado"), a private family owned business principally held by the Walker and Williams families for an initial cash consideration of £11.0m plus debt and debt like items assumed as part of this transaction of approximately £0.9m, and further payments of up to £4.1m in total depending upon the future financial performance of Vado. The Board expects the acquisition to be earnings enhancing immediately.

Vado is a leading manufacturer and global distributor of bathroom controls including taps, mixer showers, bathroom accessories and valves, with strong brands and a product offering positioned at the mid to high end segment of its target markets. The acquisition is an important step in supporting and accelerating the Group's growth strategy, and is an excellent fit with the Group's existing products and market positions.

For the year ended 31 December 2012, Vado's audited results showed revenue of £25.6m, EBITDA of £2.5m, and profit before tax of £2.1m. As at 31 December 2012 Vado also had net operating assets of £7.2m, and gross operating assets of £12.1m.

Financial Position

Closing net debt is anticipated to be in the region of £31.0m (2012: £17.8m) and includes the initial cash outflow of £11.0m associated with the acquisition of Vado on 31 March 2013. Vado has historically delivered strong cash conversion and it is expected to have a positive impact on Group operating cash flow. Excluding the Vado consideration, net debt was in the region of £20.0m and has increased in the year principally due to increased working capital requirements in Johnson Tiles UK to support the significant tranche of new B&Q business previously reported.

Property

The Group is pleased to announce that planning consent for the proposed development at Highgate Park, Tunstall has been obtained subject to the completion of certain legal formalities. The approved plans for the site include a food store and petrol station which as previously announced is subject to a conditional sale contract with Optimisation Developments Ltd. a subsidiary of WM Morrison Supermarkets plc ("Morrisons") for gross proceeds of £8.25m and net proceeds of £2.6m.  It is expected that the sale contract with Morrisons will become unconditional by the end of July 2013.  A further update will provided at the appropriate time.

In addition to the food store and petrol station, the approved planning consent also includes a number of non-food retail and restaurant/leisure units, which the Group will now actively market to prospective tenants to generate incremental returns, although it is too early to comment on the likely proceeds and timing.

Pension

Further to our previous announcements on the proposed closure to future accrual of the defined benefit section of the UK pension scheme, the Board can confirm that this process has now been completed and that the scheme was closed to future accrual on 31 March 2013.

Exceptional items

As reported previously, the Group has three remaining legacy property leases. Two of these properties remain vacant despite significant marketing efforts. Consequently it is anticipated that an exceptional charge of approximately £3m will be recognised in the results for the year to 31 March 2013. In addition, a further exceptional charge of approximately £1.5m will be made principally reflecting the costs associated with the acquisition of Vado.

Outlook

The recent weakness of Sterling and rising energy costs have added to the already challenging outlook for our UK and South African markets. Nonetheless, our businesses have demonstrated their resilience and ability to gain market share. With the acquisition of the Vado business combined with the ongoing programme of growth initiatives and self-help actions, the Board remains confident that Norcros will continue to make further progress.

¹ Underlying is before exceptional items and where relevant, before non-cash finance costs and after attributable tax

ENQUIRIES:

Norcros plc	Tel: [phone]
Nick Kelsall, Group Chief Executive
Martin Payne, Group Finance Director
Hudson Sandler	Tel: [phone]
Nick Lyon
Charlie Jack
Katie Matthews

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 four 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

·     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 1750 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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