Norcros Plc · LSE:NXR

Norcros — FY2020 Earnings Presentation

47 slides from Norcros's earnings presentation, June 2020

  1. Slide 1: Preliminary Results Year ended 31 March 2020

    Click to edit Master title style Inspiring Living Spaces Preliminary Results Year ended 31 March 2020

  2. Slide 2: Introduction

    Click to edit Master title style Introduction Martin Towers, Chairman

  3. Slide 3: Highlights

    Click to edit Master title style Highlights FY20 Results COVID-19, Liquidity and Current Trading  Resilient performance despite challenging markets  Decisive action taken to safeguard employees, reduce and COVID-19 operating costs, minimise cash burn and maximise liquidity  Eleventh consecutive y

  4. Slide 4: Financial Review

    Click to edit Master title style Financial Review Shaun Smith, Group Finance Director

  5. Slide 5: Income Statement

    Click IncometoStatement edit Master title style 2020 2020 2019 +/- +/- £m £m £m reported Constant IFRS16 Pre-IFRS16 Pre-IFRS16 Currency Revenue 342.0 342.0 331.0 +3.3% +5.0% Underlying1 operating profit 32.3 31.8 34.4 -6.1% Margin 9.4% 9.3% 10.4% Finance charges – cash (3.5) (1.6) (1.8) Underlying1

  6. Slide 6: Income Statement – Key Bridges

    Click Incometo Statement edit Master title Bridges – Key style Revenue Underlying operating profit 4.8 0.4 23.7 5.2 £m 2.1 £m - 2.7 342.0 34.4 0.4 331.0 32.3 FY19 Currency UK HoP SA FY20 FY19 Currency UK SA FY20 Revenue1 Underlying operating profit / ROS% 9.3% +5.0% 10.4% 9.4% 325.8 342.0 34.4 10.4%

  7. Slide 7: Tax, Earnings & Dividends

    Click to edit Master Tax, Earnings title style & Dividends Diluted underlying EPS (pence) Underlying1 Reported 2020 2020 2019 2020 2020 2019 1.3 £m £m £m £m £m £m IFRS16 Pre Pre IFRS16 Pre Pre 31.7 29.5p 29.5 Pre 28.2 IFRS16 IFRS16 IFRS16 IFRS16 IFRS16 FY18 FY19 FY20 Profit before Tax 28.8 30.2 32.6

  8. Slide 8: High Cash Conversion

    Click to edit High Cash Master title style Conversion 2020 2020 2019 £m £m £m Pre-IFRS16 Pre-IFRS16 Underlying EBITDA 38.6 38.6 41.3 Working capital (4.8) (4.8) (2.1) Depreciation of right of use assets 4.5 - - Cash conversion1 Operating profit impact of IFRS16 0.5 - - 99% Other (0.4) (0.4) 0.6 96%

  9. Slide 9: Strong Balance Sheet

    Click StrongtoBalance edit Master Sheet title style £m Net debt 47.1  Net debt £36.4m at end March 20 : £38.6m 7 June 20 35.0 36.4  Significant headroom versus £120m RCF FY18 FY19 FY20 times Leverage – Net debt to EBITDA * 1.2*  Leverage 0.9 times underlying EBITDA 0.8 0.9 FY18 FY19 FY20 £m Retur

  10. Slide 10: UK Pension Scheme

    Click to editScheme UK Pension Master title style IAS 19R deficit £48.9m (March 19: £31.6m) UK Pension IAS 19R Assets & Liabilities  Assets reduced by £34.5m to £361.9m  Liabilities reduced by £17.2m to £410.8m  Contributions continue to be paid in accordance with the triennial valuation recover

  11. Slide 11: COVID-19 – Decisive action to maximise liquidity, reduce costs and preserve cash

    Click to edit COVID-19 Master action - Decisive title style to maximise liquidity, reduce costs and preserve cash Strong liquidity position–significant headroom against new Maximum net debt covenant Constructive discussions with banking group  Group has a £120m committed RCF facility maturing in N

  12. Slide 12: Operating Review

    Click to edit Master title style Operating Review Nick Kelsall, Group Chief Executive

  13. Slide 13: Key Messages

    Click to edit Master title style Key Messages  Resilient Performance  Trading ahead of prior year pre CV-19 impact  Flexibility & diversity of Group’s operating model – key driver  Experienced management, leading market positions, strong brands & channel diversity  Clear, consistent, focused st

  14. Slide 14: Operational Update

    Click to editUpdate Operational Master title style  Priority is the health and safety of our staff  CV-19 Senior Management Committee meets daily  Improving outlook despite social distancing measures  Business as usual & successfully adapting to the ‘new normal’  UK  No. of staff originally fu

  15. Slide 15: Resilient Business Model

    Click to edit Master title style Resilient Business Model Nick Kelsall, Group Chief Executive

  16. Slide 16: Balanced & Diversified Business Portfolio

    Click to edit Resilient Master Business title–style Model Balanced & Diversified Business Portfolio Revenue FY131 Revenue FY201 RoW Discontinued £210.7m £342.0m Portfolio of complementary market leading businesses with strong brands 1 Financial years ended 31st March 16

  17. Slide 17: Diversified Channels; Focus on Attractive Segments

    Click to edit Resilient Master Business title–style Model Diversified Channels; Focus on Attractive Segments UK Channel Revenue - FY131 UK Channel Revenue – FY201 1% 2% 14% 11% 3% 41% £122.8m 21% £225.4m 50% 42% 14% Trade Trade DIY Retail DIY Retail Independent & Specialist Retail Independent & Spec

  18. Slide 18: Norcros DNA; Key Driver of Outperformance

    Click to edit Resilient Master Business title–style Model Norcros DNA; Key Driver of Outperformance Core Competencies EXPERIENCED DESIGN INNOVATION SOURCING MANAGEMENT BRANDS & CHANNEL ASSEMBLY SPECIFICATION MARKETING MANAGEMENT Cohesive portfolio of specialist, well invested, market leading busines

  19. Slide 19: Target Financially Weak Competitors

    Click to edit Resilient Master Business title–style Model Target Financially Weak Competitors  Financially weak & highly leveraged competitors prior to CV-19 Turnover ~£100m Turnover ~£20m Net Debt/EBITDA 16.1x Net Debt/EBITDA 7.3x % ROCE (-0.3%) % ROCE (-8.7%) Cash holdings £6.3m Cash holdings £ni

  20. Slide 20: Business Review

    Click to edit Master title style Business Review Nick Kelsall, Group Chief Executive

  21. Slide 21: Business Overview

    Click to edit Business Master title style Overview Group % FY20 Revenue Market leader in the manufacture and marketing of showers in the UK £48.6m 14.2 Market leading supplier of shower enclosures and trays £42.5m 12.4 Leading manufacturer and supplier of taps, mixer showers, bathroom accessories an

  22. Slide 22: UK Operations

    Click to edit Master title style UK Operations Nick Kelsall, Group Chief Executive

  23. Slide 23: UK Revenue Progress; Export Performance Mixed

    Click to edit –Master UK Revenue title Solid UK style Export Performance Mixed Progress; % Revenue Change (FY20 v FY19) Overall UK Export -14.1% -15.3% -8.7%  Impact of customer destocking and CV-19 in UK and Eire 7.6% 8.4%  Strong UK retail & solid specification growth offset by CV-19 2.0% 2.2% 5

  24. Slide 24: UK Channels – Trade and Independent Retail Share Gains

    Click to edit Master UK Channels – Trade title style and Independent Retail Share Gains  Trade UK Norcros - FY20 (vs FY19)  Continued traction across all national merchants • Travis Perkins, Wolseley, Grafton and Saint Gobain  Screwfix momentum – Triton, Croydex & Adhesives 1%  Toolstation devel

  25. Slide 25: UK Channels – DIY Exposure Stable; Export Performance Varied

    Click to edit Master UK Channels title style – DIY Exposure Stable; Export Performance Varied  DIY Retail UK Norcros - FY20 (vs FY19)  Triton – H2 v H1 growth despite CV-19 impact  Croydex – strong B&Q and Wickes growth 1% 14% (FY19: 2%)  Johnson Tiles – growth in Wickes; Luxury Vinyl Tile range

  26. Slide 26: UK NPD and Brand Investment – Key Driver of Differentiation

    Click UK NPDto edit MasterInvestment and Brand title style– Key Driver of Differentiation AS2000SR silent shower ~ Grab and Grip ~ Axces contemporary Proboil 2X awarded the Quiet Mark inclusive contemporary VFM range Launched at KBB approval grab bar design awards Norcros Pro AF Low Prep Pronteau 3–

  27. Slide 27: UK – Solid Performance Despite CV-19 & Tough Markets

    Click to edit UK – Solid Master titleDespite Performance style CV-19 & Tough Markets Revenue £228.1m £225.4m 2 11.3 11.8 £200.6m 9.1 41.4 41.7 47.1 16.2 14.8 21.7 23.7 12.8 24.2 41.4 42.3 42.9 39.5 42.5 11.7 52.8 56.6 48.6 2018 2019 2020 Triton Merlyn 1 Vado Croydex Abode Johnson Tiles Adhesives 1 A

  28. Slide 28: South Africa

    Click to edit Master title style South Africa Nick Kelsall, Group Chief Executive

  29. Slide 29: South Africa Investment Fundamentals

    Click South to edit–Master Africa title Fundamentals Investment style Revenue1 – Unit Breakdown £m Tile Africa TAL 116.6  Large economy & business friendly environment Johnson Tiles South Africa 102.9 99.5 23.7 House of Plumbing 88.9 15.0 12.6 73.0 72.9 10.8 14.0  Long-term socio-economic dynamics

  30. Slide 30: South Africa Revenue – Maintaining Leading Positions

    Click South to editRevenue Africa Master title style – Maintaining Leading Positions in Challenging Markets % Revenue Change (FY20 v. FY19) £ Reported Constant Currency 13.3%  House of Plumbing acquisition driving growth against significant economic 19.3% and CV-19 headwinds -11.1%  Responding to

  31. Slide 31: South Africa – Integrated Channels Business Model

    Click South to editChannels Africa Master title style Business Model – Integrated Construction  TAF  32 owned and 2 franchise stores  Flagship Greenstone and Port Elizabeth stores upgraded Retail  Segment focus – CX-format/VFM momentum  TAL Families, interior  Strong growth with minor independ

  32. Slide 32: South Africa – Solid Performance Despite More Challenging Market

    Click South to edit–Master Africa title style Despite More Challenging Market Solid Performance Revenue1 Underlying Operating Profit1 £116.6m 3 £97.7m 23.7 £91.1m 14.2 11.5 14.0 22.8 22.1 22.1 57.5 60.7 56.8 2018 2019 2020 2 Tile Africa TAL Johnson Tiles HoP 1 On a constant currency basis, 2 House o

  33. Slide 33: Group Outlook & Strategy

    Click to edit Master title style Group Outlook & Strategy Nick Kelsall, Group Chief Executive

  34. Slide 34: Outlook – Market Indicators

    Click to -edit Outlook Master Market title style Indicators UK South Africa Structural housing shortages & low point in consumer confidence should support medium term recovery Key Housing Stats Population Growth versus Dwellings Completed Sources: GOV.UK & HMRC Q1 2020 Source: Stats SA March 2020 Co

  35. Slide 35: Group Strategy – 2023 Vision Remains Valid

    Click Groupto edit Master Strategy – 2023title style Vision Remains Valid 2023 VISION “A leading supplier of bathroom and kitchen products in selected geographies, offering strong brands, contemporary designs, trusted quality, outstanding service, innovation and a wide product range” STRATEGIC TARGE

  36. Slide 36: Group Strategy – UK Industry Fragmentation & Share Gain Opportunity

    Click Groupto edit Master Strategy title style – UK Industry Fragmentation & Share Gain Opportunity UK Bathroom – Selective Markets @ MSP £220m £221m £440m £350m £405m £472m £2.1bn 100% 90% 80% 70% 60% Rest of Market 50% Top Players 40% 30% 20% 10% 0% Showers Enclosures & Adhesives Tiles Brassware F

  37. Slide 37: Summary

    Click to edit Master title style Summary  Resilient Performance  Trading ahead of prior year pre CV-19 impact  Flexibility & diversity of Group’s operating model – key driver  Experienced management, leading market positions, strong brands & channel diversity  Clear, consistent, focused strateg

  38. Slide 38: Appendix

    Click to edit Master title style Appendix

  39. Slide 39: Compelling Acquisition Track Record

    Click to edit Resilient Master Business title–style Model Compelling Acquisition Track Record 1 Revenue target      strategy Group 2 Underlying ROCE of >15%      3 Geographic fit       Acquisition criteria 4 Complementary market     5 Preferred channel mix      6 Export pote

  40. Slide 40: Multiple Sales Channels

    Click to edit Resilient Master Business title–style Model Multiple Sales Channels Housebuilding Specification End consumer DIY Retail Merchants Tradesmen Specialist Retail Trade Multiple sales channels increasing market penetration & reducing customer concentration 40

  41. Slide 41: Significant Market Opportunities

    Click to edit Resilient Master Business title–style Model Significant Market Opportunities Existing Product Portfolio – Organic Growth Opportunities Potential to Broaden Product Portfolio – Organic and Acquisition Opportunities Well Developed Pipeline – Complementary Acquisition Opportunities Chosen

  42. Slide 42: Group Strategy – SA Industry Fragmentation & Consolidation Opportunity

    Click Groupto edit Master Strategy title style – SA Industry Fragmentation & Consolidation Opportunity South Africa Bathroom – Selective Markets @ MSP £149m £426m £325m# £312m# £1.2bn 100% 90% 80% 70% 60% Rest of Market 50% 40% Top 3 Players 30% 20% 10% 0% Adhesives & Floor Tiles Bathroom Retail Plu

  43. Slide 43: Exceptional and acquisition related costs

    Click to edititems Exceptional Master andtitle style related costs acquisition Exceptional items 2020 2019 £m £m (9.0) - COVID -19 related impairment - (3.0) Onerous lease - (1.0) GMP Equalisation (9.0) (4.0) Acquisition related costs 2020 2019 £m £m Acquisition related deferred remuneration (earn o

  44. Slide 44: Net Debt Reconciliation

    Click to edit Net Debt Master title style Reconciliation 2020 2019 £m £m Net debt – opening (35.0) (47.1) Net cash flow 0.4 14.0 Other non-cash movements (0.2) (0.2) Foreign exchange (1.6) (1.7) Net debt – closing (36.4) (35.0) 44

  45. Slide 45: UK Pension Cashflows

    Click to editCashflows UK Pension Master title style Cash outflow close to peak * * * Annual pensioner payroll, excludes non-predicted costs such as transfer out and early retirement payments 45

  46. Slide 46: Impact of applying IFRS16 on key financial metrics

    Click Impacttoofedit Master applying title style IFRS16 on key financial metrics £m 2020 IFRS16 2020 Explanation pre IFRS16 Adjustment Reported Income Statement Lease costs (+£5.0m) replaced with IFRS16 Underlying operating profit 31.8 0.5 32.3 lease depreciation (-£4.5m) Finance charges (1.6) (1.9)

  47. Slide 47: Preliminary Results Year ended 31 March 2020

    Click to edit Master title style Inspiring Living Spaces Preliminary Results Year ended 31 March 2020

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