Norcros Plc · LSE:NXR
Norcros — H1 2019 Earnings Presentation
34 slides from Norcros's earnings presentation, September 2018
Slide 1: Interim Results Six Months to 30 September 2018
Interim Results Six Months to 30 September 2018 SMART SHOWERS
Slide 2: Introduction
Introduction Martin Towers Chairman SMART SHOWERS 2
Slide 3: Highlights
Highlights 1 Revenue increased by 13.3% on a constant currency basis Revenue (+12.1% reported) £162.6m +13.3% Underlying operating profit increased by 29.9% to £15.2m Underlying operating profit £15.2m +29.9% Merlyn performed strongly, in line with our expectations Triton’s strong momentum s
Slide 4: Financial Review
Financial Review Shaun Smith Group Finance SMART TAPS Director 4
Slide 5: Income Statement
Income Statement H1 H1 +/- +/- FY Sept 2018 Sept 2017 Reported Constant Mar 2018 £m £m Currency £m Revenue 162.6 145.0 +12.1% +13.3% 300.1 Underlying1 operating profit 15.2 11.7 +29.9% 27.4 Margin 9.3% 8.1% 9.1% Finance charges – cash (1.0) (0.2) (1.1) Underlying1 PBT 14.2 11.5 +23.5% 26.3 Exception
Slide 6: Income Statement – Key Bridges
Income Statement – Key Bridges Revenue Underlying operating profit - 0.3 3.9 3.5 21.3 19.5 4.0 £m £m 162.6 15.2 1.5 0.2 145.0 11.7 Sept '17 Currency Merlyn UK SA Sept '18 Sept '17 Currency UK SA Sept '18 Revenue1 +13.3% Underlying operating profit / ROS% 9.3% 162.6 15.2 +16.5% 143.5 8.1% 10.4% 11.4
Slide 7: Tax, Earnings and Dividends
Tax, Earnings and Dividends Underlying1 Reported Diluted underlying EPS H1 H1 FY H1 H1 FY Sept Sept Mar Sept Sept Mar 2018 2017 2018 2018 2017 2018 £m £m £m £m £m £m 29.5 13.9 14.0 Profit before Tax 14.2 11.5 26.3 15.2 7.4 13.5 Sep-18 Sep-17 Mar-18 FY Tax charge (3.0) (2.6) (5.7) (3.2) (1.9) (3.6) D
Slide 8: Cash Flow
Cash Flow H1 H1 FY Sept 2018 Sept 2017 Mar 2018 £m £m £m Underlying EBITDA 18.6 14.8 33.8 Cash conversion1 Working capital (7.9) 0.7 (2.8) Other 0.7 0.7 - 109% 92% Underlying operating cashflow 11.4 16.2 31.0 61% Net capital expenditure (3.5) (4.1) (7.7) Sep-18 Sep-17 Mar-18 FY Pension deficit recov
Slide 9: Balance Sheet
Balance Sheet £m IAS 19 UK Pension Deficit 52.1 48.0 IAS19R deficit £28.8m (March 18: £48.0m, Sept 17: £52.1m) 28.8 Sep-18 Sep-17 Mar-18 £m Net debt (IFRS) Net debt £53.5m (March 18: £47.1m, Sept 17: £20.8m) 53.5 47.1 20.8 Leverage 1.4 times underlying EBITDA Sep-18 Sep-17 Mar-18 times Leverag
Slide 10: UK Pension Scheme
UK Pension Scheme IAS19R deficit £28.8m (March 18: £48.0m, Sept 17: £52.1m) Assets reduced by £0.7m to £398.9m UK Pension IAS 19R Assets & Liabilities Liabilities reduced by £19.9m to £427.7m as a result of a higher discount rate of 2.95% (March 2018: 2.65%) Super-mature scheme 7,184 membe
Slide 11: Operating Review
Operating Review Nick Kelsall Group Chief Executive 11
Slide 12: Key Messages
Key Messages Overview Robust first half performance Leading market positions & strong brands Success of multi channel approach & broad product offering Financial resilience Strategy continues to drive outperformance UK Solid UK sales growth Growth momentum in trade and specificatio
Slide 13: Business Overview
Business Overview Group H11 Revenue % Market leader in the manufacture and marketing of showers in the UK £ 26.9m 16.6 Market leading supplier of shower enclosures and trays 12.0 £ 19.5m Leading manufacturer and supplier of taps, mixer showers, bathroom £ 19.7m 12.1 accessories and valves UK Market
Slide 14: UK Operations
UK Operations Nick Kelsall Group Chief Executive 14
Slide 15: UK Revenue – Strong UK Growth; Export Mixed
UK Revenue – Strong UK Growth; Export Mixed % Revenue Change Overall UK Export 9.8% 10.7% Continuing excellent UK growth. Momentum in Ireland maintained 6.1% 13.4% 1 14.1% Further robust growth across all channels 8.7% -5.3% 6.0% Excellent growth in trade. Export performance mixed -35.1% -12.2
Slide 16: UK Channels – Strong Performance in Trade & Independents
UK Channels – Strong Performance in Trade & Independents % Revenue H11 FY19 Trade (v FY182) Increasing Group trade orientation - >50% revenues 2% (FY18 - 2%) Continued Screwfix growth – Triton and Adhesives 15% Vado – significant specification growth & key contract renewals (FY18 - 17%) Me
Slide 17: UK Channels – Reduced DIY Exposure; Export Mixed
UK Channels – Reduced DIY Exposure; Export Mixed % Revenue H11 FY19 DIY Retail (v FY182) Triton – strong growth in key accounts; Homebase impact minimal 2% (FY18 - 2%) Croydex – Homebase impact significant 15% Abode – Wickes trading well (FY18 - 17%) Johnson Tiles – managed B&Q decline; Wi
Slide 18: UK NPD – Differentiation Through Product Development
UK NPD – Differentiation Through Product Development Key driver of differentiation and market leading positions Strong new product vitality – driving revenue and profit growth Triton & Vado Launch of digital shower range Triton “H20ST” & “H20ME” – strong market approval − Home & Living Award
Slide 19: UK – Robust Revenue and Profit Growth
UK – Robust Revenue and Profit Growth Revenue Underlying Operating Profit £200.6m £18.6m 9.1 47.1 12.8 £11.4m £109.9m 24.2 5.5 £94.3m 4.4 20.2 £7.4m 10.4% 42.9 25.8 7.3 9.3% 10.8 7.8% 6.5 11.7 19.7 12.3 20.8 19.5 52.8 24.5 26.9 H1 Sept 17 H1 Sept 18 FY Mar 18 HY Sept 17 HY Sept 18 FY Mar 18 Triton M
Slide 20: SA Operations
SA Operations Nick Kelsall Group Chief Executive 20
Slide 21: South Africa Revenue – Share Gains in a Tough Market
South Africa Revenue – Share Gains in a Tough Market % Revenue Change £ - Reported Rand 3.9% Solid H1 growth in challenging market 7.1% -0.9% Resilient performance – driven by new product ranges 2.2% 2.4% Robust overall performance despite continued headwinds 5.0% into key Zimbabwean market 33
Slide 22: Channels – Solid Performance in Challenging Markets
Channels – Solid Performance in Challenging Markets TAF Sustained growth in bathroom & tap category Successfully trialled VFM store concept - feedback positive Retail Group purchasing synergies delivering exclusive ranges & driving sales Families, interior TAL Designers & Small Private Bui
Slide 23: South Africa – NPD Highlights
South Africa – NPD Highlights New Product Development TAF Excellent tap category growth – benefiting from Group supply chain Launch of free-standing baths – driving above market bath category growth Latest exclusive retail offerings Hessian, Porta Nuova & Signature ranges well received Joh
Slide 24: South Africa – Robust Profit Performance
South Africa – Robust Profit Performance Revenue 1 Underlying Operating Profit 2 £8.8m £95.5m 12.1 23.2 £52.7m £4.3m £49.2m 7.9 £3.8m 5.7 12.0 12.6 60.2 8.5% 8.8% 7.2% 31.5 32.2 H1 Sept 17 H1 Sept 18 FY Mar 18 H1 Sept 17 H1 Sept 18 FY Mar 18 Tile Africa TAL Johnson Tiles Underlying Operating Profit
Slide 25: Group Outlook & Strategy
Group Outlook & Strategy Nick Kelsall Group Chief Executive 25
Slide 26: Market Outlook: UK Housing and South Africa
UK South Africa House Building Growth; Weak Consumer Cautious Outlook Key Housing Stats % GDP growth Sources: GOV.UK & HMRC Q3, October 2018 Source: Investec Q3 2018 3.5% Completed Transactions 65,000 500,000 3.0% 60,000 450,000 2.5% Quarterly Transactions Quarterly Completions 55,000 400,000 2.0% 5
Slide 27: Group Strategy – 2023 Vision
Group Strategy – 2023 Vision 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 TARGETS £600m revenue by 2023 50% revenues derive
Slide 28: Strategy - Industry Fragmentation + Consolidation Opportunity
Strategy - Industry Fragmentation + Consolidation Opportunity UK Bathroom – Selective Markets @ MSP £220m £355m £224m £350m £346m £350m £1.8bn 100% 90% 80% 70% 60% Rest of Market 50% Top 3 Players 40% 30% 20% 10% 0% Showers Brassware Enclosures & Furniture & Adhesives Tiles Total Trays Accessories S
Slide 29: Selective Acquisitions – Value Adding Approach
Selective Acquisitions – Value Adding Approach Consolidator in Large Highly Fragmented Markets Numerous opportunities across product sub sectors & channels Well developed pipeline Acquisition Criteria Complementary to Norcros DNA Market leading positions and strong brands Strong organic sa
Slide 30: Summary
Summary Robust Half Year Results 2023 Vision – Strategy Delivering Organic Growth and Synergy Opportunities Medium Term Indicators Remain Favourable Well Developed Pipeline of Acquisition Opportunities 30
Slide 31: Appendix
NOFrcros Appendix 31
Slide 32: Acquisition Related Costs
Acquisition Related Costs Acquisition related costs H1 Sept H1 Sept FY Mar 2018 2017 2018 £m £m £m Acquisition related deferred remuneration (earn out) - (0.2) 0.3 Intangible asset amortisation (1.8) (0.6) (2.2) Staff costs and advisory fees (0.1) (0.4) (2.4) (1.9) (1.2) (4.3) 32
Slide 33: Net Debt Reconciliation
Net Debt Reconciliation H1 Sept H1 Sept FY Mar 2018 2017 2018 £m £m £m Net debt (IFRS) – opening (47.1) (23.2) (23.2) Net cash flow (5.0) 3.5 (24.2) Other non cash movements (0.1) (0.1) (0.2) Foreign exchange (1.3) (1.0) 0.5 Net debt (IFRS) - closing (53.5) (20.8) (47.1) 33
Slide 34: UK Pension Scheme Cashflows
UK Pension Scheme Cashflows Cash outflow close to peak * Annual progression commencing 21 October 18 Source: KPMG Fusion * Annual pensioner payroll, excludes non-predicted costs such as transfer out and early retirement payments 34