Norcros Plc · LSE:NXR
Norcros — Investor Day (April 2018)
69 slides from Norcros's investor day presentation, Apr 12, 2018
Slide 1: Growth Strategy Delivering Outperformance
Growth Strategy Delivering Outperformance Nick Kelsall, Group Chief Executive Analyst & Investor Day 12 April 2018, London
Slide 2: Agenda
AGENDA 09:30-09:35 Introduction Nick Kelsall, Group Chief Executive 09:35-09:50 Trading & Strategy Update Nick Kelsall, Group Chief Executive 09:50-10:10 Triton Dave Tutton, Managing Director 10:10-10:30 Vado Jim Williams, Managing Director 10:30-10:45 Q&A 10:45-11:00 Coffee Break 11:00-11:20 Merlyn
Slide 3: Business Portfolio – Focused, Market Leading & Well-Invested
Business Portfolio – Focused, Market Leading & Well-Invested * Revenue % UK market leader in the manufacture and marketing of showers £49m 16% Leading manufacturer and supplier of taps, mixer showers, bathroom accessories £37m 12% and valves Market leading, innovative designer, manufacturer and dist
Slide 4: Trading Update
Trading Update GROUP Robust performance in challenging markets Underlying operating profit - expected to be in line with the Board’s expectations Group revenue of c.£300m : +10.7% reported v. prior year : +8.7% @ CC : +4.4% @ CC LfL Closing year end debt expected to be c.£48m – in line with the Boar
Slide 5: Market Dynamics – Strong Fundamentals in Preferred Segments
Market Dynamics – Strong Fundamentals in Preferred Segments UK: Households with a Shower UK: Housing Completions vs Net 90% Increase in Households 88% ‘000s Completions Increase in households 86% 280 84% 260 240 82% 220 80% 200 180 Pent-up housing 78% demand 160 76% 140 120 Source: MTW (2016), Natio
Slide 6: Market Dynamics – Opportunities Supports Growth Strategy
Market Dynamics – Opportunities Supports Growth Strategy UK - ~£2.3bn (MSP) Market Characteristics Sanitaryware Enclosures, screens & trays Our chosen markets are sizeable Mixers, taps and shower controls Markets are fragmented Kitchen taps and sinks Furniture & accessories Scope for consolida
Slide 7: Channel Dynamics – Norcros UK Channel Shift
Channel Dynamics – Norcros UK Channel Shift % Revenue FY13 % Revenue FY17 2% 2% 11% 15% 3% 41% 11% 49% 42% 24% Trade Trade DIY Retail DIY Retail Independent & Specialist Retail Independent & Specialist Retail Export Export Other Other UK business now better balanced Strategic focus on commercial
Slide 8: Substantial Investment in Facilities & New Product
Substantial Investment in Facilities & New Product c.£50m invested in capex and R&D in past 5 years Key driver of differentiation and market leading positions Triton and Vado – digital shower Triton – silent and low pressure ranges Abode Pronteau hot water tap – Vado extension Merlyn, Tr
Slide 9: Norcros DNA – Key Driver of Outperformance
Norcros DNA – Key Driver of Outperformance CORE COMPETENCIES EXPERIENCED DESIGN INNOVATION SOURCING MANAGEMENT ASSEMBLY BRANDS & CHANNEL SPECIFICATION MARKETING MANAGEMENT INCREASING GROUP COLLABORATION, DRIVING SYNERGIES 1. Experienced and successful management of decentralised, focused and complem
Slide 10: Current Strategy – Recap
Current Strategy – Recap CURRENT STRATEGY & STRATEGIC TARGETS 1 Pursue a faster and focused growth strategy to scale up the size of the Group, organically and by acquisition 2 Maintain investment in our strong brands and new GROW GROUP REVENUE TO £420M BY 2018 product development 3 Leverage revenue
Slide 11: Current Strategy – Substantial Progress
Current Strategy – Substantial Progress Revenue (£m) Capex and R&D Expenditure (£m) c.£300m: +50% £47.7m invested 18 c.300 c.3301 17 outside UK: 42.8% 271.2 17 12.1 16 outside UK: 41.6% 235.9 271.2 2 16 10.1 17 15 outside UK: 44.6% 222.1 15 9.7 14 outside UK: 44.9% 218.7 14 6.9 13 outside UK: 48.0%
Slide 12: Current Strategy – Review
Current Strategy – Review Execution of strategy has been highly successful Unequivocal support from Stakeholders Clarity of strategic objectives Focused and disciplined deployment of capital Ninth consecutive year of Revenue and EBIT growth Achievement of ROCE medium term targets Expan
Slide 13: Organic and Acquisition Opportunities
Organic and Acquisition Opportunities EXISTING PRODUCT PORTFOLIO POTENTIAL TO BROADEN PRODUCT PORTFOLIO COMPLEMENTARY ACQUISTION OPPORTUNITIES – WELL DEVELOPED PIPELINE CHOSEN MARKETS SUITABLE FOR CONSOLIDATION ORGANIC GROWTH MOMENTUM 13
Slide 14: Strategy Refresh – 2018 - 2023 Vision
Strategy Refresh – 2018 - 2023 Vision UPDATED STRATEGY & STRATEGIC TARGETS 1 Continue to pursue a focused growth strategy to scale up the size of the Group, organically and by acquisition 2 Maintain investment in our strong brands and new GROW GROUP REVENUE TO £600M BY 2023 product development 3 Lev
Slide 15: Strategy Refresh – Summary
Strategy Refresh – Summary 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 derived
Slide 16: Analyst & Investor Day – Dave Tutton (Triton)
Dave Tutton, Managing Director Analyst & Investor Day 12 April 2018, London 16
Slide 17: Business Overview
Business Overview WORLD CLASS, MARKET LEADING, SHOWER MANUFACTURER Market Leader All Channels World Class Operations Electric, mixer, digital & accessories Broad distribution Best in class quality standards Strong consumer franchise Trade, Retail, Specification, Online Service levels > 9
Slide 18: Market Dynamics – UK Market Leader
Market Dynamics – UK Market Leader 5% UK Shower Market Dec 2017 Vol (MAT) 1.9m Significant Market Opportunity Sizeable UK shower market - ~1.9m units 38% Electric still majority share - ~1.1m units 57% Leading and Increasing Market Shares Electric Mixer Power Shower 34% UK shower market share
Slide 19: Points of Differentiation
Points of Differentiation Electric shower strength, continual design & innovation Trade & consumer BRAND loyalty ….recognition #1 …More than 1 in 4 households have a Triton Shower Continuous brand awareness including digital development & online Widest distribution, ALL channels at all price
Slide 20: Points of Differentiation - Continual Brand Investment
Points of Differentiation - Continual Brand Investment 2017 / 2018 Brand Campaign #See you first thing Britain Digital Success TV Video on Retail POS demand +293% increase in Social Media traffic +40% increase in Direct Web Traffic Branch Search display Events adverts +30% increase in Net Sale
Slide 21: Business Strategy
Business Strategy Multi channel, mass market, Triton brand, with Market Leadership continual NPI & Brand marketing 1st for Electric Showers (UK & Eire) Further Category Exploiting technical & R&D base Extension & Growth Mixer Showers, Digital Mixers & Leverage distribution, sourcing & Triton Brand B
Slide 22: Channels & Customers
EXPORT ONLINE TRADE MERCHANT RETAIL DIY Channels & Customers 22
Slide 23: Product Development
Product Development In house development & engineering expertise Strong category innovation with IP protection Continual R&D - partnering areas such as heat conservation Fast speed to market – retail & trade Electric shower innovation with market leading designs Full in house & 3rd party
Slide 24: Growth Opportunities
Growth Opportunities Digital Mixer Showers MIXER UNIT Triton brand name – Own the category Exploit existing strengths Mass market via Triton; premium via Vado Specification & Contract + REMOTE RISER RAIL and / or CEILING fed CONTROLLER(s) Current strength in social housing & with a northern
Slide 25: Summary
Summary Triton – World Class, Market Leading, Shower Manufacturer Exceptional brand strength supported by innovative & high quality product and world class service Captive electric shower segment – strong replacement market Well invested in NPD to expand across the shower product category Op
Slide 26: Analyst & Investor Day – Jim Williams (Vado)
Jim Williams, Managing Director Analyst & Investor Day 12 April 2018, London 26
Slide 27: Business Overview
Business Overview Founded in 1988 as a distributor of bathroom products Business evolved to focus on mid-high end own designed and branded ranges of: Taps Shower controls Bathroom accessories Plumbing valves Product design and engineering undertaken in UK Majority of heavy manufactur
Slide 28: Market Dynamics
Market Dynamics UK market for taps, mixer showers and bathroom accessories: £563m (MSP) Retail 14% On-Line Plumbers 16% Merchants 49% DIY 21% Moderate market growth of 2-4% p.a. is forecast to 2021 Vado historical revenue CAGR post acquisition of ~10.4% RMI sector accounts 80% market value;
Slide 29: Points of Differentiation
Points of Differentiation A branded brassware specialist at the forefront of design trends Extensive, aspirational portfolio at affordable prices Trusted by an established network of retail and specification advocates 30 years of history Personal, industry leading service Un-rivalled aft
Slide 30: Business Strategy
Business Strategy UK Scope for further market penetration Continue focus and grow share in 3 targeted sectors: Specialist retailers Plumbers merchants Specifications – house builders & hotels Increase consumer brand awareness Continue leading edge design & NPD Export Leverage opportu
Slide 31: Channels & Customers - UK
Channels & Customers - UK Plumbers Merchants Specifications 23% 72% 51% Specialist Retailers 26% 31
Slide 32: Channels & Customers - Export
Channels & Customers - Export Other South America 3% 3% Caribbean 4% Asia 8% JW Marriott Hotel Four Seasons, Hong Kong 28% Dubai Europe Middle 14% East 48% Puro Hotel, Poland Ubora Towers, Dubai Africa 20% Iserena Hotel, Uganda Raffles Hotel, Dubai 32
Slide 33: Product Development
Product Development 2017 saw significant product launch activity Jan Feb March April August Kitchen Mixers Edit Ceres Kovera Slim October 33
Slide 34: Product Development
Product Development Strong and exciting future pipeline 34
Slide 35: Growth Opportunities
Growth Opportunities UK Small market share leaves significant opportunity in all sectors Increased consumer marketing Hotel sector represents <10% of our specifications Over 625,000 hotel rooms in the UK Over 18,000 new rooms planned in 2018 Export Focus on growth from existing markets
Slide 36: Summary
Summary An established brand led business with a strong platform for growth An industry leading product offering with an exciting product development pipeline Industry leading customer service Established history and trusted relationships in all targeted channels Significant experience in
Slide 37: Analyst & Investor Day – Charlie Soden (Merlyn)
Charlie Soden, Managing Director Analyst & Investor Day 12 April 2018, London 37
Slide 38: Business Overview
Business Overview Merlyn Showering was founded in 2000 and today is the UK and Ireland’s No. 1 supplier of premium showering enclosures Merlyn are passionate creators of innovative, quality bathroom products The pursuit of excellence for our customers & consumers is at the heart of our busines
Slide 39: Market Dynamics
Market Dynamics UK and Ireland market leader in a fragmented market ~15% UK market share - ~35% Irish market share Forecast market growth underpinned by positive underlying market dynamics & sector trends UK and Ireland Shower Enclosure, Bath Screen & Tray Market (£m) Growing emphasis on the b
Slide 40: Points of Differentiation – Our People, Service, Products
Points of Differentiation Our People Our Service Dedicated, passionate Commitment to employee base service excellence Our Products Our Promise Superior quality, Most reliable, trusted market leading innovation partner in the industry Success Built on Trust 40
Slide 41: Points of Differentiation
Points of Differentiation Merlyn consistently outperforms its competitors across all key service and product metrics Merlyn Competitor average Merlyn service average 4.5 Merlyn product average 4.3 Competitor Competitor average 3.8 average 3.8 4.3 3.7 4.6 3.5 4.7 4.1 4.6 3.6 3.8 4.0 4.7 3.7 4.5 4.0 4
Slide 42: Business Strategy
Business Strategy £10.8m FY10 revenue when Charlie Soden appointed as CEO Strength in Independent Retail, presence in Distribution Then Good logistics and distribution network Excellent supply partnerships set up in Far East £30.7m revenue & UK and Ireland market leader Market leading positi
Slide 43: Channels & Customers
Channels & Customers Merlyn has the knowledge and expertise to succeed in all channels Benefits of Merlyn’s multi-channel approach Revenue by Channel Doors and Enclosures Revenue by Revenue by Brand End Market Access broader 25% New End market customer base, Build diversification without cannibalisa
Slide 44: Product Development
Product Development Systematic approach to NPD, driving Merlyn’s innovative product range User Needs Customer Insight Market Trends Award Winning Stage Activity Product Ideation Events Generation of ideas by key development stakeholders Discovery Evaluation and selection of ideas (4 months) Concept
Slide 45: Growth Opportunities
Growth Opportunities Continued market growth and market share gain Development of existing customers, channels and markets Independent Retail Export Increase share of wallet with existing Utilise group’s global reach customer base Identify & target new markets - Further penetration & grow cu
Slide 46: Summary
Summary Leading Position in Premium Shower Enclosure Market Premium Branded Proposition High Quality Product and Exceptional Service Offering Successful Multi-Channel Sales Strategy Flexible and Scalable Operating Model Culture of Innovation and New Product Development Significant Barriers to Entry
Slide 47: Analyst & Investor Day – Stephen Dixon (Johnson Tiles)
Stephen Dixon, Managing Director Analyst & Investor Day 12 April 2018, London 47
Slide 48: Business Overview
Business Overview UK’s market leading provider of wall and floor tiles 12% share of total UK market 21% share of UK wall tile market Strong, long established brand One of the longest established tile brands in the world Brand is strong in all B2B sectors Built on quality and service
Slide 49: UK Market Dynamics
UK Market Dynamics Trade Dominated by specialist tile distributors Johnson has a successful demand generation model Housebuilder Commercial specification Public specification Strong position in all key distributors Johnson 12% share Consumer Dominated by B&Q, Wickes and Topps Johns
Slide 50: Points of Differentiation
Points of Differentiation Market position No 1 or No 2 in each of our chosen market segments Long held relationships with all the major players in our key markets In house design, development and factoring expertise Enables Johnson to be first to market with true market leading, differentiated
Slide 51: Business Strategy
Business Strategy 2017 restructuring successfully implemented Manufacturing plant reconfigured to enable small format growth Manufactured stocks reduced Benefits of restructuring offset by weaker market in H2 Further restructuring of cost base necessary, actioned end March 18 Loss of c.5
Slide 52: Channels & Customers
Channels & Customers Housebuilder Trade BARRATT te CTD CHARLES CHURCH ceramic tile distributors BH somes Taylor Homes (ory ES @ Travis Perkins ple ‘ZREDROW ING McCarthy & Stone Ceara Leading Tile Specialist DURKAN Public Sector oe Lambeth NottingHill Housing 4 ieiLeeds ya CALLYWITH COLLEGE Retail Ba
Slide 53: Product Development - Tiles
Product Development - Tiles Well established NPD process with proven track record of delivering market leading products Experienced in-house design and development team & sourcing expertise Design focused on UK market demands In-house manufacturing delivers faster time to market Ability to
Slide 54: Growth Opportunities
Growth Opportunities Small Format Product Historically demand has exceeded capacity New capacity now successfully brought on stream (November 2017) Improved availability is driving sales Commercial discussions well under way North America – new products launched January 2018 Scandinavia
Slide 55: Summary
Summary Strong UK market share, long established broad customer base, market leading products and service offer provides an excellent commercial platform Further restructuring necessary to return business to profit Substantial reduction in cost base planned Minimum of £2m annualised savings
Slide 56: Analyst & Investor Day – Thomas Willcocks (Norcros SA)
Thomas Willcocks, Managing Director Analyst & Investor Day 12 April 2018, London 56
Slide 57: Business Overview
Business Overview Norcros SA holds a strong position in floor & wall preparation, fixing and coverings and a growing presence in bathroom, kitchen and plumbing fittings, servicing a wide base of retail and commercial customers Three divisions: Revenue * 34 Stores R1 042m (£57.0m) No. 2 player with s
Slide 58: Market Dynamics
Market Dynamics Norcros SA has consistently outperformed Strong Regional Market Growth Prospects the market in a challenging economic environment. Young growing population Emerging middle class Well positioned to take advantage of recent positive political developments which should Shortage of housi
Slide 59: Channels & Customers
Channels & Customers Product distributed through in-house and independent retailers and wholesalers Families, Interior Designers & Retail Small Private Builders Commercial Retail Specifications Commercial Retail Supply & Fit With regional production facilities and joint distribution offering, Norcro
Slide 60: Points of Differentiation
Points of Differentiation Norcros SA offers a vertically integrated & national one-stop-shop Well-established and growing Regional Retail, Specification and Distribution Footprint Market Leading Showrooms Integrated Floor, Wall and Bathroom Fittings offer for Retail and Specifications (One-stop-Shop
Slide 61: National Footprint & Best-in-Class Showrooms
National Footprint & Best-in-Class Showrooms 24 out of 32 Corporate Stores have been upgraded to either CX or Lifestyle Models 5 Factory Stores Footprint to grow by 2 stores per year • Polokwane North – H2 FY19 • Northriding – H1 FY20 Tile Africa CX Format (Southgate) 61
Slide 62: Bathroom Store-within-a-Store
Bathroom Store-within-a-Store Strong and growing bathroom sales contribution Strong growth in retail sales per m2 Margin growth from improved presentation of premium ranges International group purchasing synergies driving exclusive ranges delivering higher sales & margins Tile Africa CX Form
Slide 63: New Product Innovation
New Product Innovation New Private Label Tap Ranges deliver Category Growth of 34% Introduction of New Decorative Tile Ranges - Q4 New Installation Friendly Water-Based Epoxy Grout – Q3 Development of Integrated Commercial Flooring Systems – FY19 ~47% of Revenue from Products Launched in Last 3 Year
Slide 64: Business Strategy
Business Strategy Accelerated organic growth supported by targeted acquisitions Organic Opportunities Strong progress continues to be made across all 3 businesses There is still significant growth upside to grow our market share in existing product channels and markets Accelerated growth will be del
Slide 65: Growth Opportunities
Growth Opportunities Market share growth will be driven by geographic expansion and product diversification Geographic Sub-Saharan markets offer good growth opportunities Housing and infrastructure shortages across the East Africa region Community Product Diversification Low market penetration & fra
Slide 66: Growth Opportunities
Growth Opportunities Group synergies driving revenue and margin growth Substantial Revenue Growth with significant improvement in Gross Margins 66
Slide 67: Summary
Summary Improving political and market conditions in both South Africa and neighbouring countries will provide a strong platform for continued growth over the next 5 years Focus Areas: CX Store Roll Out & Retrofit Program (Next 12 Months) 2 x New Stores 2 x Major Upgrades 6 x Retrofits Bathroo
Slide 68: Norcros Group – Closing Summary & Q&A
Norcros Group – Closing Summary & Q&A Resilient performance Strong financial position Hilton Hotel, Hawaii The Shard, London –Western Europe’s tallest building Differentiated offer driving growth Clear vision and challenging strategic targets Favourable market dynamics and growth opportuni
Slide 69: Growth Strategy Delivering Outperformance
Growth Strategy Delivering Outperformance