Norcros Plc · LSE:NXR
Norcros — H1 2024 Earnings Presentation
34 slides from Norcros's earnings presentation, Nov 16, 2023
Slide 1: Interim Results
INTERIM RESULTS Chief Executive Officer Chief Financial Officer 16 November 2023
Slide 2: Robust performance reflecting the strength and positioning of our market leading brands
Robust performance reflecting the strength and positioning of our market leading brands £201.6m -4.1% • UK outperformance driven by Triton and Merlyn brands • SA continues to grow share despite headwinds £21.4m -2.7% • NPD, service and cross-selling driving organic market share growth £46.6m • Excel
Slide 3: UK and South Africa highlights
£143.9m -0.8% 1 £57.7m -11.0% 1 £18.7m £2.7m 13.0% 4.7% • Outperformance from Triton and Merlyn brands • Outperformance from TAL adhesives • NPD and service levels drive share gains • Energy supply challenges materially impacted demand • Group collaboration driving sales and cost synergies • Strong
Slide 4: RMI main driver of bathroom and kitchen market
RMI Upper / Premium Residential New Build Middle Commercial RMI + New Build Economy • RMI main driver of bathroom and kitchen market • Norcros market leading brands positioned in more resilient mid-to-premium segments • New build headwinds, but strong underlying medium-term growth drivers • Norcros
Slide 5: Financial Review
FINANCIAL REVIEW James Eyre Chief Financial Officer
Slide 6: Group financial results: revenue, margin, finance charges
Constant H1 Currency Sept 2022 Reported LFL4 £m v 2022 % v 2022 % Revenue 219.9 -8.3% -4.1% 22.0 -2.7% Margin 10.0% Finance charges – cash (2.1) 19.9 -9.0% Exceptional operating items² - IAS 19R admin expenses (1.0) Acquisition related costs3 (4.9) Finance charge – non-cash - 14.0 1. Underlying mean
Slide 7: UK and SA revenue and operating profit bridges
£m £m H1 Sept 2022 Currency UK SA H1 Sept 2023 H1 Sept 2022 Currency UK SA H1 Sept 2023 -2.9% 10.0% 10.6% 13.0% +0.8% 11.4% £m £m -11.0% 7.4% 4.7% UK SA Group UK SA Group H1 Sept 2022 H1 Sept 2023 H1 Sept 2022 H1 Sept 2023 1. Constant currency basis
Slide 8: Earnings, dividend and return on capital
£14.1m (2022: £15.8m) 3.4p (2022: 3.4p) 15.6p (2022: 17.8p) 22.1% (2022: 20.6%) H1 Sept 23 H1 Sept 22 FY Mar 23 H1 Sept 23 H1 Sept 22 FY Mar 23 1. Before exceptional operating items, IAS 19R admin costs, acquisition related costs and where relevant, non-cash finance costs and attributable tax
Slide 9: Cash flow
H1 Sept 2022 £m 23.6 Working capital (11.0) Depreciation of right of use assets 2.4 Operating profit impact of IFRS 16 0.9 IFRS 2 charges 0.2 16.1 Cash conversion1 % 121% 68% 89% Net capital expenditure (3.3) Pension deficit recovery payment (1.9) Tax paid (4.3) 6.6 Exceptional and acquisition relat
Slide 10: Net cash, leverage and pension surplus
(£46.6m) 1.0x £15.7m • Reduced debt driven by excellent • Sustained low leverage • Pension surplus maintained cash generation • Significant liquidity and funding • Super-mature scheme and well • Facility of £130m RCF + £70m headroom managed accordion extended to 2026 H1 Sept 23 H1 Sept 22 FY Mar 23
Slide 11: Group Strategy
GROUP STRATEGY Thomas Willcocks Chief Executive Officer
Slide 12: Good progress in refinement and early execution of strategic priorities
• Portfolio development • Drive organic market share growth • Continued focus on operational excellence • ESG as a competitive advantage Good progress in refinement and early execution of strategic priorities
Slide 13: Strategic priorities progress
• Exit of Adhesives successfully completed • Reducing manufacturing capacity at Johnson Tiles (UK) • Well-developed acquisition pipeline • Successful new sustainable product launch program • Group cross-selling initiatives – scale advantages • Market leading brands in more resilient market segments
Slide 14: Complementary product categories
• Complementary product categories • Attractive end markets • Market leading positions and strong brands Complementary product categories • Strong organic sales growth • Potential to drive sales synergies • ESG impact • Strong M&A track record • Grant Westfield integration and synergies • Well-devel
Slide 15: New product development and sustainability
• Behind the wall and digital • Sustainability benefits of electric showering • Personalised display – lower water / energy use and cost • ENVi® is our first ClimatePartner certified product • Growth opportunity – Future Home Standard 1. FY23 Group vitality rate – proportion of revenues in the year
Slide 16: UK revenue by channel
Trade and specification 63% Independent, specialist and 12% online DIY retail 12% Export 12% 1. 1% of UK revenues to other channels
Slide 17: UK bathroom market fragmentation
100% 90% 80% 70% 60% 50% 40% 30% 20% Accessories Rest of Market 10% #1 #1 #1 #1 Leading Players 0% Showers Enclosures Brassware Wall Baths & Furniture & Total & Trays Coverings Sanitaryware Accessories Sources: AMA, BSRIA adjusted management estimates • Overall bathroom market remains highly fragmen
Slide 18: South Africa market structure
100% 90% 80% 70% 60% Rest of Market 50% Leading Players 40% 30% 20% 10% #2 #1 #2 0% Coverings Fixing Bathroom & Plumbing Total Sources: RAND, Frost & Sullivan & management estimates 2 “Bathroom & Plumbing” including Sanitaryware, Taps and Mixers, Pipes, Fittings & Valves and Geysers • Sizeable marke
Slide 19: ESG as a competitive advantage
• Carbon targets for validation with SBTi • First disclosure to CDP • Carbon Neutral – Triton, Merlyn, Vado, Abode • ENVI®, first ClimatePartner certified product • Appointed Chief People Officer • Talent development and DE&I programmes
Slide 20: Summary and Outlook
SUMMARY AND OUTLOOK Thomas Willcocks Chief Executive Officer
Slide 21: Summary and outlook
Robust performance reflecting the strength and positioning of our market leading brands Good progress on strategic priorities • Closure of Adhesives • NPD and service driving organic share gains • ESG driving competitive advantage • Excellent cash generation and low leverage Strong Norcros platform
Slide 22: Appendix
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Slide 23: Historical revenue, profit and margins FY14-FY23
£m £m 500 50 47.3 UK South Africa UK South Africa 41.8 400 40 34.4 34.0 32.3 300 30 27.4 21.3 23.8 200 20 17.0 16.1 100 10 0 0 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 % % 30% 23.9% 25% 150% 20% 18.3% 18.4% 18.0% 18.2% 18.2% 18.5% 16.3% 16.8
Slide 24: Financial year and half year summary
1 Financial year ended 31 March 2 Half year ended 30 September
Slide 25: UK business overview
• Strong heritage, market leading positions and strong brands • Large and fragmented bathroom products market ~ £2.1bn MSP • Businesses built on superior offering and customer service • Mid-to-premium RMI segment more resilient • Leveraging group synergies across acquired businesses • Immediate econ
Slide 26: South Africa business overview
• Strong heritage, market leading positions and strong brands • Large economy and business friendly environment • Business built on superior offering and customer service • Long-term socio-economic dynamics favour our markets • Sustained market outperformance through share gains • Shortage of housin
Slide 27: Specification channel share gains
• Share gains in specification • Specification forum: cross-group approach to customers and opportunities • Enhancing ESG value proposition • Collaboration on new product development • Increasing focus on cross-selling • Further gains in specification channel • Grant Westfield growth in specificatio
Slide 28: Merlyn: share gains and cross-selling
• Significant share gains • Introduction to new channels • Cross-selling synergies delivered • Revenue CAGR of c.11%1 – strong cash generation £57.5m 5.9 New Channels 15.5 • Further cross-selling opportunities Specification • Channel growth plans – specification £30.7m 1 Other business • Grant Westf
Slide 29: China sourcing footprint
Main suppliers Suzhou √ √ Representative office (RO) Headcount China Zhongshan √ √ Ningbo √ √ Shanghai √ √ No RO √ √ >30 >120
Slide 30: Exceptional and acquisition related costs
H1 Sept 2022 £m UK business restructuring - Johnson Tiles (UK) impairment - Closure of UK Adhesives - - H1 Sept 2022 £m Intangible asset amortisation (3.1) Advisory fees (1.5) Deferred remuneration (0.3) (4.9)
Slide 31: Net debt movement
H1 Sept 2022 £m Net (debt)/cash – opening 8.6 Net cash flow (66.8) Non-cash movements¹ (0.2) Foreign exchange (0.5) Net debt – closing (58.9) 1. Represents the movement in the costs of raising debt finance in the year
Slide 32: Pension scheme IAS 19R surplus
£m Membership 500 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Sep-23 9,000 Liabilities 441 422 467 448 428 411 416 368 285 259 450 8,500 Assets 397 366 404 400 396 362 398 388 300 275 8,000 400 (Deficit)/Surplus (44) (56) (63) (48) (32) (49) (18) 20 15 16 7,500 Disc Rate 3.30% 3.5
Slide 33: Pension cash flow profile
25 20 15 £m 10 5 0 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 Pensioners Deferreds Actives past service
Slide 34: Profit before tax and tax charge
Underlying¹ Reported H1 H1 Sept Sept 2022 2022 £m £m Profit before tax 19.9 Profit before tax 14.0 Tax charge (4.1) Tax charge (3.0) Earnings 15.8 Earnings 11.0 Effective tax rate 20.6% Effective tax rate 21.4% 1. Before exceptional operating items, IAS 19R admin costs, acquisition related costs and