Slide 1: Preliminary Results Year ended 31 March 2019
Preliminary Results Year ended 31 March 2019
Slide 2: Introduction
Introduction Martin Towers Chairman 2
Slide 3: Highlights
Highlights Revenue ➢ Tenth consecutive year of growth £331.0m +11.6%1 Underlying operating profit ➢ Underlying operating profit up 25.5% at £34.4m £34.4m +25.5% (2018: £27.4m) Underlying EPS ➢ Strong cash generation – net debt reduced by 31.7p +7.5% £12.1m to £35.0m Underlying operating cash flow £3
Slide 4: Financial Review
Financial Review Shaun Smith Group Finance Director 4
Slide 5: Income Statement
Income Statement 2019 2018 +/- +/- Constant £m £m Reported Currency Revenue 331.0 300.1 +10.3% +11.6% Underlying1 operating profit 34.4 27.4 +25.5% +27.4% Margin 10.4% 9.1% Finance charges – cash (1.8) (1.1) Underlying1 PBT 32.6 26.3 +24.0% Exceptional operating items2 (4.0) (2.1) IAS19R admin expen
Slide 6: Income Statement – Key Bridges
Income Statement – Key Bridges Revenue Underlying operating profit 6.9 0.5 21.3 27.5 3.5 7.9 £m £m 331.0 0.4 34.4 300.1 27.4 2018 Currency UK SA 2019 2018 Currency UK SA 2019 Revenue1 +11.6% Underlying operating profit / ROS% 331.0 10.4% 296.6 34.4 +13.7% 11.6% 9.1% 228.1 26.5 27.4 200.6 9.3% £m £m
Slide 7: Tax, Earnings and Dividends
Tax, Earnings and Dividends Diluted underlying EPS (pence) Underlying1 Reported +7.5% 2019 2018 2019 2018 31.7 £m £m £m £m 29.5 2018 2019 Profit before Tax 32.6 26.3 25.4 13.5 Dividend per share (pence) Tax charge (6.9) (5.7) (6.0) (3.6) +7.7% Earnings 25.7 20.6 19.4 9.9 7.8 8.4 Effective Tax rate 2
Slide 8: High cash conversion
High cash conversion 2019 2018 £m £m Underlying EBITDA 41.3 33.8 Underlying Operating Cash Flow / Underlying EBITDA Working capital (2.1) (2.8) 99% Other 0.6 - 96% 92% Underlying operating cashflow 39.8 31.0 Capital expenditure (5.6) (7.7) Property proceeds 0.1 - 2017 2018 2019 Pension deficit recov
Slide 9: Strong Balance Sheet
Strong Balance Sheet £m Net debt (IFRS) 47.1 35.0 ➢ Strong cash generation leaves net debt at £35.0m 23.2 2017 2018 2019 ➢ Leverage 0.8x underlying EBITDA times Leverage - Net debt (IFRS) to EBITDA 1.2* * 0.8 0.8 ➢ £120m bank facility – maturity date extended to November 2022 2017 2018 2019 Underlyi
Slide 10: UK Pension Scheme
UK Pension Scheme ➢ IAS 19R deficit £31.6m (March 18: £48.0m) UK Pension IAS 19R Assets & Liabilities ▪ Assets reduced by £3.2m to £396.4m ▪ Liabilities reduced by £19.6m to £428.0m - mainly a result of actual mortality experience ➢ Triennial valuation as at 1 April 2018 agreed between Company and T
Slide 11: Operating Review
Operating Review Nick Kelsall Group Chief Executive 11
Slide 12: Key Messages
Key Messages ➢ Strong Investment Case ▪ Decade of revenue & profit growth ▪ Proven business model underpinning resilience ▪ Clear, consistent and focused strategy driving outperformance ▪ Experienced management, leading market positions & strong brands ➢ UK ▪ Robust UK revenue growth ▪ Merlyn – stro
Slide 13: Strong Investment Case
NOFCrOS Strong Investment Case WS an | 13
Slide 14: Strong Investment Case – Decade of Sustained Growth
Strong Investment Case – Decade of Sustained Growth Revenue(1) £m Underlying Operating Profit(2) 40 Total UK Total South Africa TOTAL GROUP UK South Africa Rest of World 34.4 35 260 30 27.4 240 Index FY09/10=100 25 23.8 220 21.3 200 20 17.0 16.1 180 15 12.1 12.8 7.3 11.7 160 10 7.0 140 5 120 0 100 -
Slide 15: Strong Investment Case – A Better Balanced Business
Strong Investment Case – A Better Balanced Business Revenue FY13(1) Revenue FY19(1) RoW Discontinued £210.7m £331.0m Strong portfolio of complementary brands; reduced reliance on Triton 1 Financial years ended 31st March 15
Slide 16: Strong Investment Case – Significant Shift To Attractive Channels
Strong Investment Case – Significant Shift To Attractive Channels UK Channel Revenue - FY13(1) UK Channel Revenue - FY19(1) 2% 2% 15% 11% 3% 41% £228.1m 50% £122.8m 20% 42% 13% Trade Trade DIY Retail DIY Retail Independent & Specialist Retail Independent & Specialist Retail Export Export Other Other
Slide 17: Strong Investment Case - Norcros DNA; Key Driver of Outperformance
Strong Investment Case - 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 businesses outperforming the market #1 U
Slide 18: Strong Investment Case – Significant Market Opportunities
Strong Investment Case – 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 Markets Suitable for Consolidati
Slide 19: Business Review
NOFCrOS Business Review 19
Slide 20: Business Overview
Business Overview Group % Revenue (1) Market leader in the manufacture and marketing of showers in the UK £ 56.6m 17.1 Market leading supplier of shower enclosures and trays £ 39.5m 11.9 Leading manufacturer and supplier of taps, mixer showers, bathroom accessories and valves £ 41.4m 12.5 UK Market
Slide 21: UK Operations
UK Operations Nick Kelsall Group Chief Executive 21
Slide 22: UK Revenue – Continued UK Growth; Export Mixed
UK Revenue – Continued UK Growth; Export Mixed % Revenue Change (FY19 v FY18) Overall UK Export 7.2% 7.7% ➢ Solid momentum in both UK and Ireland 5.1% 13.8% (1) 11.7% ➢ Specification and retail growth in both UK and Ireland 32.0% -3.5% 5.5% ➢ Solid growth in UK trade & retail. Specific country expor
Slide 23: UK Channels – Trade and Independent Growth
UK Channels – Trade and Independent Growth ➢ Trade ▪ Triton – continued Screwfix momentum; Toolstation growth UK Norcros - FY19 (vs FY18) ▪ Housebuilder and specification growth – major contract wins: − Vado – St. James, Ashford Homes and Crest Nicholson 2% − Johnson Tiles – Shell, Royal Wharf (Lond
Slide 24: UK Channels – DIY Reduced Exposure & Stable; Export Mixed
UK Channels – DIY Reduced Exposure & Stable; Export Mixed ➢ DIY Retail ▪ Triton – strong retail mixer sales UK Norcros - FY19 (vs FY18) ▪ Croydex – Homebase impact significant but stable 2% ▪ Wickes growth – Abode, Johnson Tiles and Triton 15% (FY18: 2%) (FY18: 17%) (FY18: 2%) ▪ Johnson Tiles – unif
Slide 25: UK – Sustained Revenue & Profit Growth With Higher Margins
UK – Sustained Revenue & Profit Growth With Higher Margins Revenue Underlying Operating Profit £26.5m £228.1m 11.3 £200.6m £182.3m 9.1 41.4 7.9 £18.6m 47.1 16.2 £17.4m 11.6% 53.2 21.7 12.8 9.5% 9.3% 10.6 24.2 41.4 24.7 42.9 39.5 37.2 11.7 48.7 52.8 56.6 2017 2018 2019 2017 2018 2019 Triton Merlyn 1
Slide 26: South Africa Operations
South Africa Operations Nick Kelsall Group Chief Executive 26
Slide 27: South Africa Revenue – Growth in a Challenging Market
South Africa Revenue – Growth in a Challenging Market % Revenue Change (FY19 v. FY18) £ Reported Constant Currency 3.4% ➢ Consistent growth across H1 and H2 7.2% 1.9% ➢ Successful VFM store development – strong revenue growth 5.6% in bathroomware, taps and adhesives -0.8% ➢ Solid growth in construct
Slide 28: House of Plumbing – Highly Complementary Acquisition
House of Plumbing – Highly Complementary Acquisition End market (1) 1 Specialist plumbing business supplying contractors & professionals Product Range Sanitaryware 2 Leading position in Gauteng specification market 19% Taps, fittings & valves 34% 3 Experienced management team 22% Plumbing pipe & fit
Slide 29: South Africa – Revenue Growth & Robust Profit Performance
South Africa – Revenue Growth & Robust Profit Performance Revenue (1) Underlying Operating Profit (1) £8.4m £102.9m £7.9m £96.0m £90.2m 15.0 12.2 11.0 £6.4m 24.0 23.3 21.4 8.8% 7.7% 7.1% 60.5 63.9 57.8 2017 2018 2019 2017 2018 2019 Tile Africa TAL Johnson Tiles Underlying Operating Profit Return on
Slide 30: Group Outlook & Strategy
Group Outlook & Strategy Nick Kelsall Group Chief Executive 30
Slide 31: UK and South Africa Market Conditions
UK South Africa Stable but Lacklustre Market Improving Sentiment Key Housing Stats Sources: GOV.UK & HMRC Q1 2019 % GDP growth Source: Investec Q2 2019 Transactions - RHS Completions - LHS 60,000 500,000 3.5% 50,000 450,000 3.0% Quartelry Transactions Quarterly Completions 400,000 40,000 2.5% 350,00
Slide 32: 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 derived
Slide 33: Strategy – Industry Fragmentation + Consolidation Opportunity
Strategy – Industry Fragmentation + Consolidation Opportunity UK Bathroom – Selective Markets @ MSP £220m £355m £224m £450m £375m £350m £2.0bn 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 34: Key Messages
Key Messages ➢ Robust FY19 Results ▪ Challenging market conditions ▪ Strong UK performance ▪ South Africa – continued market outperformance ▪ House of Plumbing – complementary acquisition; growth potential ➢ Strong Investment Case ▪ 10 years’ sustained growth ▪ Better balanced UK business ▪ South Af
Slide 35: Norcros FY19 Results – Q&A
Norcros FY19 Results – Q&A Thank You Q&A 35
Slide 36: Appendix
NOFCrOS Appendix 36
Slide 37: Strong Investment Case – Delivering Meaningful Synergies
Strong Investment Case – Delivering Meaningful Synergies ▪ Increasing collaboration driving synergies ▪ Triton & Vado – joint new product development ▪ Croydex and Vado – success in Tile Africa ▪ Abode – Wickes & Travis Perkins new business ▪ Merlyn and Vado – channel alignment: − Independent retail
Slide 38: Strong Investment Case – Acquisition Track Record
Strong Investment Case – 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 potential 7 Growth potential
Slide 39: Strong Investment Case – South African Opportunity
Strong Investment Case – South African Opportunity South Africa: Demographic Profile 57.7 60.0 million ➢ NXSA & House of Plumbing Accumulative population million ½ population ▪ Strong market positions and track record 50.0 <27.1 years old − TAL No. 1, JTSA No.2 and TAF No.2 40.0 ▪ House of Plumbing
Slide 40: Strong Investment Case – Multiple Sales Channels
Strong Investment Case – Multiple Sales Channels Housebuilding Specification End consumer DIY Retail Merchants Tradesmen Specialist Retail Trade Multiple sales channels increasing market penetration 40
Slide 41: Exceptional items and acquisition related costs
Exceptional items and acquisition related costs 2019 2018 £m £m Exceptional operating items Business unit restructuring - (2.1) Onerous lease (3.0) - GMP Equalisation (1.0) - (4.0) (2.1) 2019 2018 £m £m Acquisition related costs Acquisition related deferred remuneration (earn out) (0.2) 0.3 Intangib
Slide 42: Net debt reconciliation
Net debt reconciliation 2019 2018 £m £m Net debt (IFRS) – opening (47.1) (23.2) Net cash flow 14.0 (24.2) Other non cash movements (0.2) (0.2) Foreign exchange (1.7) 0.5 Net debt (IFRS) - closing (35.0) (47.1) 42
Slide 43: UK Pension Scheme cashflows
UK Pension Scheme cashflows ➢ Cash outflow remains close to peak * Source: KPMG Fusion * Annual pensioner payroll, excludes non-predicted costs such as transfer out and early retirement payments 43
Slide 44: IFRS16 Implementation – Impact Analysis
IFRS16 Implementation – Impact Analysis ➢ Modified retrospective approach where the right of use asset on transition will equal the lease liability ➢ No impact on cash flow or how we run business ➢ Assessment of impact on 2019/20 opening balance sheet • Recognise estimated financial lease liability
Slide 45: Preliminary Results Year ended March 2019
Preliminary Results Year ended 31 March 2019