TIDMNXR
RNS Number : 3109I
Norcros PLC
01 April 2020
1 April 2020
("Norcros", the "Group" or the "Company")
Trading update and impact of the Coronavirus
In light of the rapidly changing developments regarding COVID-19
(Coronavirus) since our last announcement on 20 February 2020,
Norcros, a market leading supplier of high quality and innovative
bathroom and kitchen products is today providing a further update
on the potential impact on its performance for the year to 31 March
2020(1) and the measures it is taking to manage the associated
risks.
The safety and wellbeing of our staff has been paramount in our
considerations along with our key principle of doing the right
thing at the right time for all our key stakeholders.
Trading update
The Group has continued to win market share in its major markets
despite conditions remaining challenging and up until recently
remained in line to meet market expectations for this financial
year. Recent Government measures in both the UK and South Africa to
contain the spread of the COVID-19 pandemic means that this is now
no longer the case as demand in our seasonally important Period 12
has slowed markedly as our customers have focussed on how they
mitigate the risks of COVID-19.
Impact of the COVID -19 pandemic
On 20 February 2020, we reported that the slower than
anticipated return to full production at our China based suppliers
would impact this year's financial performance. Whilst our China
supply chain is now operating at close to normal levels the nature
and the extent of the commercial impact has changed significantly
moving from a supply chain issue into a global demand one.
The South African Government issued a directive on 23 March 2020
requiring a 21-day national lockdown, effective midnight 26 March
2020 to midnight 16 April 2020 in order to contain the spread of
the COVID -19 pandemic. Consequently, we have mothballed all of our
operations and trading has ceased. The situation however remains
fluid and is being closely monitored and actively managed.
In the UK, we have been in active discussions with our customers
to better understand how they are planning to trade during the
coming weeks following the recently introduced Government
measures.
It is now evident that the majority have temporarily closed
their main outlets except for products which are deemed essential
and sold through their click and collect operations. Trading is
therefore minimal. Consequently, we have suspended our main
manufacturing and assembly operations in the UK in a controlled way
to safeguard our workforce and to ensure an efficient resumption at
the appropriate time.
We now expect our underlying operating profit(2) for the year to
31 March 2020(1) to be approximately GBP31m compared to the
previous consensus forecast of GBP35m. All of this reduction is
attributable to the COVID-19 situation, is considered both
temporary and exceptional, and follows a period of robust trading
including market share gains.
Given these circumstances and the high degree of uncertainty, we
are suspending our previous guidance for the financial year
2020/21.
Short term COVID -19 response measures
Immediate action has been taken to preserve the cashflow of the
business. Actions include deferring all non-essential capital
expenditure and all discretionary operating expenditure.
We have very well-established relationships with our customers
and suppliers, and we will continue to prudently manage our working
capital given the current level of uncertainty.
We welcome the recent measures announced by the UK Government to
support businesses through this challenging period and the Group
will look to use this support where applicable. Our cash flows will
benefit from a number of them, furthermore we will access the
Government's Job Retention Scheme to help us secure jobs during the
suspension or curtailment of our operations.
Financial position and liquidity
The Group is in a strong financial position and has a low level
of net debt(2) . Year-end net debt(2) is expected to be c.GBP40m
and leverage (net debt(2) to EBITDA) circa 1.1x. Our bank covenant
ratio is for net debt(2) to EBITDA to be less than 3.0x.
The Group has access to a GBP120million committed RCF financing
facility, plus a GBP30million accordion facility, which mature in
November 2022 and has drawn down GBP84m on the RCF facility to
ensure that it has sufficient short-term liquidity.
We have modelled a number of different potential scenarios of
different durations and severity including periods of nil revenues
followed by periods of reduced revenues and assessed the impact on
both profitability and cash flow over the next 12 months. We are
confident that with the actions being taken to preserve cash and
the financial resources available to it, mean that the Group is
well placed to withstand an extended period of reduced trading
.
Dividend
The Board will consider the appropriateness, quantum and timing
of any final dividend payment for this financial year when it has a
clearer view of the scale and duration of the COVID-19 impact on
the business.
Comment from Nick Kelsall, Group Chief Executive
"These are unprecedented times, with our most important
consideration being the health and safety of our employees,
customers, and all other stakeholders. Norcros has a strong balance
sheet and the Board is confident that the short term actions being
taken in response to the impact of the global COVID-19 pandemic
together with the Group's leading market positions, strong brands
and broad distribution channels will enable it to return to growth
as soon as practicable.
The current uncertainty means that we have to focus on short
term measures which need to be balanced with the objective of
ensuring our business emerges well-positioned to progress our
longer term strategy."
(1.The accounting reference ' year to 31 March 2020 ' relates to
the 53-week accounting period commencing on 1 April 2019 and ending
5 April 2020)
(2.Pre IFRS16)
Enquiries:
Norcros plc Tel: 01625 547 700
Nick Kelsall, Group Chief Executive
Shaun Smith, Group Finance
Director
Hudson Sandler Tel: 0207 796 4133
Nick Lyon
Toby Andrews
Notes to Editors
-- Norcros is a market leading supplier of high quality and
innovative bathroom and kitchen products with operations primarily
in the UK and South Africa.
-- Based in the UK, Norcros operates under seven brands:
-- Triton - Market leader in the manufacture and marketing of showers in the UK
-- Merlyn - The UK and Ireland's No. 1 supplier of shower
enclosures and trays to the residential, commercial and hospitality
sectors
-- Vado - A leading manufacturer and supplier of taps, mixer
showers, bathroom accessories and valves
-- Croydex - A market-leading, innovative designer, manufacturer
and distributor of high quality bathroom furnishings and
accessories
-- Abode - A leading niche designer and distributor of high
quality kitchen taps, bathroom taps and kitchen sinks
-- Johnson Tiles - The leading manufacturer and supplier of ceramic tiles in the UK
-- Norcros Adhesives - Manufacturer of tile & stone adhesives, grouts and related products
-- Based in South Africa, Norcros operates under four brands:
-- Tile Africa - Chain of retail stores focused on ceramic and
porcelain tiles, and associated products such as sanitary ware,
showers and adhesives
-- Johnson Tiles South Africa - Manufacturer of ceramic and porcelain tiles
-- TAL - The leading manufacturer of ceramic and building adhesives
-- House of Plumbing - Market leading supplier of specialist plumbing materials
-- Norcros is headquartered in Wilmslow, Cheshire and employs
around 2,200 people. The Company is listed on the London Stock
Exchange. For further information please visit the Company website:
http://www.norcros.com
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END
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