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Description of nature of entity's operations and principal activities
1 Apr 2021 to 31 Mar 2022
Name of reporting entity or other means of identification
1 Apr 2021 to 31 Mar 2022
Country of incorporation
1 Apr 2021 to 31 Mar 2022
Legal form of entity
1 Apr 2021 to 31 Mar 2022
Address of entity's registered office
1 Apr 2021 to 31 Mar 2022
Domicile of entity
1 Apr 2021 to 31 Mar 2022
Revenue
1 Apr 2021 to 31 Mar 2022
Revenue
1 Apr 2020 to 31 Mar 2021
Underlying operating profit
1 Apr 2021 to 31 Mar 2022
Underlying operating profit
1 Apr 2020 to 31 Mar 2021
IAS 19R administrative expenses
1 Apr 2021 to 31 Mar 2022
IAS 19R administrative expenses
1 Apr 2020 to 31 Mar 2021
Acquisition related costs
1 Apr 2021 to 31 Mar 2022
Acquisition related costs
1 Apr 2020 to 31 Mar 2021
Exceptional operating items
1 Apr 2021 to 31 Mar 2022
Exceptional operating items
1 Apr 2020 to 31 Mar 2021
Profit (loss) from operating activities
1 Apr 2021 to 31 Mar 2022
Profit (loss) from operating activities
1 Apr 2020 to 31 Mar 2021
Finance costs
1 Apr 2021 to 31 Mar 2022
Finance costs
1 Apr 2020 to 31 Mar 2021
IAS 19R finance cost
1 Apr 2021 to 31 Mar 2022
IAS 19R finance cost
1 Apr 2020 to 31 Mar 2021
Profit (loss) before tax
1 Apr 2021 to 31 Mar 2022
Profit (loss) before tax
1 Apr 2020 to 31 Mar 2021
Tax expense (income)
1 Apr 2021 to 31 Mar 2022
Tax expense (income)
1 Apr 2020 to 31 Mar 2021
Profit (loss), attributable to owners of parent
1 Apr 2021 to 31 Mar 2022
Profit (loss), attributable to owners of parent
1 Apr 2020 to 31 Mar 2021
Basic earnings (loss) per share
1 Apr 2021 to 31 Mar 2022
Basic earnings (loss) per share
1 Apr 2020 to 31 Mar 2021
Diluted earnings (loss) per share
1 Apr 2021 to 31 Mar 2022
Diluted earnings (loss) per share
1 Apr 2020 to 31 Mar 2021
Weighted average number of ordinary shares outstanding
1 Apr 2021 to 31 Mar 2022
Weighted average number of ordinary shares outstanding
1 Apr 2020 to 31 Mar 2021
Underlying profit before taxation
1 Apr 2021 to 31 Mar 2022
Underlying profit before taxation
1 Apr 2020 to 31 Mar 2021
Underlying earnings
1 Apr 2021 to 31 Mar 2022
Underlying earnings
1 Apr 2020 to 31 Mar 2021
Basic underlying earnings per share
1 Apr 2021 to 31 Mar 2022
Basic underlying earnings per share
1 Apr 2020 to 31 Mar 2021
Diluted underlying earnings per share
1 Apr 2021 to 31 Mar 2022
Diluted underlying earnings per share
1 Apr 2020 to 31 Mar 2021
Profit (loss)
1 Apr 2021 to 31 Mar 2022
Profit (loss)
1 Apr 2020 to 31 Mar 2021
Other comprehensive income, net of tax, gains (losses) on remeasurements of defined benefit plans
1 Apr 2021 to 31 Mar 2022
Other comprehensive income, net of tax, gains (losses) on remeasurements of defined benefit plans
1 Apr 2020 to 31 Mar 2021
Gains (losses) on cash flow hedges, net of tax
1 Apr 2021 to 31 Mar 2022
Gains (losses) on cash flow hedges, net of tax
1 Apr 2020 to 31 Mar 2021
Gains (losses) on hedges of net investments in foreign operations, net of tax
1 Apr 2021 to 31 Mar 2022
Gains (losses) on hedges of net investments in foreign operations, net of tax
1 Apr 2020 to 31 Mar 2021
Other comprehensive income
1 Apr 2021 to 31 Mar 2022
Other comprehensive income
1 Apr 2020 to 31 Mar 2021
Comprehensive income
1 Apr 2021 to 31 Mar 2022
Comprehensive income
1 Apr 2020 to 31 Mar 2021
Goodwill
31 Mar 2022
Goodwill
31 Mar 2021
Intangible assets other than goodwill
31 Mar 2022
Intangible assets other than goodwill
31 Mar 2021
Property, plant and equipment
31 Mar 2022
Property, plant and equipment
31 Mar 2021
Non-current net defined benefit asset
31 Mar 2022
Non-current net defined benefit asset
31 Mar 2021
Right-of-use assets
31 Mar 2022
Right-of-use assets
31 Mar 2021
Non-current assets
31 Mar 2022
Non-current assets
31 Mar 2021
Current inventories
31 Mar 2022
Current inventories
31 Mar 2021
Trade and other current receivables
31 Mar 2022
Trade and other current receivables
31 Mar 2021
Current derivative financial assets
31 Mar 2022
Current derivative financial assets
31 Mar 2021
Cash and cash equivalents
31 Mar 2022
Cash and cash equivalents
31 Mar 2021
Current assets
31 Mar 2022
Current assets
31 Mar 2021
Trade and other current payables
31 Mar 2022
Trade and other current payables
31 Mar 2021
Current lease liabilities
31 Mar 2022
Current lease liabilities
31 Mar 2021
Current tax liabilities
31 Mar 2022
Current tax liabilities
31 Mar 2021
Current derivative financial liabilities
31 Mar 2022
Current derivative financial liabilities
31 Mar 2021
Current liabilities
31 Mar 2022
Current liabilities
31 Mar 2021
Current assets (liabilities)
31 Mar 2022
Current assets (liabilities)
31 Mar 2021
Assets less current liabilities
31 Mar 2022
Assets less current liabilities
31 Mar 2021
Non-current portion of non-current borrowings
31 Mar 2022
Non-current portion of non-current borrowings
31 Mar 2021
Non-current net defined benefit liability
31 Mar 2022
Non-current net defined benefit liability
31 Mar 2021
Non-current lease liabilities
31 Mar 2022
Non-current lease liabilities
31 Mar 2021
Deferred tax liabilities
31 Mar 2022
Deferred tax liabilities
31 Mar 2021
Other non-current financial liabilities
31 Mar 2022
Other non-current financial liabilities
31 Mar 2021
Show more results
Validation results
| Severity | Code | Message |
|---|
+
-
Norcros plc Annual Report and Accounts 2022
Inspiring Living Spaces
Norcros plc Annual Report and Accounts 2022
Strategic report
03 Highlights
04 Investment case
06 At a glance
08 Markets
10 Chair’s statement
13 Chief Executive Officer’s statement
16 Business model
18 Strategy and objectives
20 Key performance indicators
21 Business performance
22 UK business review
28 South Africa business review
31 Chief Financial Officer’s report
35 Risk management
36 Principal risks and uncertainties
41 Viability statement
42 Environmental, social and governance
60 Stakeholder engagement
Corporate governance
64 Board of Directors
66 Corporate governance
70 Audit and Risk Committee report
75 Nomination Committee report
76 Remuneration Committee
annual statement 2022
79 Directors’ remuneration policy report
87 Annual report on remuneration
97 Directors’ report
99 Statement of Directors’ responsibilities
Financial statements
101 Independent auditor’s report
107 Consolidated income statement
108 Consolidated statement of
comprehensiveincome
109 Consolidated balance sheet
110 Consolidated cash flow statement
111 Consolidated statement of changes in equity
112 Notes to the Group accounts
140 Parent Company balance sheet
141 Parent Company statement of
changesinequity
142 Notes to the Parent Company accounts
Annual General Meeting
146 Notice of Annual General Meeting
148 Explanatory notes
Our purpose
To inspire and enhance our
customers’ living spaces.
Our mission
To be a leading supplier of bathroom
and kitchen products in selected
geographies, offering strong brands,
contemporary designs, trusted quality,
outstanding service, innovation and
awide product range.
UK portfolio
South African portfolio
®
PICTURED
Vado: Knurled X Fusion, a fusion
ofcolour and intricate textured
accents, striking the perfect blend
of confidence and urbanity to
injecttrue individuality into
yourbathroom design.
FRONT COVER
Johnson Tiles UK: The 1901 range
pays homage to traditional glaze
effects, giving the illusion of
handcrafted qualities on the
contemporary slimbrick format.
BACK COVER
Vado: Omika Noir, a Polished
Blackrange designed by Jo Love
and launched late in November
2021, showcasing a new PVD
finishfor Vado.
(Latest acquisition 31 May 2022).
Norcros plc Annual Report and Accounts 202202
Strategic
report
03 Highlights
04 Investment case
06 At a glance
08 Markets
10 Chair’s statement
13 Chief Executive Officer’s statement
16 Business model
18 Strategy and objectives
20 Key performance indicators
21 Business performance
22 UK business review
28 South Africa business review
31 Chief Financial Officer’s report
35 Risk management
36 Principal risks and uncertainties
41 Viability statement
42 Environmental, social and governance
60 Stakeholder engagement
Merlyn: Introduction of the new Merlyn revo bathroom rail and accessories to reduce clutter
in your bathroom whilst giving you the safety, adaptability, independence and storage your
home requires. The revo rail can be configured to suit your family’s needs, present and
future, in multiple ways, all in a stylish, easy to clean package.
Strategic report
Annual Report and Accounts 2022 Norcros plc 03
Total revenue £m
£396.3m +20.6%
1
2022
396.3
2021
324.2
2020
342.0
2019
331.0
2018
300.1
Underlying operating profit £m
£41.8m +23.7%
2022
41.8
2021
33.8
2020
32.3
2019
34.4
2018
27.4
Record underlying operating profit
andstrong financial position.
1 On a constant currency basis.
Year to 31 March 2022 highlights
• Robust trading and decisive action taken to counter
unprecedented cost inflation and supply chain challenges
• Strong execution of strategy
• Full year revenue of £396.3m (2021: £324.2m), 20.6%
higher than prior year on a constant currency basis and
20.9% higher than the pre-pandemic 2020 comparator
on a constant currency like for like basis (after adjusting
the 2020 comparator period from a 53 to a 52 week
period pro-rating)
• Record underlying operating profit of £41.8m,
23.7%higher than prior year (2021: £33.8m)
• Operating profit of £36.2m (2021: £24.9m)
• Underlying net cash
2
of £8.6m (2021: net cash of £10.5m)
• Underlying ROCE
2
above strategic target rate at 23.9%
(2021: 18.2%)
• Diluted underlying EPS
2
of 38.2p, 22.8% higher than prior
year (2021: 31.1p)
• Progressive dividend at 10.0p for the year (2021: 8.2p)
• The acquisition of Grant Westfield completed after
theyear end, a compelling strategic fit with the Group
Key messages
• Our record performance is a testament to our proven
business model and the dedication of our employees
• The Group has delivered revenue and profit growth on
theprior year and the pre-pandemic 2020 comparator
• UK – a strong performance benefiting from the breadth of
distribution channels, stock availability and market leading
service levels
• SA – an excellent performance, reflecting leading market
positions, stock availability and enhanced product offer
• The Group has agreed a new £130m multicurrency revolving
credit facility in the year
• We remain confident that the Group’s highly experienced
management teams, leading brands, proven business model,
and leading customer service proposition will continue to
drive outperformance, leading to further progress in the
year ahead
2 Definitions and reconciliations of alternative performance measures
are provided in note 8 to the financial statements.
Revenues derived from overseas markets
50%
Sustainable ROCE
>15%
Revenue target
£600m
Strategic vision remains valid
Current trading
• Group revenue in the two months to the end
ofMay 2022 was marginally ahead of the strong
prior year comparator by approximately 1%
and significantly ahead of the pre-pandemic
comparator of the two months ended May 2019
byapproximately 25%. Whilst market conditions are
likely to remain uncertain, the Board believes that
the Group’s proven business model and leading
customer service proposition will continue to drive
outperformance leading to further progress and
market share gains, in line with its expectations,
forthe year to 31 March 2023
Highlights
Norcros plc Annual Report and Accounts 202204
Investment case
Strategic report
Why we outperform?
It’s in our DNA.
We have a clear investment case and aresilient business model;
we are well positioned for future growth.
Focused operating model
A leading supplier of bathroom and kitchen
products in selected geographies.
Experienced
managementteam
Our management team has considerable
years of experience of successfully
operating in our markets and segments.
Leading market positions
andbrands
Our brands and products hold market
leading positions or have a significant
share of the markets we operate in.
Group-scale advantages
versus smaller competitors
A well-developed and leading supply chain
infrastructure, joint product development
sharing costs and strong balance sheet
tosupport business growth.
�
2
3
4
Strategic report
Annual Report and Accounts 2022 Norcros plc 05
Flexible and capital
lightmodel
Focusing investment where our expertise
achieves the best return for investors.
Balanced and diversified
businessportfolio
Multi-product, broad channel
coverage, wide market positioning
andgeographicaldiversification.
Clear and focused strategy
£600m revenue by 2025, 50% of revenues
derived from overseas and sustainable
ROCE of >15%.
Innovation and new
productdevelopment
We constantly invest in innovation and
developing our product portfolio to better
meet our customer requirements and
refresh our offering.
6 8
5 7
Strategic report
Norcros plc Annual Report and Accounts 202206
At a glance
A portfolio of market leading
businesseswith strong brands.
Market leader in the manufacture and
marketing of showers in the UK
A market leading, innovative designer,
manufacturer and distributor of high quality
bathroom furnishings and accessories
UK
In the UK we offer a wide range of quality bathroom and kitchen products both for domestic
and commercial applications. Our portfolio of businesses is well established, services a broad
customer base and benefits from leading market positions and strong brands.
The UK and Ireland’s no. 1 supplier of shower
enclosures and trays to the residential,
commercial and hospitality sectors
A leading niche designer and distributor of
high quality kitchen taps, bathroom taps
and kitchen sinks
A leading manufacturer and supplier of
taps, mixer showers, bathroom accessories
and valves
The leading manufacturer and supplier of
ceramic tiles in the UK
Manufacturer of tile and stone adhesives,
grouts and related products
Grant Westfield is a leading manufacturer of
high end waterproof bathroom wall panels
Read more about our UK businesses
onpages 22 to 27
Strategic report
Annual Report and Accounts 2022 Norcros plc 07
Chain of retail stores focused on ceramic and
porcelain tiles, and associated products such
as sanitaryware, showers and adhesives
The leading manufacturer of ceramic and
building adhesives
South Africa
Our complementary businesses in South Africa operate principally from a shared
manufacturing and administrative site near Johannesburg, allowing them to
maximise operational, revenue and cost synergies.
®
Manufacturer of ceramic
andporcelain tiles
Read more about our South African
businesses on pages 28 to 30
Market leading supplier of specialist
plumbing materials
Strategic report
Norcros plc Annual Report and Accounts 202208
Markets
Excellent opportunities
for growth in all markets.
UK and South Africa market demand is dependent on:
• New building activity
• Repair, maintenance and improvement (RMI) activity
Influenced by macroeconomic factors:
• Consumer confidence
• Economic growth
• Interest and inflation rates
• Government expenditure
Key market drivers
The Group offers a wide range of quality bathroom and kitchen
products for both domestic and commercial applications across
the UK, Ireland, South Africa and a number of export markets.
The UK overall bathroom market is large and mature and is highly
fragmented with no dominant or global player across all product
categories. Many of the market product category sub-segments
are also highly fragmented with no one company serving all
segments and channels. Shower enclosures, bathroom furniture
and accessories sub-markets are particularly fragmented,
characterised by a significant number of SME players.
The South African overall bathroom market is large although more
concentrated than in the UK, albeit selected market segments (e.g.
plumbing) are regionally fragmented with limited national players.
Both Norcros and the other market leader deploy integrated
business models from production to retail to reach all segments
and channels.
In both the UK and South Africa market demand is dependent on
new building activity and RMI activity in both the public and private
sectors. This is in turn influenced by macroeconomic factors,
such as GDP, interest rate fluctuations, inflation rates, availability of
credit, equity market conditions, unemployment rates, consumer
confidence, changes in government policy and housing shortages.
Johnson Tiles: Material Lab is a design resource studio and
materials library in London, created especially by Johnson
Tiles, the UK’s leading tile manufacturer. We listened and
responded to what thearchitect and design community
wanted and created a muse for inspiration, sharing ideas,
networking and meeting clients.
Strategic report
Annual Report and Accounts 2022 Norcros plc 09
• Large target market – c. £2.1bn @ MSP
1
• Shortage of housing
• Fragmented by product and channel
• Norcros market leading positions
• No overall dominant or global player
• No one company serving all segments and channels
• Complementary kitchen market segments
• Further opportunity to grow market share
Quarterly housing completions and transactions
Sources: GOV.UK and HMRC – Q1 2022
2005
2006
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
2022
2021
2020
2019
2017
2015
2013
2018
2016
2014
2012
2011
2010
2009
2008
2007
UK South Africa
• Sizeable target market – c. £1.2bn @ MSP
1
• Supportive dynamics:
• Shortage of housing
• Construction levels are still less than half 2007 peak
• Favourable long-term socio-economic demographics
• Integrated business models – Norcros market
leading positions
• Complementary sub-markets alternative coverings
• Further opportunity to grow market share
Large fragmented market
Significant consolidation opportunity
Medium-term potential
Market leading positions
LHS: Completions (England) RHS: Transactions (UK)
Quarterly – dwellings completed and plans passed
Source: SA Stats – Q1 2022
Planning Completions
2009
2008
30,000
25,000
20,000
15,000
10,000
5,000
0
2020
2018
2016
2022
2021
2019
2017
2015
2014
2013
2012
2011
2010
Quarterly completions
Quarterly transactions
UK GfK consumer confidence
Source: GfK – May 2022
10
5
0
-5
-10
-15
-20
-25
-30
-35
-40
FY22
FY21
FY20
FY19
FY18
FY17
FY16
FNB/BER consumer confidence index
Source: FNB/BER – Q1 2022
FY15
30
25
20
15
10
5
0
-5
-10
-15
-20
-25
-30
-35
FY22
FY21
FY20
FY19
FY18
FY17
FY16
1 MSP = manufacturer’s selling price.
COVID-19
Brexit
referendum
COVID-19
Strategic report
Norcros plc Annual Report and Accounts 202210
Chair’s statement
Strategy
Notwithstanding the challenges of COVID-19, we have made
strong strategic progress and our focused growth strategy
continues to be valid and relevant. Our targets to grow Group
revenue to £600m by 2025 whilst sustaining a pre-tax return on
underlying capital employed of more than 15% over the economic
cycle continue to govern how we evaluate opportunities and
deploy capital. TheGroup’s performance in the year demonstrates
the resilience and effectiveness of our business model and
strategy. Whilst there is still a significant degree of uncertainty
around the post-COVID-19 economic recovery, supply chain
challenges and the Ukraine crisis, we are convinced of the validity
and effectiveness of the strategy andremain committed to
these targets.
Dividend
The Group responded swiftly to the impact of the COVID-19
pandemic and the need to preserve cash by not paying a final
dividend in relation to the year ended 31 March 2020 nor an interim
dividend in relation to the year ended 31 March 2021. Based on the
improved trading performance in the second half of the prior year,
the further strengthening of the balance sheet and the outlook,
the Board reinstated the progressive dividend policy with a final
(and total) dividend for 2021 of 8.2p per share. For the year ended
31March 2022, the Board is recommending a final dividend of 6.9p
(2021: 8.2p) per share. When combined with the interim dividend
of 3.1p (2021: £nil) per share, which was paid on 11 January 2022,
this will make a total dividend for the year of 10.0p (2021: 8.2p) per
share, a 21.9% increase on the previous year in line with the growth
in earnings albeit maintaining a prudent level of cover.
Pension scheme
The net position relating to our UK defined benefit pension
scheme (as calculated under IAS 19R) has improved to a surplus
position of £19.6m at 31 March 2022 from a deficit of £18.3m at 31
March 2021, primarily as a result of an increase in the discount rate
driven by market factors.
The Group has reached agreement with the Trustee on the 2021
triennial actuarial valuation for the UK defined benefit scheme and
on a new deficit recovery plan. Deficit repair contributions have
been agreed at £3.8m per annum from 1 April 2022 to March 2027
(increasing with CPI, capped at 5%, each year). Both the Group and
the Trustee regard this as an appropriate outcome.
We remain confident that our pension obligations continue to be
appropriately funded and well managed. The Group recognises
that the pension scheme is a key stakeholder and the Group and
the Trustee continue to work constructively together.
A record performance
for the Group.
Norcros has continued to trade robustly
through unprecedented cost inflation
and supply chain challenges.”
Gary Kennedy
Chair
Overview
In my first year as Chair, I am pleased to report a record
performance for the Group. Norcros has continued its recovery
following the period of exceptional global disruption and
uncertainty caused by the COVID-19 pandemic. The resilience
of the Group’s business model and strategy has proven once
again to be highly effective through a period of unprecedented
cost inflation, supply chain challenges and more recently the
Ukraine crisis.
Group revenue for the year was £396.3m (2021: £324.2m), 22.2%
higher than the prior year on a reported basis and 20.6% higher
on a constant currency basis. Against the pre-pandemic 2020
comparator, this represents a 15.9% increase on a reported basis,
18.6% on a constant currency basis and 20.9% on a constant
currency like for like basis after adjusting the 2020 comparator
period from a 53 to a 52-week period pro-rating.
Underlying operating profit was at a record level of £41.8m
(2021:£33.8m), 23.7% ahead of the prior year, reflecting the strong
progress and market share gains in both the UK and South Africa.
The Group finished the year with net cash of £8.6m (2021: net
cash of £10.5m), reflecting investment into inventory in the period
to optimise our service and stock availability in the light of the
exceptional supply chain challenges.
Acquisition of Grant Westfield
On 31 May 2022, we completed the acquisition of 100% of
theshare capital of Granfit Holdings Limited and its subsidiaries
including Grant Westfield Limited, trading as Multipanel. Grant
Westfield is a leading manufacturer of high end waterproof
bathroom wall panels. The company has a 140-year track record
and operates under the leading UK bathroom wall panel brand
Multipanel. Headquartered in Edinburgh, Scotland, customers
are served from a nationwide UK distribution network of
eight locations, and a growing presence in Europe from a
distribution hub in Germany. Customers include national and
regional merchants, major buying groups, specification and
onlinecustomers. See note 31 to the financial statements.
Strategic report
11 Norcros plc
Environmental, social and governance (ESG)
The Board remains committed to embedding sustainability
within our business strategy. We recognise that our stakeholders,
including our employees, investors and customers, have rising
expectations about our environmental and social impacts and the
way that we operate our business. We are proud of our history of
environmental and social leadership, our achievements in setting
industry leading standards in our products and the support we
provide our communities. This year, we have made enhancements
to our emissions and energy data collection process and are
pleased to include our first report aligned to the recommendations
of the Task Force on Climate-related Financial Disclosures (TCFD),
which outlines our approach to managing climate-related risks and
opportunities across the Group. We also report on the enhanced
structure of our ESG management internally which has helped us
develop our framework and improve the management of our impact.
Further details can be found in the ESG section on pages 42 to 59.
Board changes and senior management appointments
As previously announced, I was appointed as a Non-executive
Director and Non-executive Board Chair on 8 December 2021. I am
delighted to join the Board and be part of the future growth of the
Group. I would like to thank David McKeith, who was Acting Chair
for the Group from April2021 until my appointment.
As previously reported, James Eyre was appointed to the Board as
Chief Financial Officer with effect from 1 August 2021 following
Shaun Smith’s retirement at the end of December 2021. James was
our Corporate Development and Strategy Director and has been
a member of the Group’s senior team since 2014, responsible for
leading our acquisitions. He is a Chartered Accountant and held
senior finance roles at AstraZeneca, Bank of Ireland and Rothschild
& Co prior to joining Norcros.
The Board composition can be found on pages 64 and 65.
As previously announced, Thomas Willcocks was appointed to the
Group senior executive team as Group Business Director – UK, with
effect from 1 August 2021. Thomas joined Norcros South Africa in
2006 and was promoted to Managing Director of Norcros South
Africa in 2009. He has overseen the sustained and profitable
growth of our South African business. Kevin Swan succeeded
Thomas as Managing Director of Norcros South Africa, also from
1 August 2021, having joined Norcros in March 2021. He was
previously chief executive of Bidvest Packaging.
The Group Executive Committee comprises our CEO (NickKelsall),
CFO (James Eyre), Group Counsel/Company Secretary (Richard
Collins) and Group Business Director – UK (Thomas Willcocks).
Governance
As Chair, one of my primary responsibilities is to ensure that the
Group continues to operate to the highest standards in all aspects
of governance and risk management. Our aim at Norcros has
always been to operate in line with our values and the “Norcros
DNA” which sets us apart from our competitors, while ensuring that
proper operating procedures and internal controls are maintained
at all times. Transparency is central to this objective and you will
find more detail about our approach and progress over the last
year in the Corporate Governance section on pages 66 to 69.
Abode: Agilis Single Lever in Brushed Brass and
Matt Black: Style, form and function unite with
Agilis, the latest innovation to join the Distinctly
Abode collection of design-led taps.
With the handle up front and centre an agile
movement such as the flick of a wrist will operate
the water flow of the Agilis, great if you have
dirtyhands from food preparation, baking
orgardening.
Designed for ultimate ease of use, the Agilis
reduces reach, making it simpler to access the
tap handle. Available in Chrome, Brushed Nickel,
Brushed Brass, Matt Black or Black and Brass.
Strategic report
Norcros plc Annual Report and Accounts 202212
Chair’s statement continued
People
The Board continues to regard our employees as our most valuable
asset and in recognition of this the Group aims to create a safe
and positive working environment within an open, transparent and
entrepreneurial culture and de-centralised operating model. On
behalf of the Board, I would like to thank the Group’s employees
who have helped to deliver on the Group’s strategic objectives
and in particular for their dedication and contribution over the
last twelve months. I would also like to warmly welcome the
management team and employees of the Grant Westfield business
to the Group.
Current trading
Group revenue in the two months to the end of May 2022
was marginally ahead of the strong prior year comparator by
approximately 1% and significantly ahead of the pre-pandemic
comparator of the two months ended May 2019 by
approximately 25%.
Summary
The Group has delivered a robust performance and a record
result despite challenging market conditions. This demonstrates
the effectiveness and resilience of our Group with its highly
experienced management teams, leading brands, proven business
model, leading customer service proposition and strong financial
position. In addition, through the acquisition of Grant Westfield,
the Group has taken a further important step forward in its
growth strategy.
Market conditions are likely to remain uncertain and challenging,
albeit the Board is confident that the Group’s resilient business
model and strong execution of strategy will continue to deliver
outperformance leading to further progress and market share
gains in line with its expectations in the year ahead.
Gary Kennedy
Chair
8 June 2022
Abode: Protrad 4 in 1 boiling hot water tapin
Antique Brass and Brushed Nickel.
Abode’s research confirms that there is now
astrong demand for hybrid tap designs that
combine traditional style traitswith modern
functionality, like instant steaming hot and
filtered water on tap. Abode’s Protrad in
Antique Brass or Brushed Nickel is able to
create a blendeddécor that is both classic
andmodern, with the advanced functionality
ofboiling hot water.
Strategic report
Annual Report and Accounts 2022 Norcros plc 13
Chief Executive Officer’s statement
Tiles (which was relatively more impacted by the slower recovery
in the commercial sector) delivered revenue growth on the
pre-pandemic levels in 2020 and all divisions outperformed the
prior year.
UK underlying operating profit for the year was a record at
£30.9m(2021: £26.9m) with an underlying operating margin of
12.0% (2021:12.2%). Underlying operating profit growth was driven
by a strong performance across the UK businesses.
Operating cash flow was lower than prior year as a result of
investment into working capital, primarily inventory.
Revenue in South Africa increased by 28.8% on prior year on a
constant currency basis, and 34.2% higher on a Sterling reported
basis, to £139.6m (2021: £104.0m). Revenue was also 30.7% higher
than 2020 on a constant currency like for like basis. All divisions
delivered revenue growth on both prior year and 2020.
Tile Africa, Johnson Tiles and TAL continued to benefit from higher
demand and market share gains in the retail renovation market,
while House of Plumbing’s growth from new branch openings was
partially offset by subdued activity in the large-scale commercial
building segment.
South African underlying operating profit for the year was at a
record level of £10.9m (2021: £6.9m), largely reflecting strong retail
demand and a £0.2m foreign exchange translation gain from a
stronger Rand. Underlying operating margin was 7.8% (2021: 6.6%).
As in the UK, operating cash flow was lower than prior year as a
result of investment into working capital, primarily inventory.
Acquisition of Grant Westfield
On 31 May 2022 we completed the acquisition of 100% of the
share capital of Granfit Holdings Limited and its subsidiaries
including Grant Westfield Limited, trading as Multipanel. The
acquisition was funded through equity and utilisation of the
Group’s banking facilities. Grant Westfield is a quality business with
a strong track record of profitability and cash generation run by an
experienced and capable management team. We welcome all the
employees to the Norcros Group and expect the business to make
a strong contribution to the Group through its complementary
range of waterproof bathroom wall panels.
Strong financial position
The Group has a strong balance sheet with net cash of £8.6m
(2021: net cash of £10.5m). This position reflects a planned
investment into working capital in the year of £23.6m, particularly
inventory, with a resultant underlying operating cash flow of
£28.6m (2021: £65.8m) in the year.
The Group completed a refinancing of its banking facilities in the
second half of the year. The new facility is a £130m multicurrency
revolving credit facility for an initial three-year and seven-month
term, with two further years as extension options. There is also
an uncommitted accordion facility of £70m. The Group therefore
remains well positioned to progress its growth strategy.
Following the acquisition of Grant Westfield in May 2022,
pro-forma leverage is approximately 1.0x EBITDA.
Record performance notwithstanding
supply chain challenges and exceptional
cost inflation.
We have continued to build on last
year’s strong recovery from the
unprecedented global disruption and
uncertainty caused by the pandemic.”
Nick Kelsall
Chief Executive Officer
Overview
Norcros has ended the year reporting record levels of revenue and
underlying operating profit and a net cash position.
We have continued to build on last year’s strong recovery from the
COVID-19 pandemic against a backdrop of unprecedented cost
inflation and exceptional supply chain challenges. It is particularly
pleasing to see how well our businesses in the UK and SouthAfrica
responded and adapted to these challenges and continued to
make the strong progress in performance. It is a testament to
our management teams, proven business model, supply chain
infrastructure and our leading customer service proposition.
Group revenue at £396.3m (2021: £324.2m) increased by 22.2%
on a reported basis and by 20.6% on a constant currency
basis. Revenue was also 20.9% higher than the pre-pandemic
comparator of 2020 on a constant currency like for like basis (after
adjusting the 2020 comparator period from a 53 to a 52-week
period pro-rating). The strong trading performance in the first half
of the year continued into the second half with further revenue
growth in South Africa and a robust performance in the UK.
Group underlying operating profit for the year increased by 23.7%
to a record of £41.8m (2021: £33.8m), reflecting the increased
revenue in the year and an operating margin slightly ahead of
last year at 10.5% (2021: 10.4%). Management acted decisively to
counter unprecedented cost inflation and supply chain challenges
to protect margins through implementing selling price increases
and ensuring superior levels of stock availability and service.
Revenue in the UK was £256.7m for the year (2021: £220.2m),
16.6% higher than the prior year on a reported basis and 16.1%
higher than 2020 on a like for like basis. Buoyant demand in the
RMI sector, market share gains (supported by excellent stock
availability) and increased selling prices to recover higher input
costs were the key drivers. All businesses apart from Johnson
Strategic report
Norcros plc Annual Report and Accounts 202214
Chief Executive Officer’s statement continued
Strategy remains valid
In April 2018 we launched a refreshed strategy for growth and a
2023 vision for the Group, including an updated set of strategic
targets which were: to increase Group revenue to £600m by 2023;
to maintain revenue derived outside of the UK at approximately
50% of Group revenue; and to sustain a pre-tax return on
underlying capital employed of more than 15% over the economic
cycle. The previous timescale of 2023 was extended to 2025 in
the prior year reflecting the COVID-19 disruption. Notwithstanding
the extended timeframe, the strategy remains valid and we have
performed strongly against these targets as detailed below:
• Group revenue increased by 22.2% to £396.3m (2021: £324.2m;
original 2023 target: £600m).
• On a Sterling reported basis, Group revenue derived outside of
the UK was 43.9% (2021: 41.6%), and in constant currency terms,
from when the targets were set, 47.0% (2021: 45.6%).
• Group underlying return on capital employed was 23.9% on a
pre-IFRS 16 basis (2021: 18.2%) and significantly exceeded our
strategic target of 15%.
The Group’s very strong recovery from the COVID-19 pandemic
and the decisive response to the inflationary and supply chain
challenges continue to demonstrate the resilience of our business
model and the effectiveness of our strategy.
The UK bathroom and kitchen product market remains highly
fragmented with significant consolidation opportunities to either
broaden our product portfolio or further consolidate our current
offerings. The significant strength of the balance sheet means the
business is well placed to take advantage of further acquisitions or
organic growth opportunities as they arise.
Sustained investment in new product development will continue
to drive organic growth alongside our market leading brands,
customer service and best in class quality. Our product vitality
rate (the percentage of revenue in the period derived from new
products launched in the last three years) remained high at 29%
(2021: 28%), but marginally short of our demanding target of 30%
mainly due to the COVID-19 related disruption to supply chains
and the temporary closure of retail showrooms in recent years
postponing projects. Our vitality rates are nonetheless market
leading and are expected to increase again as our new product
launches return to pre-COVID-19 levels.
Summary and outlook
The Group has outperformed expectations, recovering very
strongly from the pandemic and then successfully navigating
a period of unprecedented cost inflation and supply chain
challenges. Our performance on all fronts is a testament to our
business model and our employees, particularly against the
backdrop of challenging markets as demand continues to adjust to
the impact of the pandemic. It is particularly pleasing to see how
well our businesses both in the UK and South Africa have continued
to make strong progress, gain market share and benefit from their
leading brands, supply chain infrastructure and stock availability.
The Board remains confident that
the Group’s focused strategy, highly
experienced management teams,
talented people, market leading
brands, supply chain and customer
service will continue to drive
outperformance in the current
financial year.”
Nick Kelsall
Chief Executive Officer
Strategic report
15Norcros plc
Whilst the recovery has been strong, the normalisation of
consumer spending patterns in addition to pressure on household
disposable incomes will provide some uncertainty in our markets.
In addition, the secondary impacts of the COVID-19 pandemic
and the Ukraine crisis remains difficult to predict. Notwithstanding
these uncertainties, we are confident that our supply chain
infrastructure combined with our local inventory holdings will
ensure our leading competitive position is maintained.
In summary, we have ended the year strongly, outperforming our
expectations and our markets and delivered record levels of revenue
and profit and growth on prior year and pre-pandemic levels.
Whilst market conditions are likely to remain uncertain, the
Board believes that the Group’s proven business model and
leading customer service proposition will continue to drive
outperformance leading to further progress and market share
gains, in line with its expectations, for the year to 31 March 2023.
Nick Kelsall
Chief Executive Officer
8 June 2022
Vado: In collaboration with Jo Love, Design
Director of Love Interiors, Vadohas launched
Omika Noir inPolished Black. Omika Noir offers
anumber of bathing and showering solutions,
embracing a slim, minimalistic silhouette with
intricate geometric accents. The range will add
interest andcharacter to any minimalistic
modern décor.
Strategic report
Norcros plc Annual Report and Accounts 202216
Business model
Maximising shareholder value
throughcontinuous investment.
We have a well-established, successful track record of serving consumers, architects, designers,
developers, retailers and wholesalers. Our emphasis is on strong branding, contemporary designs,
trusted quality, outstanding service, innovation and breadth of product range.
We invest significantly and continuously in our people, brands, product
development and processes and we aim to develop our business in both
thequality of our products and the scale of our activities.
We serve consumers,
architects, designers,
developers, retailers and
wholesalers offering
outstanding customer
service, bespoke
solutions and unrivalled
technical support.
How we do business
We are focused on providing sustainable
value creation whilst committed to
operating in an ethical, entrepreneurial
and responsible manner with the highest
standards of corporate governance.
People
• Providing our employees with a safe
andpositive working environment
• Open, transparent and entrepreneurial
culture and de-centralised operating model
• Strong cultural values aligned to our
“Norcros DNA”
Products
• Strong brands, contemporary designs,
trusted quality, innovation and a wide
product range
• Continuous NPD programme driving
organic market share growth
Process
• Customer centric approach
• Committed to operating in an ethical
andresponsible manner
• Upholding the highest levels of corporate
responsibility and governance
• Minimising our negative impact
ontheenvironment
Our key inputs
Brand portfolio
Market
share
We have a wide range of
strong brands with market
leading positions across
our chosen markets.
Synergies
and scale
We benefit from
economies of scale and
shared synergies across
our complementary
businesses.
We focus on investment in
newproducts with 29% of 2022
revenue derived from products
launched in the last three years.
Innovation
Strategic report
Annual Report and Accounts 2022 Norcros plc 17
The key areas of value creation across our stakeholder
base are below:
Shareholders
• Progressive and resilient return of value to shareholders
• Continued execution of growth strategy with strong pipeline
of opportunities
• Strong financial position with robust cash-generative business
• Return on capital employed maintained above strategic target
Customers
• Over 7,500 business customers supplied during the year
withinnovative high quality branded products
• Continued innovation and deployment of technology to
service our customers
• Sustained investment in our leading brands to ensure longevity
• Customer-focused approach delivering outstanding customer
service and unrivalled technical support
Employees
• Nearly 2,400 employees around the world
1
• Focus on training and development
• Experienced, devolved management teams and
well-established local trading relationships
• Empowering culture to enable our people to meet
theiraspirations
Society
• Playing a key role in the communities we serve by supporting
local businesses, schools and colleges, through education
and training schemes
• Supporting the local communities with a range
ofcharitableevents
Environment
• Committed to monitoring and minimising our environmental
impacts and encouraging our suppliers to do the same
• Committed to adapting our business to changing consumer
demands for our products
1 Including Granfit Holdings and its subsidiaries.
We base our business on understanding our
customers’ needs. Norcros is a substantial and growing
international group with consistent, high quality
standards and considerable resources.
What makes us different
• Collaborative branding
Broad brand positioning facilitates channel
development and acquisition of new accounts.
• Channel management
As our businesses enjoy leading positions, we have the
necessary management expertise to satisfy the needs
of all our customers across our broad distribution base.
• Leveraging Group reach
Achieving greater penetration of housebuilders and
modular/bathroom pod manufacturers.
• Complementary products and broad
productrange
Our complementary and extensive product range
provides a one-stop shop to our existing customer base
and is important in attracting new customers.
• Best in class sourcing and assembly
Our products are sourced and manufactured to the
highest standards and are quality monitored at each
stage of the supply chain.
• Successful acquisition strategy
We target acquisitions in complementary product,
market and industry segments exhibiting attractive
returns on capital.
• Broad coverage of the Group
Leveraging channel development, joint product
development and supply chain efficiencies.
The value we create
Strategic report
Norcros plc Annual Report and Accounts 202218
Progress in 2022
• Acquisition of Grant Westfield
– a leading UK designer,
manufacturer and supplier of
waterproof bathroom wall panels,
operating under the renowned
Multipanel brand
Priorities for 2023
• Well-developed complementary
acquisition pipeline
• Attractive opportunities to gain
share and build the “one-stop-shop”
• Develop international pipeline
2
Acquisitions
Target acquisitions in
selected geographies
and complementary
product markets with
attractive returns
oncapital
Strategy and objectives
About our strategy
The Board believes the execution of this
strategy will enhance shareholder value.
Organic growth will continue to be driven
by capitalising on our leading market
positions in the UK and South Africa. Our
strategic initiatives will ensure we maintain
the provision of innovative new product
programmes, excellent customer service
and investment in our brand portfolio.
We will also reinforce our “designed in
Britain” credentials as well as capture the
growth opportunities in South Africa and
Sub-Saharan Africa where medium-term
growth rates are likely to be higher than
those in the more developed markets. We
will continue to drive faster revenue growth
in our existing export markets and develop
new emerging export opportunities.
Acquisitions will be targeted at
complementary market and industry
segments exhibiting attractive returns on
capital which are likely to be in bathroom
and kitchen products with exposure to
commercial and specification segments.
The successful acquisitions of Vado,
Croydex, Abode, Merlyn and the House
of Plumbing business all demonstrate
theexecution of our strategy.
A focused growth strategy delivering
strong sustainable results.
Grow Group revenue to
£600m
by 2025
Maintain approximately
50%
of Group revenue derived
outsidethe UK
Achieve a sustainable underlying
return on capital employed of
15%
through the economic cycle
Ourstrategic targets
Progress in 2022
• Underlying operating profits
increased by 23.7% from
£33.8m to £41.8m
• Ended the year with strong Balance
Sheet with net cash of £8.6m (2021:
net cash of £10.5m)
• Underlying ROCE achieved of 23.9%
(2021: 18.2%) ahead of strategic
target of 15%
• UK market share growth during
the year particularly in Triton,
Merlyn and Abode
• Tile Africa, Johnson Tiles and TAL
increasing market share gains in the
retail renovation market; House of
Plumbing branch expansion
• Momentum in Eire market, Triton,
Merlyn and Vado
Priorities for 2023
• Continue to move towards being
“one-stop shop for bathrooms” in
our selected markets
• Further investment in brands,
service, marketing and sales, and
stock availability underpinning
margins and share gains
• Further increase export traction
via Merlyn, VADO, Croydex and
Johnson Tiles
1
Share gains and
sector focus
Pursue a faster and
focused growth strategy
to scale the size of the
Group organically
Strategic report
Annual Report and Accounts 2022 Norcros plc 19
Progress in 2022
• Specification channel group
continues to drive further
penetration of housebuilders
and modular/bathroom pod
manufacturers
• Collaborative branding winning new
accounts – Merlyn and Triton: “Fast
Fix” shower enclosure into Screwfix
• Joint new product initiative – Triton
and Abode: Proboil
Priorities for 2023
• Opportunity to apply Group
reach to Grant Westfield into new
channels, markets and accounts
• Focus on development of further
supply chain and sourcing synergies
Progress in 2022
• New ESG governance structure –
Board reporting and ESG Forums
• Reported against Task Force
on Climate-related Financial
Disclosures (TCFD)
• New Code of Ethics and
Standards of Business Conduct
across the Group
• Group-wide assessment by Carbon
Trust of Scope 1, Scope 2 and
Scope 3 emissions
• Triton and Croydex achieve Route
toNet Zero Standard (Taking Action)
• Group Health and Safety
Policy updated
Priorities for 2023
• Continue to develop an overarching
ESG framework, considering
metrics and targets
43
Operational
excellence
Leverage revenue
synergies and efficiencies
within our portfolio of
complementary
businesses
ESG
Continue to ensure
highstandards of
corporate governance
and responsibility and
place sustainability at the
heart of our business
Progress in 2022
• House of Plumbing product range
expanded to serve broad civils
market segment
• Comprehensive launch of a number
of new product lines in the year (see
Business Reviews for details)
• New Product Vitality Index at 29%
(revenue % from products launched
in last 3 years) – maintained at high
level (2021: 28%)
Priorities for 2023
• Further investment in NPD
• Further investment in marketing
5
Product vitality
Maintain investment
inour strong brands
andnew product
development
programmes
Strategic report
Norcros plc Annual Report and Accounts 202220
Key performance indicators
Measuring our progress.
Total revenue £m
£396.3m +22.2%
Group revenue outside the UK %
43.9% +2.3%
2022
43.9
2021
41.6
2020
43.1
2019
41.7
2018
44.3
Underlying operating profit £m
£41.8m +23.7%
2022
41.8
2021
33.8
2020
32.3
2019
34.4
1
2018
27.4
1
Definition Reported Group revenue
for the year.
Performance Total revenue for the year
increased by 22.2% on a reported basis
and by20.6% on a constant currency basis.
Definition Revenue from the Group’s
South African operating segment plus
export revenue from the Group’s UK
operating segment.
Performance Group revenue outside the UK
has increased in the year to 43.9%, reflecting
growth in South Africa ahead of growth in the
UK. In constant currency terms from when
the targets were set we are more closely
in line with the strategic target (of 50%) at
47.0% (2021: 45.6%), the growth on prior
year reflecting the higher constant currency
growth in South Africa over the UK in the year.
Definition Reported operating profit
as adjusted for IAS 19R administrative
expenses, acquisition related costs and
exceptional operating items, as defined in
note 8 to the financial statements.
Performance Underlying operating profit
increased by £8.0m (+23.7%). This reflected
a strong trading performance in the UK
and in South Africa.
Underlying return on capitalemployed %
23.9% +570bps
2022
23.9
2021
18.2
2020
16.4
2019
18.2
2018
18.0
Dividend per share p
10.0p +21.9%
2022
10.0
2021
8.2
2020
3.1
2019
8.4
2018
7.8
Underlying operating cash flow £m
£28.6m -56.5%
2022
28.6
2021
65.8
2020
38.4
2019
39.8
2018
31.0
Definition Underlying operating profit
on a pre-IFRS 16 basis expressed
as a percentage of the average of
opening andclosing underlying capital
employed(as defined in note 8 to the
financial statements).
Performance Underlying ROCE remained
above the strategic target of 15% over
the economic cycle. The improvement
over prior year reflected the 23.7% growth
in underlying operating profit against
increased capital employed, driven by
theGroup’s investment into inventory.
Definition The total of the interim dividend
and the proposed final dividend for the
financial year.
Performance In line with the Board’s
progressive albeit prudent dividend policy,
the dividend per share increased 21.9% to
10.0p per share from 8.2p per share.
Definition Cash generated from continuing
operations adjusted for cash flows from
exceptional items and pension fund deficit
recovery contributions, as defined in note 8
to the financial statements.
Performance Underlying operating cash
generation decreased to £28.6m reflecting
a strong trading performance and
investment into inventory.
2022
396.3
2021
324.2
2020
342.0
2019
331.0
2018
300.1
We use the following key performance indicators (KPIs) to measure our progress against our
strategicpriorities.
Link to strategy
1 2 3 4 5
1 2 3 4 5 1 2 3 4 5 1 2 3 4 5
1 2 3 4 5 1 2 3 4 5
Link to strategy Link to strategy
Link to strategy Link to strategy Link to strategy
1 Share gains
andsector focus
Link to strategy 2 Acquisitions 3 ESG 4 Operational
excellence
5 Product vitality
1 On a pre-IFRS 16 basis.
Strategic report
Annual Report and Accounts 2022 Norcros plc 21
Business performance
A record performance
fortheGroup.
2022
£m
202�
£m
Revenue 396.3 324.2
Operating profit 36.2 24.9
IAS �9R administrative expenses 1.7 �.4
Acquisition related costs 4.8 3.7
Exceptional operating items (0.9) 3.8
Underlying operating profit 41.8 33.8
2022
£m
202�
£m
Revenue – UK 256.7 220.2
Revenue – South Africa 139.6 �04.0
Revenue – Group 396.3 324.2
Underlying operating profit – UK 30.9 26.9
Underlying operating profit – South Africa 10.9 6.9
Underlying operating profit – Group 41.8 33.8
Underlying operating profit margin – UK 12.0% �2.2%
Underlying operating profit margin – South Africa 7.8% 6.6%
Underlying operating profit margin – Group 10.5% �0.4%
2022
£m
202�
£m
Underlying operating profit 41.8 33.8
Depreciation of right of use assets 4.1 4.0
Lease costs (5.7) (5.3)
Depreciation and underlying amortisation (owned assets) 5.2 5.4
Underlying EBITDA 45.4 37. 9
Net working capital movement (23.6) 2�.8
Share-based payments 1.1 �.0
Operating profit impact of IFRS �6 1.6 �.3
Depreciation of right of use assets 4.1 4.0
Cash settlement of share options — (0.2)
Underlying operating cash flow 28.6 65.8
2022 202�
Basic underlying earnings per share 38.9p 3�.2p
Diluted underlying earnings per share 38.2p 3�.�p
The Group makes use of a number of alternative performance measures to assess business performance and provide additional useful
information to shareholders. Definitions and reconciliations of these alternative performance measures are provided in note 8.
Strategic report
Annual Report and Accounts 2022 Norcros plc 23
Triton
Revenue at Triton, the UK’s market leader in showers, was £60.1m
(2021: £54.5m), 10.3% higher than the prior year and 26.3% higher
than the pre-COVID-19 2020 comparator on a like for like basis.
Triton has benefited from strong retail sales over the last two years
by ensuring product availability and maintaining high customer
service levels. As a result, as competitors struggled to react to the
challenging situation, Triton was able to build on its market leading
position taking an increasing market share in electric and mixer
showers which has been retained. Retail sector revenue increased
by 2.9% in the year and by 31.2% in comparison to 2020 on a like
for like basis.
Following an initial delay in the recovery of contract, housing and
local authority business, the trade sector revenue has returned
strongly. Trade sector revenue in the year was 22.1% higher than
prior year and 21.3% higher than 2020 on a like for like basis. Export
revenue also performed strongly with 11.0% growth on the prior
year and 31.5% growth against 2020 on a like for like basis.
Proud to be manufactured in Britain for over 45 years and a
member of the “Made in Britain” scheme since 2014, Triton is
known as a leader in electric shower innovation with a focus on its
environmental credentials. Our “cleaner conscience” TV and press
campaigns highlighting the environmental and financial benefits
of showering less have been well received. Further initiatives were
introduced in the year such as 100% recycled bags for shipping,
30%+ recycled content plastic packaging, carbon neutral paper
for all production (such as installation instructions) and electric
vehicles within the fleet.
During the year Triton continued to work with the Carbon Trust
with the target to be net carbon zero by the end of 2025, Triton’s
50th anniversary year.
New products continue to be a key driver in maintaining Triton’s
long-term leading market position where ongoing investment
and new product launches have proven successful. Notable
revenue growth in the year was delivered from Omnicare Ultra, a
shower range for the care and adaptations segment. Triton’s Enrich
electric shower won an award in the year as the product of choice
by installers and, overall Triton was awarded the Feefo Platinum
Trusted Service Award for demonstrating outstanding service
tocustomers.
Triton again delivered a high level of underlying operating profit
ahead of the prior year combined with good cash conversion.
TRITON
Beauty salon goes
withthe Instaflow to
improve efficiency
The challenge
Award-winning LUXE Hair Beauty Bridal, Leicestershire,
urgently needed an energy efficient solution to provide
instantaneous hot water, while helping to keep its utility
billsunder control.
The solution
Triton’s 15L Instaflow Stored Water Heater is ideal for premises
that only have access to cold mains water supply; it is quick
and easy to install and easy to hide from view. The system
benefits from low operating pressures, while also providing
quick heat-up times and variable temperature settings.
Asthe electric Instaflow heats water only when needed,
itminimises wastage and conserves power.
The result
The salon is able to cater for the needs of its customers, while
using as little water and energy as possible in the process.
Strategic report
Norcros plc Annual Report and Accounts 202224
UK business review continued
UK continued
Merlyn
Merlyn, the UK and Ireland’s no. 1 supplier of shower enclosures
and trays to the residential, commercial and hospitality sectors,
performed strongly and recorded revenue of £58.3m (2021:
£43.3m), growth of 34.6% on the prior year and 39.8% against
2020 on a like for like basis. The business continued to grow its
market share, leveraging its leading position in the UK through
its quality product offering, stock availability and customer
centric service.
UK revenue grew by 35.8% on prior year and 41.7% on 2020 on
a like for like basis, with a particularly strong performance in the
trade sector, where revenue grew by 56.3% against the prior year
and 65.8% against 2020 on a like for like basis. This was driven
by growth across a number of existing customers in addition to
a number of new contracts including Sanctuary Housing and
StModwen Homes. The retail sector revenue increased by 21.3%
against prior year and 25.2% against 2020 on a like for like basis,
representing an increased share of showroom spend. Exports
increased by 26.0% in the year and 26.0% against 2020 on a like
forlike basis, reflecting growth in Ireland and France.
New product development remains a core component of Merlyn’s
growth strategy with the launches of Arysto luxury shower
enclosures and slip resistant trays during the year. The future
pipeline includes an Arysto range extension, a next generation of
shower trays, further storage options and products with improved
glass cleaning properties. Our focus on our customers was
reflected in Merlyn winning the Fortis Overall Supplier of the Year
and Wetroom Supplier of the Year and the Neville Lumb Overall
Supplier of the Year and also attaining the Gold Standard in
Excellence Through People.
Merlyn has continued to progress its environmental credentials
during the year and has launched an eco-packaging solution
developed last year to eliminate the use of single-use plastics
with fully recyclable alternatives. All new product launches will
incorporate eco-packaging.
Notwithstanding substantial increases in input and sea freight
costs, Merlyn recorded a strong underlying operating profit
performance. Cash conversion remained strong in the period.
MERLYN
Bodmin Jail Hotel
blendsheritage
architecture with
contemporary design
The challenge
Bodmin Jail Hotel is a four-star boutique hotel based in
theGrade II listed walls of the former prison building in
Cornwall. The design brief to Merlyn was to intertwine
theimposing architecture of the 18th century jail with
highquality contemporary products.
The solution
Dart Bathrooms, the contracted bathroom merchant,
worked closely with Merlyn’s Specification Team to select
the stylish 8 Series Frameless Quadrant Door to effortlessly
combine high aesthetics with functionality.
The result
The new bathroom suites perfectly marry the imposing
original architecture of the 300-year-old jail with
contemporary fittings and finishes. The 8 Series Frameless
Quadrants with concealed fixings help to create the illusion
of space, blending seamlessly with the original architecture
and weathered stone walls. The product also comes with
alifetime guarantee and Mershield Stayclear easy clean
protected glass.
Strategic report
25Norcros plc
Vado
Vado, our leading manufacturer of taps, mixer showers, bathroom
accessories and valves, recorded revenue of £43.9m for the year
(2021: £38.2m), 14.9% higher than the prior year and 5.8% higher
than 2020 on a like for like basis.
In the UK, our retail sector revenue showed strong growth, up on
prior year by 23.8% and 12.0% up on 2020 on a like for like basis on
the back of a vibrant new product development programme and
excellent stock availability.
The trade sector was more challenging with revenue up 6.3% on
prior year but 4.5% lower than 2020 on a like for like basis. This was
in part driven by the lack of availability of building materials and
labour which resulted in slower than planned build programmes
atkey customers.
Export revenue was 16.5% ahead of both prior year and 2020 on
a like for like basis on the back of strong growth in Europe and the
Middle East.
The business continued to invest in NPD with further market
leading launches planned to follow the successful launches of
the Knurled X Fusion and Omika Noir ranges this year. Our NPD
programme has a strong environmental and sustainability focus,
with the launch of our EcoTurn range of cold start taps last year
reinforcing Vado’s position as an on-trend and sustainable brand.
Vado generated an underlying operating profit ahead of last year
and a strong level of cash conversion in the period.
Croydex
Croydex, our market leading, innovative designer, manufacturer,
and distributor of high quality bathroom furnishings and
accessories, recorded revenue of £27.0m (2021: £24.1m) for the
period, 12.0% higher than the prior year and 15.9% higher than
2020 on a like for like basis.
Retail sector revenue was marginally ahead of prior year and 14.0%
up on 2020 on a like for like basis. Retail and E-Commerce sales
slowed in the second half of the year as customers returned to
physical stores and activity returned to more normal levels. The
business continues to develop its digital strategy and has secured
further listings with Home Depot.com, Lowes, Walmart and
Amazon, providing a sound base for both our export and online
growth plans.
Trade sector revenue was up 28.4% on the prior year and up 16.9%
against 2020 on a like for like basis, with the toilet seat category
including Croydex’s patented fixing system performing especially
well. Export sales were in line with prior year and 18.2% up on 2020
on a like for like basis, mainly driven by new business in Italy, offset
by a slowdown in Germany.
Croydex’s ongoing new product development programme has
played a major role in driving new sales opportunities, particularly
through new patented solutions within the shower rod, toilet seat
and medicine cabinet categories. Hygiene-focused products with
anti-bacterial and anti-viral surfaces and non-touch taps were
also introduced. The packaging policy was developed further in
the year to reduce the environmental impact and eco-design was
integrated into all products. Croydex has worked with the FSC on
timber certification and BEIS, DEFRA, BMA and UWL regarding the
proposed water efficiency labelling scheme.
Underlying operating profit was ahead of the prior year, albeit
cash conversion was significantly lower than prior year, reflecting
investment into inventory to support stock availability and service.
Vado: By using the latest thermostatic
cartridge technology, Vado’s thermostatic
shower and bath valves can eliminate the risk
of scalding, delivering optimum mixed water
temperature to guarantee safety for all
thefamily.
Strategic report
Norcros plc Annual Report and Accounts 202226
UK business review continued
UK continued
Abode
Abode, our leading designer and distributor of high quality hot
water taps, bathroom mixers, kitchen sinks and taps, recorded
revenue of £18.9m for the year (2021: £15.0m), a 26.0% increase on
prior year and a 30.3% increase against 2020 on a like for like basis.
The business continued to benefit from its strong market positions
with key customers, a well-planned and executed NPD programme
and timely investment in additional inventory. The business has
grown market share over the period and remains focused on
developing sustainable products that provide customers with
“water the way you want it”.
Retail growth has been supported by an “Approved Retailer”
scheme and investment in point-of-sale display aids to drive
market share growth in our premium Distinctly Abode ranges.
Growth in the specification sector has benefited from the Pronteau
and Protrad hot water taps with further initiatives planned in
theyear ahead. Both taps have been awarded WRAS approval,
apre-requisite for new build markets.
Our focus on our products and customers will see further market
leading product launches in the year ahead that will further benefit
the growth of the business.
Underlying operating profit was higher than prior year with
cashconversion lower than prior year, reflecting the investment
into inventory.
JOHNSON TILES
Johnson Tiles and
Norcros Adhesives unite
to refurbish Everglow
Salon, Biddulph
The challenge
This 40m² project required all walls and floors to be
stripped back to properly prepare the structural framework
of the space. The floors then needed levelling to provide a
suitable substrate for tiling. Additionally, a tight deadline
was set to meet the fixed salon opening date.
The solution
Norcros Adhesives Pro-10 Leveller was used to provide a
suitable substrate; this product is ideal for preparing sub-floors
before fixing tiles. Johnson Tiles’ Glide porcelain marble-effect
floor tiles were fitted using Norcros Adhesives’ S1 Rapid
White Adhesive and finished with Flexi Grout in Slate Grey.
The result
The pairing of opulent floor tiles and neutral grout allows
other design elements to shine. Foliage features within
furniture pieces and hanging plants create a biophilic-
inspired design. Gold fixtures add a touch of luxury with a
metallic vibe, with the deep green velvet chairs add texture
and colour.
This collaboration between Norcros Adhesives and Johnson
Tiles resulted in the completed space delivering an
on-trend style, perfect for this contemporary salon.
Johnson Tiles
Johnson Tiles, our UK market leading ceramic tile manufacturer
and a market leader in the supply of both own manufactured and
imported tiles, recorded revenue of £34.2m (2021: £32.8m), 4.3%
higher than the prior year but 16.4% lower than 2020 on a like
for like basis. We have accelerated the process of repositioning
Johnson Tiles and specifically exited a number of lower margin
products as part of this plan, resulting in a more focused business.
Trade sector revenue was up 17.6% on the prior year but 5.7% down
on 2020 on a like for like basis, with the second half recording a
2.0% decrease on 2020 on a like for like basis. The house developer
sector continued its strong performance during the year but
commercial specifications, which are driven by the hospitality
and retail sectors, continued to operate significantly below
pre-COVID-19 levels. The social housing refurbishment market
continues to be impacted by the overhang from the Grenfell
cladding issue. Johnson Tiles’ strong relationships with the national
house developers continued, including Barratt, David Wilson,
Persimmon, Charles Church, Redrow and Countryside.
Retail sector revenue was down 9.9% on prior year and 28.9%
down on 2020 on a like for like basis, driven primarily by the
planned exit of lower margin product categories. This has
freed up resources for our growing focus on small format niche
product ranges.
In 2021 Johnson Tiles celebrated both its 120th year as a UK
manufacturer of tiles and its heritage as a designer and innovator
in tiles, with the business winning a Product of the Year award for
the South Bank range at the Mix Interiors 2022 Mixology Awards.
Export revenue was 11.1% below prior year and 22.6% below 2020
on a like for like basis due mainly to lower revenues to France.
Johnson Tiles has developed a market leading position on
sustainability over many years focusing strongly on recycling
energy, water and waste and will pursue further initiatives to
progress the reduction in our carbon footprint in the year ahead.
Strategic report
Annual Report and Accounts 2022 Norcros plc 27
NORCROS ADHESIVES
Norcros Adhesives helps
Maggie’s Wirral cancer
support centre
The challenge
Maggie’s Wirral cancer support centre offers a warm and
friendly atmosphere where every person feels cared for.
The centre aims to provide calming, therapeutic and
relaxing spaces, for those receiving treatment for cancer
and their families and carers who need support. As such,
the design of its buildings is of key importance in creating
awelcoming and comforting environment.
The solution
Norcros Adhesives was able to provide the products,
expertise and technical back-up, together with a lifetime
guarantee. The project featured an underfloor heating mat
on top of a 70–80mm thick sand and cement screed. The
surface of the screed was primed with Norcros Prime Bond
and the heat mat was fully embedded in Norcros Rapid
Porcelain Grey Adhesive. Large-format tiles were then laid
using Norcros S1 Fibre Reinforced Tile Adhesive in Grey and
colour matched grouts and silicone were used for seamless
expansion joints.
The result
The completed space has a very usable and comforting feel
and the project was completed without any technical
problems or delays.
In the past year, while the business made encouraging progress,
the performance was impacted by the significant increase in
input costs and in particular energy. These cost increases have
now been passed through to our customers by a series of phased
selling price increases, albeit with some lag effect. The underlying
operating loss was lower than the previous year and the level of
cash generation reflected an investment into inventory.
Norcros Adhesives
Norcros Adhesives, our UK manufacturer and supplier of tile and
stone adhesives and ancillary products, recorded revenue of
£14.3m (2021: £12.3m), 16.3% higher than prior year and 23.3%
higher than 2020 on a like for like basis.
Retail sector revenue was 70.5% ahead of prior year and 73.3%
above 2020 on a like for like basis, reflecting significant growth
of our product lines into some of our larger customers combined
with a displacement of competitor products.
Trade sector revenue was 29.1% below prior year and 4.9% below
2020 on a like for like basis, reflecting a slower recovery in the
larger private and public commercial specification projects
andanincreased focus on the retail sector.
The Middle Eastern operations were closed at the end of the previous
financial year, and as a result, there were no revenues in the year.
Norcros Adhesives maintained the “Gold Standard” from the
Supply Chain Sustainability School and the business remains
committed to making further progress, especially in the areas
ofpackaging andrecycling.
Raw material and transport costs both increased significantly in
theyear and impacted margins as the recovery through selling price
increases lagged the increase in operating costs. Norcros Adhesives
made a small underlying operating loss in line with the prior year.
Strategic report
Annual Report and Accounts 2022 Norcros plc 29
Johnson Tiles South Africa
Johnson Tiles South Africa, our tile manufacturing business,
recorded revenue of £16.5m (2021: £12.5m), a 32.0% increase on
a reported basis and 26.9% higher on a constant currency basis.
Revenue was 27.9% higher than 2020 on a constant currency like
for like basis.
Record levels of manufacturing output were achieved during the
year as productivity and efficiency initiatives were successfully
delivered. Together with targeted plant investments during the
period, this focus helped to drive improved throughput and
product quality, enabling the business to meet the increased
demand from housing renovations, commercial housebuilders
and, in the latter part of the year, from the recovering commercial
sector, particularly the corporate renovation segment. A lack of big
build construction activity remains.
Products were specified and installed in leading developments
across the country, in quality, entry-level residential developments
such as Thaba Village, The Reeds and Greenpark in Johannesburg,
The Blyde and Greencreek in Pretoria, The Huntsman, Fynbos and
Greenbay in Cape Town and Ballito Hills in Durban.
During the year, the manufactured tile range was consolidated,
reducing the complexity of the portfolio to further improve
in-stock and customer service levels whilst increasing the depth
ofsome ranges.
Underlying operating profit was ahead of the prior year.
Tile Africa
Tile Africa, our leading retailer of wall and floor tiles, sanitaryware
and bathroom fittings, recorded revenue of £75.5m (2021:£54.9m),
a 37.5% increase on a reported basis and 32.0% higher on a constant
currency basis. Revenue was 45.5% higher than 2020 on a constant
currency like for like basis.
The substantial growth on prior year was driven by buoyant retail
demand from increased renovation activity, significantly improved
operating disciplines and superior stock availability.
The successful, exclusive Evox range of bathroomware and
sanitaryware was expanded with several new bath and tap ranges,
and an exclusive upmarket range, NUVO, was launched in the
second half of the year. An appealing range of bathroom furniture
was also added.
The commercial contracts sector however remains subdued
with lower overall new build activity. Despite this, the category
improved as several retail floor covering installations for Pick n Pay,
Boxer and Spar were completed.
Tile Africa currently operates from thirty-three owned stores and
two franchise stores. The temporary Wynberg pop-up clearance
store was closed during the year, and a new store opened in
Thohoyandou. The dual Tile Africa HomeXpress value-for-money
brand is being trialled in this store.
Ongoing capital investment continues, mirroring the successful
flagship Greenstone store and Ballito store concepts, incorporating
a bathroom store-within-a-store format and a bespoke alternative
floor coverings offer.
Tile Africa’s underlying operating profit was significantly ahead of
prior year, with strong cash flow partially offset by the investment
into inventory. This investment enabled the business to both
support the revenue growth and ensure our customer service
and stock availability were maintained notwithstanding the supply
chain challenges and extended import lead times.
TILE AFRICA
Launch
HomeXpress store
Norcros Tile Africa is proud to announce the launch
ofitsfirst HomeXpress store in Thohoyandou. Tile Africa
HomeXpress is all about making home improvement easy.
The brand is focused on helping people update and finish
their homes with quality, value-for-money products and
great advice and service. The store will stock wall and floor
tiles, taps, baths, toilets and all the usual bathroomware as
well as PVC ceilings, cornices and paint.
Strategic report
Norcros plc Annual Report and Accounts 202230
South Africa business review continued
South Africa continued
TAL
TAL, our market leading adhesives business, recorded revenue
of£22.5m (2021: £19.1m), a 17.8% increase on a reported basis
anda 13.1% increase on a constant currency basis. Revenue was
11.4% higher than 2020 on a constant currency like for like basis.
Large commercial new build projects remained limited, which
impacted demand for the business’s high specification, rapid
setting adhesives and system-driven construction products.
Export retail demand remained solid despite competitors
reopening plants in neighbouring countries.
Notwithstanding market conditions, TAL remains the leading
supplier, with the business supplying market leading products
andtechnical expertise to several construction projects during the
year, including The Blyde residential development, Babylonstoren
Spa, Ford Motor Company’s new manufacturing facility, Dr Pixley
Kaseme Hospital, The Hilton Hotel, Hilton Towers and The Arch.
Investment in new product development continued during the
period with the launch of products in the waterproofing category
as well as barrier and keying compounds. Ongoing development
of novel fixing systems for coverings outside our traditional tile
market continues.
TAL’s underlying operating profit and cash generation were ahead
of the prior year.
House of Plumbing
House of Plumbing, our market leading supplier of specialist
plumbing materials into the specification and commercial
segments, recorded full year revenue of £25.1m (2021: £17.5m),
43.4% higher than the prior year on a reported basis and 37.2%
higher on a constant currency basis. Revenue was 15.1% higher
than 2020 on a constant currency like for like basis.
The large commercial projects traditionally supplied by House of
Plumbing are yet to recover post-COVID-19. However, additions to
the branch network contributed to increased revenues compared
to the prior year. During the period, four new branches were added
in Nelspruit, Secunda, City Deep and Durban South focused on the
civils product ranges used in infrastructure, mining, engineering
and irrigation projects in addition to the traditional commercial
plumbing offering.
House of Plumbing now operates eight branches. The focus is on
providing expert technical advice and consistent stock availability
with the business planning to continue to extend its geographical
expansion and further establish a national footprint.
During the year, House of Plumbing supplied several landmark
projects, including Redhill School, Ford Silverton, Coca Cola
Midrand, SAB Alrode, Rand Airport, N2 Woodhill shopping mall
andNetcare Hospital, Alberton.
House of Plumbing’s underlying operating profit was marginally
higher than prior year, with cash flow reflecting the investment into
inventory and new branches.
TILE AFRICA
Launch NUVO
Bathroom Brands
Tile Africa launched new exclusive NUVO Bathroom
Brandsin its stores with a selection of beautiful lifestyles
toshowcase the different ranges. It was first introduced
tothe local market through the tap and basin offering and
wasthen followed by four exciting vanity ranges.
Strategic report
Annual Report and Accounts 2022 Norcros plc 31
Chief Financial Officer’s report
Record revenue and profit performance
and a strong balance sheet.
The Group completed a refinancing of
its banking facilities in the second half
of the year and is well-positioned to
progress its growth strategy.”
James Eyre
Chief Financial Officer
• Group revenue increased by 22.2% to £396.3m (2021: £324.2m)
• Group underlying operating profit increased by 23.7% to
£41.8m (2021: £33.8m)
• Group operating profit was £36.2m (2021: £24.9m)
• Group underlying profit before tax was £39.3m (2021: £30.6m)
• Group profit before tax was £33.0m (2021: £18.5m)
• Underlying operating cash flow of £28.6m (2021: £65.8m),
63% of underlying EBITDA (2021: 174%)
• Net cash of £8.6m (2021: net cash of £10.5m)
• Pension scheme in a surplus position of £19.6m
(2021:deficit of £18.3m)
Revenue
Group revenue at £396.3m (2021: £324.2m) increased by 22.2% on
a reported basis and by 20.6% on a constant currency basis. Group
revenue was 20.9% higher than 2020 on a constant currency like
for like basis, after adjusting the 2020 comparator period from
a53to a 52-week period pro-rating.
Underlying operating profit
Underlying operating profit increased by 23.7% to £41.8m
(2021:£33.8m). Our UK businesses recorded an underlying
operating profit of £30.9m (2021: £26.9m), and our South African
businesses an underlying operating profit of £10.9m (2021: £6.9m).
Group underlying operating profit margin was 10.5% (2021: 10.4%).
IAS 19R administrative costs
These costs represent the costs incurred by the Trustee of
administering the UK defined benefit pension scheme and are
reflected in the Income Statement under IAS 19R. Costs of £1.7m
are higher than prior year largely as a result of the fees relating
tothe triennial actuarial valuation (2021: £1.4m).
Acquisition related costs
A cost of £4.8m (2021: £3.7m) has been recognised in the year
andis analysed as follows:
2022
£m
202�
£m
Intangible asset amortisation 3.7 3.7
Advisory fees 1.1 —
4.8 3.7
The advisory fees relate to the costs incurred in relation to
acquisition activity.
Exceptional operating items
A net exceptional operating credit of £0.9m (2021: charge
of£3.8m) has been recognised in the year.
2022
£m
202�
£m
Release of UK property provision (0.9) —
COVID-�9 related restructuring — 3.8
(0.9) 3.8
The UK property provision related to the only remaining surplus
and legacy onerous property lease at Groundwell, Swindon. In
the year, the Group reached agreement with the landlord to exit
the lease early. A cash settlement payment of £1.3m including
dilapidation obligations was made in the period. The remaining
£0.9m of the related provision has been released as an exceptional
operating item.
During the prior year an exceptional charge of £3.8m was incurred
in relation to restructuring programmes implemented by the Group
as a result of COVID-19.
Financial overview
2022
£m
202�
£m
Revenue 396.3 324.2
Underlying operating profit 41.8 33.8
IAS �9R administrative expenses (1.7) (�.4)
Acquisition related costs (4.8) (3.7)
Exceptional operating items 0.9 (3.8)
Operating profit 36.2 24.9
Net finance costs (3.2) (6.4)
Profit before taxation 33.0 �8.5
Taxation (7.3) (3.5)
Profit for the year 25.7 �5.0
Strategic report
Norcros plc Annual Report and Accounts 202232
Chief Financial Officer’s report continued
Finance costs
2022
£m
202�
£m
Interest payable on bank borrowings 0.8 �.5
Interest on lease liabilities 1.7 �.7
Movement on fair value of
derivativefinancial instruments — 2.0
Discounting of property
leaseprovisions 0.1 —
Amortisation of costs of raising
debtfinance 0.2 0.2
Finance costs 2.8 5.4
IAS 19R finance cost 0.4 �.0
Total finance costs 3.2 6.4
Net finance costs for the year of £3.2m compares to £6.4m
in 2021. This decrease is mainly due to the movement in the
fair value of foreign exchange contracts which was a £2.0m
cost in the prior year in relation to expired forward foreign
exchange contracts. Forward foreign exchange contracts are
now accounted for under IFRS 9 hedge accounting, with the
movement in fair value recognised in the Consolidated Statement
of Comprehensive Income.
The Group has recognised a £0.4m interest cost in respect of
the UK defined benefit pension scheme liability (2021: £1.0m)
which decreased by £0.6m principally reflecting the lower deficit
throughout the year.
Underlying profit before tax
Underlying profit before tax was £39.3m (2021: £30.6m), mainly
reflecting the increase in underlying operating profit noted above.
Taxation
The tax charge for the year of £7.3m (2021: £3.5m) represents an
effective tax rate for the year of 22.1% (2021: 18.9%). The increase
in the effective tax rate mainly relates to a higher proportion of the
Group’s taxable profits being generated in South Africa and the
non-deductible acquisition related costs in 2022.
The standard rates of corporation tax in the UK, South Africa and
Ireland in the period were 19% (2021: 19%), 28% (2021: 28%) and
12.5% (2021: 12.5%) respectively.
Dividends
The Group responded swiftly to the impact of the COVID-19
pandemic and the need to preserve cash by not paying a final
dividend in relation to the year ended 31 March 2020 or an interim
dividend in relation to the year ended 31 March 2021. The Group’s
dividend policy, which takes into account the Group’s growth
strategy, the interests of other key stakeholders, the Group’s cash-
generative characteristics and its earnings growth, was reinstated
in the second half of the prior year. The Board recommends a
final dividend of 6.9p per share (2021: 8.2p). This, combined with
the interim dividend of 3.1p per share (2021: £nil), results in a total
dividend of 10.0p per share (2021: 8.2p). The total dividend is
equivalent to a dividend cover of 3.8 times, consistent with the year
ended 31 March 2021. The cash cost of the total dividend is £8.7m.
This final dividend, if approved at the Annual General Meeting,
will be payable on 29 July 2022 to shareholders on the register
on 24 June 2022. The shares will be quoted ex-dividend on
23 June 2022. Norcros plc operates a Dividend Reinvestment Plan
(DRIP). If a shareholder wishes to use the DRIP the latest date to
elect for this in respect of this final dividend is 8 July 2022.
Balance sheet
The Group’s balance sheet is summarised below.
2022
£m
202�
£m
Property, plant and equipment 29.0 28.0
Right of use assets 19.9 �9.6
Goodwill and intangible assets 90.3 93.6
Deferred tax (9.4) (0.5)
Net current assets excluding cash
and borrowings 68.2 44.0
Pension scheme surplus/(liability) 19.6 (�8.3)
Lease liabilities (24.0) (24.2)
Other non-current assets and liabilities (1.9) (4.3)
Net cash 8.6 �0.5
Net assets 200.3 �48.4
Total net assets increased by £51.9m to £200.3m (2021: £148.4m).
Net current assets increased by £24.2m reflecting the significant
cash investment into working capital, particularly inventory.
Property, plant and equipment increased by £1.0m to £29.0m
and included additions of £5.3m (2021: £2.5m). The depreciation
charge was £5.1m (2021: £5.2m) and foreign exchange gains were
£0.8m (2021: gain of £1.7m).
Right of use assets increased by £0.3m to £19.9m (2021: £19.6m),
reflecting the small difference between additions or renewals
and right of use asset depreciation in the year. Lease liabilities of
£24.0m (2021: £24.2m) decreased by £0.2m.
The deferred tax liability increased by £8.9m to a liability of
£9.4m (2021: liability of £0.5m). The increase is mainly the result
of a movement in the pension scheme position from a deficit
at31March 2021 to a surplus at 31 March 2022.
Pension schemes
On an IAS 19R accounting basis, the gross defined benefit pension
scheme valuation of the UK scheme showed a surplus of £19.6m
compared to a deficit of £18.3m last year. The present value
of scheme liabilities decreased by £47.8m primarily due to an
increase in the discount rate to 2.75% (31 March 2021: 2.05%) and
benefit payments made in the period. The value of scheme assets
decreased by £9.9m largely due to benefit payments made in the
period partially offset by asset returns.
During the year, the Group reached agreement with the Trustee
on the 2021 triennial actuarial valuation for the UK defined
benefit scheme and on a new deficit recovery plan. The actuarial
deficit at 31 March 2021 was £35.8m (2018: £49.3m). Deficit repair
contributions have been agreed at £3.8m per annum from 1 April 2022
to March 2027 (increasing with CPI, capped at 5%, each year).
The Group’s contributions to its defined contribution pension
schemes were £3.7m (2021: £3.0m).
Strategic report
Annual Report and Accounts 2022 Norcros plc 33
Cash flow and net debt
Underlying operating cash flow was £37.2m lower than in the prior
year at £28.6m (2021: £65.8m).
2022
£m
202�
£m
Underlying operating profit 41.8 33.8
Depreciation and amortisation 5.2 5.4
Net working capital movement (23.6) 2�.8
IFRS 2 charge add-back 1.1 �.0
Depreciation of right of use assets 4.1 4.0
Cash settlement of share options — (0.2)
Underlying operating cash flow 28.6 65.8
The main driver of the reduction in the underlying operating
cash flow was a significant cash investment into working capital,
particularly inventory, to optimise our service and stock availability
proposition in the light of exceptional supply chain challenges.
Underlying operating cash conversion in the year was 63% of
underlying EBITDA (2021: 174%).
2022
£m
202�
£m
Underlying operating cash flow 28.6 65.8
Cash flows from exceptional items
and acquisition related costs (1.7) (2.5)
Pension fund deficit
recoverycontributions (3.3) (3.3)
Cash flow generated
fromoperations 23.6 60.0
Net interest paid (2.5) (3.2)
Taxation (6.5) (3.5)
Net cash generated from
operatingactivities 14.6 53.3
Capital expenditure (5.4) (2.8)
Dividends (9.1) —
Share transactions 0.1 0.3
Principal element of lease payments (4.7) (4.3)
Exchange movement 1.6 0.6
Movement in costs of raising finance 1.0 (0.2)
Net cash (spent)/generated (1.9) 46.9
Opening net cash/(debt) 10.5 (36.4)
Closing net cash 8.6 �0.5
NORCROS ADHESIVES
Norcros Adhesives is the
trusted solution for new
seaside development
The challenge
Norcros Adhesives has been involved in the construction of
a new development of seven houses and eight holiday lets
at the seaside town of Whitstable, Kent. All are designed
according to the local style to fit in with surrounding
buildings and finished to a luxury standard, offering
spectacular views across the bay.
The solution
Tiling contractor Cerface of Gillingham, who have a long
established partnership with Norcros Adhesives would only
specify Norcros Adhesives products. This gave them the
confidence to ensure that the products would work well for
all areas of the project.
The result
The properties are now being advertised by town estate
agency Christopher Hodgson for prices ranging from
£800,000 to £1.45m, with five of them set to fetch
seven-figure sums.
Strategic report
Norcros plc Annual Report and Accounts 202234
Chief Financial Officer’s report continued
Cash flow and net debt continued
Cash generated from operating activities was £38.7m lower than the prior year at £14.6m, largely due to the £37.2m reduction in
underlying operating cash flows.
Cash flows from exceptional items and acquisition related costs in the current year primarily relate to the settlement of the surplus legacy
lease at Groundwell of £1.3m.
Capital expenditure at £5.4m (2021: £2.8m) represents an increase against COVID-19 levels and includes investment in new product
programmes, new stores and upgrades, IT systems and manufacturing facilities.
The Group ended the year with net cash of £8.6m (2021: net cash of £10.5m) on a pre-IFRS 16 basis after a net cash outflow of £1.9m.
Netdebt inclusive of IFRS 16 lease liabilities was £15.4m (2021: £13.7m).
Funding and liquidity
The Group agreed a new multicurrency revolving credit facility with four lenders in the second half of the year. The Group now has
committed banking facilities of £130m (plus a £70m uncommitted accordion) with a maturity date of the facility of October 2025 with two
further years as extension options.
James Eyre
Chief Financial Officer
8 June 2022
Average rate vs £
2022 202�
South African Rand 20.28 2�.36
Euro 1.18 �.�3
US Dollar 1.37 �.32
Closing rate vs £
2022 202�
South African Rand 19.20 20.24
Euro 1.19 �.�8
US Dollar 1.31 �.38
2022 202� Change
Revenue (£m) 396.3 324.2 22.2%
Underlying operating profit (£m) 41.8 33.8 23.7%
Underlying profit before tax (£m) 39.3 30.6 28.4%
Underlying diluted earnings per share (pence) 38.2 3 �.� 22.8%
Underlying return on capital employed (%) 23.9 �8.2 570bps
Underlying operating cash flow (£m) 28.6 65.8 (56.5%)
Net cash (£m) 8.6 �0.5 (�.9m)
Strategic report
Annual Report and Accounts 2022 Norcros plc 35
Risk management
Risk management framework
How we manage risk
Our risk management activities form
part of a flexible and robust governance
framework, which is owned by the Board,
overseen by the Audit and Risk Committee
and embedded at operational level.
Itconsists of the following key elements:
Defined risk responsibilities:
Board – Overall responsibility for risk
management. Defines the Group’s Risk
Management Policy, sets risk appetite
levels for each risk category and provides
leadership on the Group’s risk culture
Audit and Risk Committee –
Provides oversight, challenge and
independent assurance on the risk
management framework
Management – Day to day
operationalmanagement of risk
followingGroup policies and
embeddedreporting procedures
Defined risk policies and
reportingprocedures:
• Formal Board-approved Group Risk
Management Policy
• Defined risk appetite levels for each
category of risk
• Standardised, regular risk reviews and
embedded risk reporting
• Divisional support from Group Head
ofInternal Audit and Risk Assurance
Risk management remains a priority for the Group to help sustain the success of the business in the future. There is a range of potential
risks and uncertainties which could have a material impact on the Group’s performance. The objective of our risk management framework
is to support the business in meeting its strategic and operational objectives through the identification, monitoring and mitigation of risks
within clearly defined risk appetite levels for each risk category.
Supporting sustainable business objectives
through embedded risk management.
Risk landscape
Current risks:
Risks that could affect our
business, customers, supply chain,
employees and other stakeholders
and impact the achievement of our
strategic goals
Emerging risks:
“New” risks with relatively
unclear potential future impact
or likelihood, identified through
the embedded internal risk
assessment process
What we assess
Risk appetite: Acceptable level of risk, defined
bytheBoard, for each category of risk
Risk ownership: Each risk has a named owner
Risk scoring: Each risk is assessed in terms of its
financial and reputational impact, and its likelihood,
using a standard scoring scale
Inherent (gross) risk score: Assessment before
mitigating controls or actions are applied or taken
Residual (net) risk score: Assessment after mitigating
controls or actions are applied or taken
Actions: Required actions to address risks that exceed
risk appetite, including defined timelines
Risk categories
• Strategic
• Commercial
• Operational
• Financial
• People
• Regulatory and legal
• Fraud
• Health and safety
• Information technology and cyber
• Environmental, social and
governance (includes
climate change)
What we monitor
Group and business units
Risk monitoring
Regular review and updating of risk registers
Group
Strategic risk management
Identification, review and
management of Group risks
Business units
Operational risk management
Update and maintain risk registers
reflecting key risks identified and
mitigating actions taken
Group Internal Audit and Risk Assurance
Provide independent, objective assurance
Facilitate business risk reviews
Reporting on principal risks and uncertainties
Group Audit and Risk Committee
Risk management framework oversight and challenge
Review management of top risks
Integrated top-down and bottom-up risk management process
Strategic report
Norcros plc Annual Report and Accounts 202236
Principal risks and uncertainties
Principal risks
Our risk management framework identifies the principal risks
and uncertainties that we consider may threaten the Group’s
business model, future performance, solvency or liquidity.
These are explained in further detail in the table below, including
how they are being managed. The Board has carried out a
robust assessment of the principal risks and taken them into
consideration when assessing the long-term viability of the
Company on page 41. The list does not comprise all the risks that
the Group may face, and they are not listed in any order of priority.
During the past two years, many of our existing principal risks were
affected by the COVID-19 global pandemic. The Group has gained
considerable experience in identifying and managing the specific
risks arising from COVID-19. Although those risks appear to be
diminishing, we remain of the opinion that uncertainty resulting
from the COVID-19 pandemic is likely to remain throughout the
next financial year; we therefore continue to identify COVID-19
asaprincipal risk.
Building on the Group’s history of being focused on providing
sustainable value creation, environmental, social and governance
(ESG) risk was added as a principal risk in 2021, recognising ESG’s
importance to key stakeholders.
Strategic risks
Coronavirus (COVID-19) pandemic
Risk movement
Reducing
Description
Although diminished, the ongoing effects of the
COVID-19 global pandemic are still in evidence
in 2022. Vaccination programmes have been
rolled out across much of the world, reducing
the impact of contracting COVID-19 for most,
whilst not necessarily preventing its spread.
While travel restrictions, social lockdowns and
business closures are no longer in place in most
locations, there is a risk that COVID-19 will
continue to be a source of uncertainty in the
markets where we operate. Cases remain high
and there is ongoing uncertainty over the
effectiveness of vaccines on future variants of
the virus, and over the lower take-up rates of
vaccines in some locations.
Impact
Whilst the Group has continued to perform
robustly throughout the pandemic, the mid
tolong-term financial impact of the COVID-19
pandemic on our main markets remains
uncertain. Additionally, further outbreaks of
new variants that are vaccine resistant or
vaccine supply issues that impact the rollout
of vaccination efforts in some of our key
markets could lead to further restrictions or
other impacts that could be detrimental
toourtrading in the short term.
COVID-19 may continue to affect other
principal risks, for example by accelerating
orexacerbating their potential effects.
Mitigation
Throughout the various waves of the pandemic,
we have demonstrated that our existing
business continuity plans, insofar as they
applied to a global pandemic, assisted us in
mitigating the impacts of COVID-19. In the early
days of the pandemic, this included being able
to quickly safeguard our employees and limit
the financial impact on the business through
arange of measures including the temporary
suspension of operations, bringing forward
planned factory maintenance shutdowns and
reducing discretionary expenditure. We ensured
that those employees who could continue to do
their jobs from home were technologically
enabled to do so securely, and we provided safe
systems of work for those who could not
practically work from home. We could
reintroduce any or all of these measures again
should the need arise.
We continue to closely monitor global
developments related to the COVID-19 pandemic.
Strategic report
Annual Report and Accounts 2022 Norcros plc 37
Strategic risks continued People risk
Acquisition risk Environmental, social and
governance (ESG) risk
Staff retention and recruitment
Risk movement Risk movement Risk movement
Stable
Increasing
Increasing
Description
Part of the Group’s strategy is to grow through
selective acquisitions.
The impact of significant global events, including
COVID-19, may affect the cost, timing or availability
of potential acquisitions, and the availability of
equity or bank funding. However, such events
may also provide additional opportunities that
would not otherwise have existed.
The Group might fail to successfully integrate
acquisitions into its existing business model.
Impact
The operational performance of acquired
businesses may not reach expectations
impacting Group profitability and cash flow,
aswell as affecting the Group’s reputation.
Mitigation
The Group has detailed target appraisal
procedures in place, including appropriate
duediligence, and has senior management
experienced in M&A work. The Group also has
robust Board approval procedures in place to
ensure independent review of proposals.
Integration plans are finalised prior to
acquisitions completing to ensure newly acquired
businesses are integrated efficiently and swiftly
after acquisition. Group Internal Audit and Risk
Assurance conducts post-integration audits
toensure operations are fully integrated. Past
acquisitions provide demonstrable evidence
ofthe Group’s ability to successfully integrate
new businesses.
Description
The need to develop more sustainable ways
ofdoing business is vital. Investors, customers
and a wide range of other stakeholders are
increasingly wanting to form relationships with
companies that have a clear plan and
framework to improve their ESG credentials.
A significant part of ESG risk is related to
climate change and the potential effects of
both physical and transition climate-related
risks. See the TCFD section on pages 55 to 59.
There is a risk from failing to meet increasing
regulatory and reporting requirements.
Impact
Failure to adequately mitigate ESG risks or to
satisfactorily meet reporting requirements
could lead to the Group losingcustomers,
investors or support from other stakeholders
that would negatively impact our reputation,
future profits or funding opportunities that
could further limitfuture growth.
Mitigation
The Group has a history of being focused on
providing sustainable value creation whilst
being committed to operating in an ethical,
entrepreneurial and responsible manner with
the highest standards of corporate governance.
In recognition of the rising importance of ESG,
the Group has established an ESG governance
structure, revised Group policies, strengthened
carbon data with The Carbon Trust and
developed our ESG reporting (see the ESG
section on pages 42 to 59).
Description
The Group currently employs 2,196
1
people
worldwide. The Group’s ability to grow and
increase its market share depends significantly
on its continuing ability to recruit and retain
highly skilled employees in each area of its
activities and to be an employer of choice in
the communities where it operates.
The current employment landscape, including
high levels of employment, inflation, increasing
minimum and living wage rates and flexible
working demands, is increasing uncertainty in
the recruitment and retention of appropriately
skilled employees.
Impact
Future growth plans may be restricted or
delayed by difficulties experienced in recruiting
and retaining appropriate employees.
Mitigation
Group policy is to remunerate employees in
line with market rates and practices. In addition
to competitive salaries, bonus schemes, share
option schemes and other benefits are offered.
Executive and key management are
incentivised through an Approved
Performance Share Plan (APSP). A grant
ofoptions under the APSP has taken place
annually since 2011.
The Group is able to offer employees
appropriate training and development
opportunities and has a demonstrable
trackrecord of internal promotion.
1 Not including Granfit Holdings and its subsidiaries.
Strategic report
Norcros plc Annual Report and Accounts 202238
Principal risks and uncertainties continued
Commercial risks
Market conditions Loss of key customers Competition
Risk movement Risk movement Risk movement
Increasing
Stable
Stable
Description
Demand in our markets is dependent on
newbuilding activity and repair, maintenance
and improvement (RMI) activity in both the
public and private sectors. This is in turn
influenced bymacroeconomic factors,
consumer confidence and government
spending policy inour key markets.
COVID-19 had an unprecedented negative
effect on the growth of the global economy and
the impact of this is expected to continue, at
least in the short to medium term. RMI demand
in our key markets has remained resilient in the
last financial year while consumers continued to
invest in improving their homes; however, there
is no guarantee that this will continue in the
future. The disposable income of consumers
may be adversely impacted by rising inflation
especially in food, household energy bills and
fuel and transport costs.
Recovery from COVID-19 placed
unprecedented demand on global supply
chains, as evidenced by the ongoing shortage
of shipping containers and increasing freight
costs, along with raw material and energy price
inflation, which has been influenced by the
recent conflict in Ukraine.
Impact
Demand for our products remains robust
following the unexpected and rapid deterioration
in market conditions arising from COVID-19.
However, demand could still weaken in the
shortto medium term as consumer spending
patterns change, impacting profitability and
cash generation.
In the short to medium term, the ongoing
disruption to global supply chains and
increasing inflationary pressures could
leadtoreduced profitability.
Mitigation
There are a number of mitigating factors in
place that could limit the impact of potential
changes in consumer spending patterns on the
Group. These include the breadth of products
offered, the geographical spread of our
businesses, a flexible cost base and supply
chain, investment in new product development
and the replacement cycle of a number of our
key products.
We maintain appropriate headroom against our
borrowing facilities and covenants, maintain
strong working capital and capital expenditure
controls and have disciplined planning,
budgeting and forecasting processes.
Our businesses actively manage their supply
chains and monitor input costs whilst liaising
with their customers. They mitigate risks through
proactive sourcing and pricing strategies.
Description
While the Group has a diverse range of
customers there are nevertheless certain key
customers which account for higher levels
ofrevenue.
The deterioration in market conditions noted
elsewhere and the ongoing impact of
COVID-19 continue to heighten the risk that
key customers could go out of business, or
that they could change their business models,
e.g. they may move to an online, or other
alternative, model and we may miss this
opportunity if we fail to adapt to such changes.
Impact
Many of the contractual arrangements with
customers are short term in nature (as is
common in our markets) and there exists a risk
that the current performance of a business
may not be maintained if such contracts were
not renewed or extended or were maintained
at lower volumes due to a decline in economic
activity or our failure to provide goods or
services in the way a customer requires us
todo so.
Mitigation
The importance of relationships with key
customers is recognised and managed by
senior management within the Group who
have direct and regular access to their
counterparts at the highest levels
ofmanagement.
Rebate schemes and incentive programmes
help maintain these key relationships in a
competitive market situation.
The Group stresses key selling points such as
the continuity of supply, financial strength of
the Group and level of customer service to
help maintain relationships. As well as an
excellent product offering, the Group is also
able to assist with customers’ sourcing,
storage and logistics requirements.
Each of our businesses continues to develop
and evolve its digital and online offering in
response to the changing trading environment.
Description
The Group operates within a highly competitive
environment in all its markets. The actions of
our competitors, including their marketing
strategies and new product development,
could lead to them gaining competitive
advantage in key products and markets.
Impact
The Group recognises that there is a risk to its
results and financial condition caused by the
actions of its competitors.
Mitigation
To help identify and manage such risks,
thecompetitive environment, the specific
business marketplace and the actions of
particular competitors are reviewed and
discussed at both Group and operating
divisional Board meetings. In addition, each
market is carefully monitored to identify any
significant shift in policy by any competitor,
anychange in the routes to market, or any
indication of new competitors and/or new
product technology entering the market.
Strategic report
Annual Report and Accounts 2022 Norcros plc 39
Operational risks
Reliance on production facilities Loss of key supplier Information security and cyber
Risk movement Risk movement Risk movement
Stable
Stable
Increasing
Description
The Group operates a number of facilities
forthe manufacture of tiles and adhesives.
Impact
If any of these facilities (including technology
used to operate them) were to fail, the effect
onthe Group could be significant.
Mitigation
The Group has a well-established ongoing
preventative maintenance programme as well
as a comprehensive and flexible “annual
shutdown” programme throughout its
manufacturing operations.
Furthermore, the Group has experienced,
globally co-ordinated product sourcing
functions, which could mitigate the risk
offailure.
Finished goods inventory holdings across
theoperations provide limited “buffer” stocks
inthe event of operational failure. Disaster
recovery plans are in place and business
continuity plans have been developed and are
tested. Additionally, a business interruption
insurance policy is in place to mitigate losses
caused by a serious insurable event affecting
manufacturing capability.
Description
The Group’s extended supply chain, with its
dependency on interconnected third parties
for manufacturing, has several potential points
of failure. Raw materials, components and
energy represent a significant proportion of
the Group’s input costs. The potential lack of
availability of, or poor quality standards in, these
key elements represents a significant risk.
Reliance on a single supplier within the
supplychain, or on several suppliers in close
geographical proximity, could lead to a failure
to acquire the required quantity or quality of
essential resources.
Impact
The lack of supply of raw materials such as
clay or sand, components such as electronics,
glass or brassware, or gas or electricity could
have significant impacts on the Group’s ability
to manufacture product. The risk of energy
supply interruption is elevated in South Africa
as its utility infrastructure is less well
developed than in the UK.
Mitigation
The Group manages supply chain risks
through long-term relationships with key
suppliers, audits of key suppliers, dual supply
of critical materials or components, where
considered appropriate, and holding
appropriate levels of finished goods stock.
The Group maintains strict product quality
standards and has dedicated procurement
and quality control resource in China to
ensure these standards are adhered to. The
Group aims to mitigate risks on energy supply
where these arise. The Group regularly reviews
the geographical concentration of its supplier
base and mitigates risks arising where it is
commercially and economically practical to
do so.
Description
The Group relies heavily on several processes
and automated systems to manage data and
conduct its business. The continuing prevalence
and increasing sophistication of cyber-crime
and data loss incidents, along with stringent
data protection legislation compliance
requirements, present risks to all businesses
and organisations across the globe. The risk
from state-backed cyber-attacks has
increasedrecently.
The evolution of home and remote working
methods developed during COVID-19 presents
increased cyber security risks due to remote
system access from potentially less secure
working environments and unfamiliar
workingpractices.
Impact
A major failure of systems or a successful
cyber-attack could result in a temporary
inability to conduct operations or a loss of
commercial and/or customer data. Such an
incident may result in regulatory breaches,
financial loss, operating disruption or damage
to the reputation of the Group.
Mitigation
The Group uses modern systems that are
appropriately maintained and updated.
The latest network and security protocols are
deployed, updated and regularly tested.
Dedicated business IT managers monitor
services and networks in line with established
policies and procedures.
Each business maintains remote backups of
data. The Group undertakes annual penetration
testing conducted by certified third parties and
it has recently introduced ongoing vulnerability
scanning which takes place throughout the year.
Data protection regulation compliance reviews
are undertaken to confirm the effectiveness
ofthe relevant processes and controls. Data
protection representatives have been nominated
at each business to help co-ordinate the Group’s
approach to data protection and provide
localadvice.
During the year, the Group invested in an online
training programme with information security
and data protection training mandated for all
users of IT equipment.
A third-party specialist Incident Response
provider is retained to assist the Group with an
appropriate and quick response to any
cyber-related or data breach incidents that
may occur.
New equipment, and security tools and
methods such as virtual private networks and
multi-factor authentication, are employed to
mitigate remote working risks.
Strategic report
Norcros plc Annual Report and Accounts 202240
Principal risks and uncertainties continued
Financial risks
Exchange rate risk Funding and liquidity risk Pension scheme risk
Risk movement Risk movement Risk movement
Stable
Reducing
Stable
Description
The Group’s financial performance is subject to
the effects of fluctuations in foreign exchange
rates. In particular, the Group sources a
significant proportion of its components and
goods for resale from the Far East and Europe
which are denominated in foreign currencies
(primarily the US Dollar, Euro and Renminbi).
Impact
Should Sterling or the South African Rand
weaken against these currencies this could
result in an increase in future input costs.
Mitigation
The Group typically seeks to hedge its foreign
exchange transactional flows for up to twelve
months forward, which largely removes the
effects of day to day exchange rate volatility
onour businesses.
Regular monitoring of exchange rates and
market conditions, together with frequent
dialogue with suppliers, allows our businesses
time to negotiate revised commercial terms with
customers to mitigate the impact of longer-term
changes in exchange rates.
The Group may, where it is considered appropriate,
denominate some of its borrowings in other
currencies to hedge translational asset risk.
Description
The Group’s ability to grow and adapt its
business is dependent, in part, on its ability to
source funding through bank financing
facilities. Whilst the Group has committed
funding until October 2025 it is possible that
the Group may find it difficult to obtain
financing on commercially acceptable terms
in the longer term.
Impact
The inability to source adequate longer-term
funding could impact our longer-term growth
strategy whilst a breach of one or more of the
banking covenants could result in the Group’s
debt becoming immediately repayable.
Mitigation
The Group completed a refinancing of its
banking facilities in the year. We reforecast
ourliquidity and funding requirements and
covenant performance monthly. Senior
executives and divisional management teams
review, monitor and track short-term liquidity
weekly and covenant performance monthly.
Description
The Group’s pension position is subject to a
number of risks including changes in interest
rates, asset values, inflation and mortality
(seenote 24 for more detail).
Impact
These risks could increase the assessed pension
scheme liability adversely or affect the funding
of the defined benefits under the scheme and
consequently the Group’s funding obligations.
Mitigation
The scheme was closed to new members and
future accrual with effect from 1 April 2013 and
replaced by an auto-enrolment compliant defined
contribution scheme. Risks from rising costs of
providing a final salary pension scheme have
therefore been materially reduced.
All asset investments are managed by
professional fund managers and a diverse
asset portfolio is maintained to spread risk
andreturn.
Executive Management regularly monitors
thefunding position of the scheme and is
represented on the Trustee board to monitor
and assess investment performance and other
risks to the Group.
The Group considers each valuation (IAS 19R
and technical provisions basis) and reassesses
its position regarding its pension commitments
in conjunction with external actuarial advice.
The Group’s financial results show a net
surplusin this scheme, as at 31 March 2022,
of£19.6m (2021: deficit of £18.3m) assessed in
accordance with the accounting standard IAS
19R. The present value of scheme liabilities
decreased by £47.8m due to an increase in the
discount rate to 2.75% (31 March 2021: 2.05%),
partially offset by increased levels of inflation.
The assets’ value reduced as benefit payments
were in excess of asset returns.
During the year, the Group has reached
agreement with the Trustee on the 2021
triennial actuarial valuation for the UK defined
benefit scheme and on a new deficit recovery
plan. The actuarial deficit at 31 March 2021
was£35.8m (2018: £49.3m). Deficit repair
contributions have been agreed at £3.8m
perannum from 1 April 2022 to March 2027
(increasing with CPI, capped at 5%, each year).
Strategic report
Annual Report and Accounts 2022 Norcros plc 41
Viability statement
In accordance with provision 31 of the 2018 revision of the UK
Corporate Governance Code, the Directors have assessed the
viability of the Group over a longer period than the twelve months
required by the “going concern” provision. Taking into account the
Group’s current position and the nature of the principal risks and
uncertainties it faces (see pages 36 to 40), the Board has decided
to assess the viability of the Group over a three-year period to
31 March 2025. The Board considers this period appropriate as
it believes it is not possible to credibly forecast beyond this time
horizon and it is also the period over which long-term incentives
are set for Executive Directors and senior management.
A Viability Statement financial model was developed on a
bottom-up basis by taking the output of the annual budgeting
process built up by individual businesses, then subjected to
review and challenge by the Board, and applying conservative
general and business-specific assumptions to build years two
and three. The acquisition of Grant Westfield was also reflected
in the assessment. The Board considers the outputs from this
financial model, including the Group’s cash flows, headroom
under existing financial facilities of £130m, dividend cover and
other key financial ratios over the three-year period. The financial
model has then been stress tested by modelling the most extreme
but plausible scenario, that being further national lockdowns as
a result of a resurgent COVID-19 pandemic. This has been based
on the actual impact of the COVID-19 pandemic on the Group,
which at its peak saw a revenue reduction of 25% over a six-month
period. The Directors have considered the impact of this scenario
on the Group’s financial performance (specifically headroom on
our financial facilities and covenants) which are in place until at
least October 2025 after taking account of mitigating actions that
could be made, with the result being that the Group maintains the
necessary liquidity levels and complies with the facility covenants
despite the impact of significant declines in revenues, earnings
and cash outflows and increasing leverage.
Reverse stress testing has also been applied to the model, which
represents a further decline in sales compared with the reasonable
worst case. Such a scenario, and the sequence of events which
could lead to it, is considered to be implausible and remote.
Therefore, the Directors have a reasonable expectation that the
Group and Company will be able to continue in operation and
meet their liabilities as they fall due over the period to March 2025.
ABODE
Abode saves water
withnew flow limited
tap collection
In anticipation of the Government’s Future Home Standard
to lower energy consumption by 2025, Abode is proud to
offer six of its most popular mixer tap designs for the
modern kitchen, alongside two of its Pronteau steaming
hottaps.
Every component of its flow limited taps has been
extensively tested to meet exacting standards and withstand
the added stress that flow restriction creates. The
development of the new Flow Limited Tap Collection by
Abode is testament to the company’s investment in new
product design and development, delivering the best in
design-led, sustainable solutions across the UK property
market to support the next generation of buyers who want a
“house of the future”. Each product has a flow limitation of
5LPM to comply with the maximum number of regulations.
Strategic report
Norcros plc Annual Report and Accounts 202242
Environmental, social and governance
ESG
EMBEDDING SUSTAINABILITY 1
Why sustainability matters
At Norcros, sustainability is at the centre of our strategy. We aim
to manage our societal and environmental impact by conducting
business to the highest standards as well as using resources
moreefficiently.
We have a history of environmental and social leadership. We pride
ourselves on reducing our operational environmental impact
through energy saving, recycling and waste management
schemes. We design and supply product that not only create
commercial returns but also generate savings for customers on
energy bills, carbon footprint, water consumption and waste.
Wealso play an active role in our communities.
Going forward, as our customers, staff, other stakeholders and
the communities in which we work place increasing importance
on environmental, social and governance (ESG) issues, we will
continue to develop our sustainability strategy. In the remainder
of 2022, we will continue to work on our ESG plan, which will
capture our existing ESG initiatives, a set of new activities and
an overarching framework, through which we will give further
consideration to ESG metrics and targets. Wewill continue to make
a positive impact and difference to ourcustomers, communities
and employees.
Achievements and priorities
Achievements since our last Annual Report include:
• We have reported against the recommendations of the
Task Force on Climate-related Financial Disclosures (TCFD)
recommendations for the first time, including integrating
climate-related risk assessment into the Group’s overall risk
management framework.
• We established an ESG governance structure, including
business unit level ESG Forums and twice yearly reporting
to the Norcros plc Board, to co-ordinate and manage our
sustainability strategy.
• We carried out a Carbon Trust carbon footprint assessment
across the Group, establishing an updated methodology for
calculating emissions.
• We developed, agreed and rolled out a new Code of Ethics and
Standards of Business Conduct across the Group and updated
our Group Health and Safety Policy.
• We conducted a materiality assessment, identifying ethical
conduct and integrity, product quality and safety, and health
andsafety as our most material issues.
• Triton achieved the Carbon Trust Standard for Carbon in 2021
and lowered its CO
2
footprint by 38% during the assessment
period. Croydex achieved the new Carbon Trust Route to Net
Zero Standard (Taking Action) in early 2022.
• We continued to invest in the development of new sustainable
products. The eco-friendly Abode Swich was an SBID winner in
the Kitchen Product Design category in 2021 and the One Small
Step Award for Sustainability at the 2021 Ideal Home Awards.
Our priorities are to:
• continue to deliver the programme of initiatives we are
undertaking across our business units to support their staff
andtheir communities;
• continue to focus on sustainability as part of our new product
development programmes;
• build on the work we have done with the Carbon Trust to
develop Carbon Management Plans across the Group; and
• develop our ESG plan that prioritises our effort on the ESG
issues most material to Norcros and considers the right metrics
and targets so that we can measure, continuously improve
andreport on our ESG performance.
Strategic report
Annual Report and Accounts 2022 Norcros plc 43
EMBEDDING SUSTAINABILITY
Sustainability governance
The Board of Norcros plc is responsible for ensuring key
sustainability policies, such as the Code of Ethics and Standards
of Business Conduct, are communicated, understood and
observed by all Group businesses, employees and associates.
Day to day responsibility for promoting and implementing these
policies is delegated to business unit senior management.
Thisyear,weestablished our ESG Forums to provide more
structure to our sustainability management process, which
willaccelerate our sustainability ambition within the Group.
The ESG Forums use expertise across Group functions and allow
us to prioritise our impact through organisational workstreams
andto monitor progress against our plans across the Group. Our
South African business, Norcros South Africa, has a well-established
Social and Ethics Committee of its Board, which oversees ESG
inall South African business units.
Sustainability metrics and progress
Goals and objectives
ESG Forums (UK and SA)
Business unit operations and project teams
Board
(six-monthly
meetings)
Executive Management
(quarterly meetings)
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Norcros plc Annual Report and Accounts 202244
Environmental, social and governance continued
Sustainable business goals andmaterialityassessment
Materiality assessment
We have carried out a materiality assessment to define the issues
which matter most to the Group, from a financial perspective, and
the issues which impact society and influence our stakeholders.
The materiality assessment is crucial as it allows us to prioritise
issues and will be a vital input as we develop our sustainability
strategy and ESG plan throughout 2022.
We developed the materiality assessment by considering
the issues that were important to our internal and external
stakeholders. We held a workshop with our senior leadership
team to develop and shortlist these issues and prioritised their
relative importance to the business. We also surveyed a selection
of staff and external stakeholders, such as customers and our
lending banks, to incorporate their views into our analysis and
to help improve our understanding of issues that are of highest
importance to them.
Our materiality assessment is shown in the matrix below. We
identified 18 material issues and prioritised the issues by the
impact of the issue on our business and the level of influence the
issue has on stakeholders. The most material issues for Norcros
are in the top right of the diagram. We concluded the three most
important issues are ethical conduct and integrity; product quality
and safety; and health and safety. As we develop our ESG plan, we
will focus our effort on the material issues and the prioritisation of
these issues will help us to further refine where we invest our time.
EMBEDDING SUSTAINABILITY CONTINUED1
Influence on stakeholders
Impact on Norcros
Ethical conduct
and integrity
Climate change and emissions
Product quality
and safety
Health and safety
Talent and workforce
development
Innovative and efficient products
Supply chain management
Energy management
Effective use of raw materials
Waste management
Air pollutants
Water use
Communities and
partnerships
Freedom of
association
Cyber and data security
Packaging and plastic
Diversity and inclusion
Human rights
We have grouped our material issues into three broad categories:
Governance
Environmental
Social
HigherLower
Higher
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Annual Report and Accounts 2022 Norcros plc 45
United Nations Sustainable Development Goals Alignment
At Norcros, we impact and influence six of the United Nations
Sustainable Development Goals (UN SDGs). There are 17 SDGs
(https://sdgs.un.org/goals) and this year, we assessed which Goals
are most material to us. Norcros makes the greatest contribution
to SDGs 8, 12 and 16 (explained in the graphic below) through the
provision of safe, quality products and ensuring our business is
conducted in an ethical manner. The alignment of these material
topics to the SDGs most relevant to us is shown below.
EMBEDDING SUSTAINABILITY CONTINUED
Environment
Material topics:
• Energy management
• Effective use of raw materials
• Waste management
• Packaging and plastic
• Innovative and efficient products
• Climate change and emissions
Aligned UN SDGs:
Social
Material topics:
• Talent and workforce development
• Health and safety
• Supply chain management
• Human rights
• Freedom of association
• Product quality and safety
Aligned UN SDGs:
Governance
Material topics:
• Ethical conduct and integrity
• Cyber and data security
Aligned UN SDGs:
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Norcros plc Annual Report and Accounts 202246
Environmental, social and governance continued
Safety first
Our Group Health and Safety Policy is driven from the top of the
organisation with the Board having ultimate responsibility. The
policy, which covers all employees, sets out our commitment to
create, maintain and continuously improve a safe and healthy
working environment for employees, contractors and visitors.
Our working environment is designed to prevent occupational
accidents and illnesses. We monitor key health and safety KPIs at
operational board and management meetings.
Our health and safety organisational framework, outlined below,
clearly defines those responsible and accountable for health
and safety across our businesses. In addition, every employee
is made aware that they have a responsibility for their own and
others’ health and safety when engaged on Company business.
The Group Health and Safety Managers’ Forum is chaired by the
Company Secretary and comprises all the divisional Health and
Safety Managers. Other members of Group management attend
by invitation including the Group Head of Internal Audit and
RiskAssurance.
Currently, Triton Showers, Vado, Johnson Tiles SA, TAL and Merlyn
Industries are certified to the Health and Safety Management
System ISO 45001 standard; together this covers 50% of
our turnover.
Many of our employees have access to online health and safety
training, which provides a range of training modules as required.
In addition, where hands-on or specialist training is required, we
use regular “toolbox talks” and provide more specific training
wherethisis identified as being necessary.
HEALTH AND SAFETY 2
Divisional H&S Managers
Board of Directors
(set Health and Safety Policy)
Group H&S Managers’ Forum
(chaired by Company Secretary)
Our working environment is designed
to prevent occupational accidents
and illnesses. We monitor key health
and safety KPIs at operational board
and management meetings.”
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Annual Report and Accounts 2022 Norcros plc 47
Safety performance
We have a proud track record of safety performance, and we are
starting to report on this as part of our ESG annual report. There
were no fatalities recorded in the year (2021: nil) and there have
been no fatalities recorded over the last decade when the current
executive team have been in post. We record Accident Incidence
Rate (AIR) monthly for each location and for the whole Group; this
includes all reported accidents, however minor. Our Group AIR
for2022 was 308
1
injuries per 100,000 employees in the year –
which is consistent with levels in years when operations were not
affected by the pandemic (2021: 222 per 100,000 employees;
2020: 303 per 100,000 employees). We recorded five serious
reportable accidents in 2022 (2021: four, 2020: six).
We record the root cause of accidents and 80% of accidents in
2022 were caused by slips, trips and falls, or by handling, lifting
or carrying. All accident statistics and their causes are regularly
reviewed by the Group Health and Safety Managers’ Forum. We
maintain externally managed whistleblowing reporting lines that
are available to all employees where they can report confidentially,
and anonymously should they want to, any concerns they may
have in respect of health and safety matters.
1 The UK HSE’s all-manufacturing industry average AIR was 2,080 per 100,000
workers in 2021.
Response to covid-19
Health and safety during the COVID-19 pandemic has been of
paramount importance to us as a responsible employer. As social
lockdowns and travel restrictions have been lifted, the impact
of COVID-19 on Norcros, our employees and our customers has
reduced. We followed government legal requirements and advice
closely throughout the pandemic, including when all restrictions
were lifted in the UK, and responsibility for COVID-19 workplace
safety fell solely upon employers. This rigorous approach to the
protection of our people meant that, as with the previous financial
year, in the year to 31March 2022 there were no reported incidents
of transmission of COVID-19 at any Norcros location. Instructions,
such as “work from home wherever possible”, have now ended
and we are encouraging our employees to return to the workplace
when they feel comfortable doing so. Where practical, we have
introduced flexible working policies for those colleagues who are
able to effectively work remotely; this provides them with greater
flexibility on a more permanent basis.
Health and wellbeing
We treat everyone with respect and encourage them to be themselves.
We promote employee wellbeing and reduce stress through several
initiatives and support mechanisms. Support is provided to all UK and
Eire employees through our Employee Assistance Programme that
extends to all aspects of wellbeing, including free access to various
independent support helplines (e.g. stress, health, lifestyle, etc.).
Norcros South Africa’s
WellnessCentre
Norcros SA runs a well-established Wellness Programme
with an on-site Wellness Centre at the Olifantsfontein site,
providing primary healthcare, occupational health, and
professional wellness programmes and support.
The centre can dispense chronic illness and HIV medication
and it is also partnered with Reality Wellness to provide
professional counselling and support to staff on issues such
as health, financial, psychological, trauma, substance abuse
and more. The families of employees are also encouraged
to make use of these support services.
HEALTH AND SAFETY
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Annual Report and Accounts 2022 Norcros plc 49
Talent and career management
All of our businesses have staff training programmes that are
suitable for the development of appropriate technical and
people skills. We are committed to education and career
development, and for those in senior leadership roles, coaching
and mentoring have been offered rather than attending courses
or other developmental activities. The coaching is focused on the
individual’s unique work challenges and opportunities as well as
onthe individual’s personal style and behaviour.
Employees are encouraged to be involved in the Company’s
performance through employee share schemes, and other means
of incentivisation and reward.
Community partnerships
Our commitment to the society in which we operate is deep.
Every Group business has programmes of social engagement,
including many charitable activities, and will have a positive impact
on the local communities in which they operate. We empower our
businesses to support local charities and community projects,
and provide local employment. Given our decentralised structure,
business units in the Group are encouraged to become involved
in and support local initiatives where possible. The Executive
Management of the Group supports this commitment to our
society and reviews each business’ activities monthly.
Norcros SA –
celebrating success
Our colleagues are fundamental to the successful delivery
of our strategy and, as such, Norcros SA has partnered
withthe Gordon Institute of Business Science (GIBS) on
aprogramme for management development for staff
acrossthe different divisions in South Africa. The aim
ofthis12-month programme is to develop colleagues so
thatthey have a better understanding of the current and
future global economic and social environment, and to
develop their leadership and management skills in an
ever-changing environment.
Merlyn supports
#WalkAMileInMay
campaign
Almost half of UK women don’t regularly check for early
signs of breast cancer, even though we know that early
detection can make all the difference to the fight against this
disease. Merlyn’s campaign with the Pink Ribbon Foundation
urges women to use precious time behind the shower
screen to check for early warning signs. In fact it is the most
common place that women pick up on any changes to their
bodies. That’s why the partnership with Merlyn, which was
launched back in 2019 to support the Pink Ribbon
Foundation, is such a vital one.
Merlyn is currently supporting the #WalkAMileInMay
campaign with Merlyn donating £3,100 to get each
employee started by sponsoring one mile per day for them.
Employees and the local community are getting involved,
with Lisa Allen from the Pink Ribbon Foundation arriving at
Merlyn’s offices in Kilkenny to kick off the campaign.
OUR PEOPLE
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Norcros plc Annual Report and Accounts 202250
Environmental, social and governance continued
We are committed to minimising the environmental impact of
our operations, products and services wherever possible. Making
progress in improving our energy efficiency and reducing carbon
emissions, waste and water use are important for our customers,
our staff and our stakeholders. At this stage, our initiatives are
delivered within our business units and include action in the
following key areas.
ENVIRONMENTAL PERFORMANCE4
Managing environmental performance
Our individual business units track and monitor their environmental
impacts. The main vehicles for compliance and improvement
across sites are our environmental management systems. Six
of our businesses, covering 88% of turnover, are certified to
the Environmental Management ISO 14001 standard and our
businesses report regularly on any environmental issues that
arise. We have also completed an environmental audit at Johnson
Tiles South Africa during the year and, where improvements
have been suggested, they are being assessed and addressed
by management. The Group has not had any environmental fines
inthe last twelve months.
Energy management and greenhouse gasemissions
Climate change is one of the biggest challenges of our time
and the transition to a low-carbon economy has the potential
to significantly impact our business as well as our clients and
suppliers. Norcros aims to minimise our impact on climate change
by reducing our carbon emissions across all operations.
We have a range of initiatives underway across the Group to
reduce our carbon footprint. We engaged with the Carbon Trust
to undertake a review of our carbon management practices in
each of our business units. We will consider the recommendations
from this work as part of our ESG planning work through the
remainder of 2022. Triton has ambitious aims to achieve carbon
neutral certification and net zero status by 2025, which include
the launch of Triton’s Cleaner Conscience Taskforce, a working
group of employees focused on driving down waste pollution,
pursuing sustainable and innovative product design and looking
at how Triton can improve its product life cycle. Triton achieved
the Carbon Trust Standard for carbon in 2021 and, over the review
period, lowered its CO
2
footprint by 38%, a significant result and
one that demonstrates the company’s level of commitment to
reducing carbon emissions. Croydex has also been awarded the
Carbon Trust Route to Net Zero Standard (Taking Action).
Carbon emissions
Our emissions data covers 100% of our operations. Following
our work with The Carbon Trust over the last 12 months, we have
modified our methodology for calculating carbon emissions.
We measure our CO
2
emissions in accordance with the
internationally recognised Greenhouse Gas (GHG) Protocol and
our metrics include Scope 1 and 2 emissions. Our Scope 3 CO
2
emissions represent estimated CO
2
emissions from business
travel for FY2022. We continue to develop our data and a deeper
understanding of Scope 3 emissions and will report further on this
in due course.
The increase in Scope 1 and 2 emissions from FY 2021 is in a large
part due to the reopening of the UK and South Africa economies
after the COVID-19 pandemic and the return to normalised levels
of operating activity of Norcros as a Group through FY22.
Triton achieved the
Carbon Trust Standard
for Carbon
Triton achieved the Carbon Trust Standard for Carbon in
2021 and Croydex achieved the new Carbon Trust Route to
Net Zero Standard (Taking Action) in 2022 based on the
progress it has made with carbon management and
emissions. At Triton, some of the key carbon management
initiatives have included installing LED lighting throughout
95% of its facility, reducing water usage by 38%, introducing
electric vehicle charge points in the car park and a cycle to
work scheme and using 100% recycled paper.
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Annual Report and Accounts 2022 Norcros plc 51
Water consumption
Water efficiency is an increasingly important issue for us. Thisincludes, where possible, reducing the amount of water weuse in all our
operations and designing products that help ourcustomers reduce the amount of water used for their domesticor commercial purposes.
Targets
Triton has a target to reduce water usage by 7% which has led tothe introduction of two new water meters to help identify where the majority
of water is being consumed. We recognise this target only covers 15% of our business operations and we will consider broadening the
coverage of targets as part of the next stage of our ESG plan.
Water consumption
Freshwater usage (m
3
) FY 2022 FY 202� FY 2020
UK 37,267 27,4 6 6 48,920
SA 101,663 79,866 84,274
Total 138,930 �07,332 �3 3,�9 4
Intensity ratio m
3
per £m revenue 433.07 3 97. 2 3 4 6 7.0 2
The table above outlines water consumption across business units which account for 81% of Group revenue for FY 2022 (FY 2021: 83%,
FY 2020: 83%). As with emissions, as the Group has returned to normal levels of manufacturing activity after the restrictions from the
COVID-19 pandemic ended, water consumption has increased in comparison to FY 2021.
Waste management
Reducing packaging and increasing the amount of recycling are important goals for all our business units from an operational,
commercial and environmental perspective. Various initiatives aimed at reducing waste sent to landfill and encouraging recycling
are in place; employees are expected to support these schemes by sorting waste and disposing of it appropriately. Triton challenges
suppliers to remove unnecessary extras, such as strapping used on the outer boxes. As a result, two out of three suppliers have invested
in reusable plastic containers, which has meant that Triton has seen significant reductions in the amount of cardboard being received
fromUKsuppliers.
ENVIRONMENTAL PERFORMANCE
Carbon Emissions and Energy Consumption Data
FY 2022 FY 202� FY 2020
UK
Global
(excl. UK) Total UK
Global
(excl. UK) Total Total
Scope � (tCO
2
e) 15,846 30,669 46,515 �3,6�0 3�,33� 44,94� 6 3,�4 3
Scope 2 (tCO
2
e) 3,798 25,986 29,784 3,508 �8,078 2�,586 30,284
Scope 3 (tCO
2
e)
– business travel 270 941 1,211 n/a n/a n/a n/a
Total emissions (tCO
2
e) 19,914 57,59 6 77, 510 �7,��8 49,409 66,527 93,427
Intensity ratio (total
emissions (tCO
2
e)/
Grouprevenue (£m)) — — 195.6 — — 205.2 273.2
Energy consumption (kWh) 100,560,823 18 0,14 6, 3 6 9 28 0,707,192 75,225,476
�47,7 5 0,0 36 222,975,5�2
n/a
Strategic report
Norcros plc Annual Report and Accounts 202252
Environmental, social and governance continued
Abode – eco-friendly
“Swich” – SBID winner
of Kitchen Product
Design category 2021
Abode’s aim is to reduce to amount of plastic waste
goingtolandfill and not harming the environment is a key
consideration for the brand. At the 2021 Society of British
International Design (SBID) awards ceremony, Adobe’s
Swich was recognised as an outstanding example of
technical innovation, aesthetic creativity and fit-for-purpose
functionality. The versatility and ease of Swich is an industry
game changer for the modern home. With a revolutionary
design, via a simple turn of the control handle, Swich can
transform a new or existing kitchen tap into a water filter tap,
removing the need to have bottled water in the house.
SUSTAINABLE PRODUCTS5
Boosting innovation
Norcros is committed to designing, manufacturing and supplying
products that are reliable and safe to use. All our products are
tested to ensure that they meet safety requirements in the
countries in which they are sold and information about safe
use and disposal of Norcros products is provided through
warning labels, manuals and other documentation where this
is appropriate. The majority of our business units, covering 95%
of turnover, are externally certified to the Quality Management
ISO9001 standard.
The Group is also committed to minimising the environmental
impact of its products and services wherever possible. We have
provided our customers with some environmentally beneficial
products that are energy efficient, easily recyclable and durable
to increase their longevity. To be a sustainable business, we
need to continue to develop innovative solutions and we are
always developing new products and technologies that align to
customer and market demands as well as investing in research
and development to stay ahead of our competitors. The impacts
from climate change and the accelerated commitment to
environmental legislation from governments, such as net zero by
2050 in the UK, has created opportunities for Norcros to capitalise
on consumer and market demands for products that help
customers reduce their environmental impacts. The Group offers
a number of innovative products that already provide customers
with solutions to reduce their carbon emissions whilealso
saving money.
Responsible sourcing
The way our products are sourced has a significant impact on
our environmental and social sustainability. We are committed to
encouraging our suppliers to minimise their environmental impact
and we also expect all our suppliers to conduct themselves to
standards equivalent with the Code of Ethics and Standards of
Business Conduct. Environmental standards at Norcros Adhesives
have been maintained in the year with the continued “Gold
Standard” accreditation from the Supply Chain Sustainability
School (which ispartnered with the housebuilder Barratt).
Norcros does not accept and will not tolerate the use of child
labour or forced labour (i.e. modern slavery) anywhere in its own
business or its supply chain. The Company has issued a public
statement to this effect, which can be found on its website at
https://www.norcros.com/investor-centre/other-disclosures/.
We also encourage our direct suppliers to promote human rights
throughout the supply chain. Our supplier assessments include
evaluation of policies and practices in this area.
Abode Filter
RecycleScheme
Abode’s 4 in 1 range of taps provide hot and cold domestic
water, steaming hot water on demand, and fresh filtered
water meaning you can make a start to eliminate the use of
single-use plastic in the home. Its Filter Recycle Scheme
adds another advantage to the list, as the filter and the
boiler can be recycled free of charge to the consumer.
Abode’s recycle partner will oversee the separation of each
component part with the plastic being ground down and
theinternal resin brought back to life, ready to be reused.
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Annual Report and Accounts 2022 Norcros plc 53
ETHICS AND COMPLIANCE6
The Code of Ethics and Standards of Business Conduct (the Code
and Standard) applies in all areas of Norcros Group’s business
and to all officers, Directors, employees, contractors and agency
staff employed by or working for Norcros plc or any division of
Norcros plc. The Board of Norcros plc is responsible for ensuring
these business principles, such as anti-bribery and corruption and
diversity, are communicated to, and understood and observed by,
all Group businesses, employees and associates. This Code and
Standard will be made available to every employee at the start
of their relationship with Norcros and will also be communicated
toallnew employees of any business acquired by Norcros.
Whistleblowing
Norcros encourages an environment where honest and open
communication is expected, with employees feeling comfortable
bringing forwards any concerns or violations of Group policies.
This is embedded into the Code and Standard and legal protection
exists for all whistleblowers. Norcros maintains a whistleblowing
policy and engages two independent and confidential
whistleblowing service providers, one covering South Africa
specifically and the other covering all other locations. Both lines
operate 24/7 and 365 days a year in the whistleblower’s chosen
local language. Concerns and reports can be made in confidence
anonymously, and we will not discriminate or retaliate against
any employee who reports suspected violations in good faith
or who co-operates in any investigation or enquiry regarding
possibleviolations.
Reports on the use of these services, any significant concerns
that have been raised, details of investigations carried out and
any actions arising as a result are reported to the Audit and Risk
Committee at each meeting. The Committee also receives papers
on incidents of fraud or attempted fraud and reviews them at
each meeting. At least annually, the Committee conducts an
assessment of the adequacy of the Group’s procedures in respect
of compliance, whistleblowing and fraud.
Anti-bribery and corruption
Norcros prohibits bribery and all other types of fraud and will
take disciplinary and/or legal action as appropriate in all cases of
actual or attempted fraud across all operations. We have a strict
Anti-Bribery and Corruption Policy, which applies to suppliers, set
out in the Code and Standard and we conduct our business in
a fair, open and transparent manner. The Board of Directors has
overall responsibility for ensuring this policy complies with our
legal and ethical obligations, and that all those who have influence
comply with it. We prohibit, and will not accept, facilitation
payments or “kickbacks” of any kind. Facilitation payments are
typically unofficial payments made to secure or expedite a routine
government action by a government official. All employees
are required to undertake training under our Anti-Bribery and
Corruption Policy at regular intervals and appropriate procedures
are in place at all locations to mitigate the risk of any employee
committing an offence of the policy.
Various day to day business situations are potentially sensitive in that
they can create opportunities for corruption, particularly bribery, or
a perception of improper practices. These situations include, but are
not limited to the following and Norcros’ Anti-Bribery and Corruption
Policy sets out steps to prevent these situations occurring:
• hospitality and gifts offered to third parties;
• hospitality, gifts and other goods or services offered to Norcros
employees by third parties;
• payment of third parties’ travel expenses;
• facilitation payments;
• political contributions;
• lobbying;
• sponsorships; and
• civic, charitable and other donations.
This Code of Ethics and Standards of Business
Conduct applies in all areas of Norcros Group’s
business and to all officers, Directors, employees,
contractors and agency staff employed by or working
for Norcros plc or any division of Norcros plc.”
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Norcros plc Annual Report and Accounts 202254
Environmental, social and governance continued
Our corporate values focus on respect, integrity and
fairness. We are committed to respecting the dignity of the
individual and to supporting the UN Declaration of Human
Rights, the UN Universal Declaration of Human Rights,
andthe International Labour Organisation’s Declaration
onFundamental Principles and Rights at Workand
othercoreconventions.”
Human rights
Our corporate values focus on respect, integrity and fairness.
We are committed to respecting the dignity of the individual and
to supporting the United Nations (UN) Declaration of Human
Rights, the UN Universal Declaration of Human Rights, and the
International Labour Organisation’s Declaration on Fundamental
Principles and Rights at Work and other core conventions. These
principles are applicable across all our operations. As a result, the
Directors do not consider human rights issues to be a material
risk for the Group, principally due to the existing regulatory
frameworks in place in the UK and South Africa, being the primary
geographical locations in which we operate. In South Africa, the
businesses are cognisant of their responsibilities under the Broad-
Based Black Economic Empowerment legislation. In addition,
the Group has its Modern Slavery Act statement and a policy in
support of this.
Labour
All our employees are entitled to a fair salary and other terms and
conditions of employment, as appropriate. Our policy is to comply,
at the very least, with minimum wage legislation for any job role for
all employees and we seek to be competitive as is appropriate to
the role and business in question. Legally required benefits such
as annual leave, sick leave, maternity leave and normal working
patterns and hours are of course applicable to all.
Tax transparency
Norcros plc is committed to trading within the law and conducting
all of its business activities in an honest and ethical manner. Our
Tax policy governs all of our business dealings and the conduct
of all persons or organisations which are appointed to act on
our behalf. Norcros plc and its subsidiaries has a zero-tolerance
approach to all forms of tax evasion, whether under UK law or
under the law of any foreign country.
ETHICS AND COMPLIANCE CONTINUED6
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Annual Report and Accounts 2022 Norcros plc 55
The Group recognises the recommendations of the Task Force on
Climate-related Financial Disclosures. The following pages represent
our first disclosure against the TCFD recommendations and the UK
Government requirement for Premium Listed companies to make
climate-related financial disclosures aligned with TCFD.
Governance
We are enhancing our sustainability management and reporting
and developing our framework and response, which will include
managing our emissions impact.
The Board of Directors is responsible for all matters of strategy at
Norcros, and the oversight of climate-related issues is embedded
in that process. The Board is kept informed of climate-related
matters through regular scheduled updates at Board meetings
with climate change on the agenda at least once every six months
and through twice yearly reports. The Board has regular access
to appropriate expertise, monitors and oversees progress of
the Group’s sustainability performance, tracks the process of
significant strategic developments and monitors the Group’s
emissions (Scope 1 and 2).
The Audit and Risk Committee supports the Board in ensuring
climate-related issues are integrated into the Group’s risk management
process. Climate-related risk assessments are conducted twice
a year and are fully incorporated into the Group’s principal risk
process. Materially significant risks, including climate-related
risks, that fall outside risk appetite levels need to be reviewed and
approved by the Board unless treatment actions can bring them
inline with the appropriate risk appetite level, as outlined below.
As climate-related issues are fundamental to the Group’s business
purpose, the CEO has overall responsibility for their oversight,
ensuring climate-related issues are considered in the review of
Norcros’ strategy, budget and business. The CEO is also responsible
for reporting on progress to the Board, which is done twice yearly.
At a management level, the Group has instigated a sustainability
committee (ESG Forum), comprised of representatives of the
underlying business units. The ESG Forum convenes quarterly
and is led by the CEO and the Corporate Development and
Strategy Director. The ESG Forum is responsible for reviewing and
managing progress against the Group’s sustainability framework,
directing action in their respective business units and feeding back
data, achievements and barriers to be resolved. Representatives
of the ESG Forum are themselves informed by operational and
project teams within the business units. The Norcros management
team will also begin to consider KPIs, targets and aligning
staff incentives as part of ESG strategy and planning work
through 2022.
Risk management
Climate-related risks and opportunities relevant to Norcros
wereidentified with the help of external consultants CEN-ESG
and refined through consultation with the Head of Internal Audit
and Risk Assurance and senior management. We considered
climate-related risks and opportunities in all physical and transition
risk categories, current and emerging, whether they occur within
our own operations or upstream and downstream of the Group
and whether they occur within short, medium or long-term
timehorizons.
Climate-related risks and opportunities were assessed and
prioritised on the existing Group five-point risk scoring criteria
for both financial impact and reputational impact (minimal, low,
intermediate, high and severe) and for likelihood (remote, unlikely,
possible, likely and certain). Overall risk scores are calculated as
the multiple of impact and likelihood. Likelihood is based on the
probability of the risk crystallising and affecting the business at
least once during a three-year period and the longer time horizon
of some climate-related risks is thus reflected in a lower likelihood
score. By using the existing Group risk framework, climate-
related risks are fully integrated into the current risk management
framework and the relative significance of climate-related risks in
relation to other risks can be determined.
A summary of key risks in the divisional and corporate risk registers
is presented to the Audit and Risk Committee every six months. In
addition, there is a Group level risk review in March which identifies
and reviews Group level/strategic risks.
The decision to control or accept risks is partially determined by
the nature of the risk and its scoring. Management will regularly
review risk exposures against defined acceptable risk appetite
levels and develop remedial actions, with target dates, to address
risks scoring higher than the accepted risk appetite level. Except
for “strategic”, “operational” and “commercial” risks, which carry a
medium risk appetite, all other risk types carry a low risk appetite.
Risks scoring outside of these risk appetite levels require treatment
actions to bring them in line with the appropriate risk appetite level,
or they need to be reviewed and approved by Board Directors.
See pages 36 to 40 for principal risks and uncertainties disclosures.
TCFD REPORT7
Strategic report
Norcros plc Annual Report and Accounts 202256
Strategy
Through the above process the following key risks and opportunities that could have a material financial impact on the organisation have
been identified. These are expanded in further detail below.
In consideration of the longer time horizons for climate-related issues, the time horizons for our climate-related risk assessment analysis
have been determined as:
• short term: zero to three years;
• medium term: three to ten years; and
• long term: over ten years.
Risk
1. Carbon pricing
(carbon tax)
inown
operations
2. Carbon
pricingin the
value chain 3. Water scarcity
4. Cost of capital
linked to
sustainability
criteria
5. Customer and
consumer
pressure
6. Rising
temperatures
7. Extreme
weatherevents
Type Transition
(current and
emerging
regulation)
Transition
(emerging
regulation)
Physical
(chronic)
Transition
(market)
Transition
(market and
reputation)
Physical
(chronic)
Physical
(chronic)
Area Own
operations
Upstream Own
operations
Own
operations
Downstream Downstream Downstream
Primary potential
financial impact
Higher costs
associated
with energy
Increased cost
of purchased
goods and
inbound
transportation
Higher costs/
disruption
Higher cost
ofcapital
Lost revenue Higher costs/
disruption
Higher costs/
disruption
Time horizon Medium term Medium term Medium term Medium term Medium term Medium term Medium term
Likelihood Certain Certain Possible Likely Likely Possible Possible
Impact measure Intermediate Low Intermediate Severe Intermediate Low Low
Opportunity
1. Product design
– resource efficient
manufacturing
2. Product design
– resource
efficientproducts
3. Water, energy and
wastesavings 4. Renewable energy
5. Lower transport
relatedemissions
Type Products and
services
Products Resource efficiency Energy source Resource efficiency
Area Own operations/
downstream
Own operations/
downstream
Own operations Own operations Own operations/
downstream
Primary potential
financial impact
Increased sales Increased sales Decreased costs Decreased costs Decreased costs
Time horizon Medium term Medium term Medium term Medium term Short term
Likelihood Likely Likely Likely Likely Likely
Impact measure Intermediate Intermediate High Low Low
TCFD REPORT CONTINUED7
Environmental, social and governance continued
Strategic report
Annual Report and Accounts 2022 Norcros plc 57
Internally, we are developing our climate-related scenario analysis to improve our understanding of the behaviour of certain risks to
different climate outcomes. We expect much of our scenario analysis to be qualitative at first but, there will be opportunities in future years
toimprove our analysis as new data is made available both internally and externally to support a meaningful quantitative assessment.
Climate-related risks
Risk Carbon pricing (carbon tax) in own operations
Description The cost of carbon, applied either via emissions trading prices, the price of offsets or direct carbon taxes, is expected
to rise as businesses are compelled to take more responsibility for their energy use and carbon emissions. This would
increase our manufacturing costs, through costs associated with Scope 1 emissions or through the increased cost of
electricity used (Scope 2). The most energy intensive areas of the business are the kilns used in the manufacture of tiles
(Johnson Tiles UK and Johnson Tiles South Africa).
Impact The UK and South Africa currently have different carbon tax schemes and prices. In the UK, Johnson Tiles is part of an
Emissions Trading System for energy intensive industries. The current ETS price is circa £80/tCO
2
e and is expected to
increase in the medium term. In South Africa the current (gross) carbon tax is R144/tCO
2
e although the net price is circa
20% of this level. Carbon taxes are expected to increase significantly from 2026 as per draft legislation.
Mitigation Continued improvement in the energy efficiency of the manufacturing processes through recycling of heat from
the kilns.
Risk Carbon pricing in the value chain
Description The cost of carbon, applied either via emissions trading prices, the price of offsets or direct carbon taxes, is expected
torise as businesses are compelled to take more responsibility for their energy use and carbon emissions. In addition,
the scope of this tax is expected to widen to include Norcros’ value chain.
Impact We have yet to quantify our Scope 3 emissions but expect the prices of embedded carbon of purchased goods and
services, and transportation, to increase for the Group. China accounts for a significant percentage of the Group’s
suppliers, so the Chinese Emissions Trading Scheme (ETS) will be a key risk. How it develops is uncertain, but in line with
global trends we expect the scope to widen and pricing to increase. We expect our suppliers to pass on their increased
energy costs over time.
Mitigation Broaden Scope 3 reporting and disclosure so we can better monitor and assess Scope 3 emissions. Work more closely
with suppliers to ensure they are following practices in line with our regulatory standards and to where possible “design
out” carbon in our product suite.
Risk Water scarcity
Description The Group’s tile manufacturing businesses in the UK and South Africa rely on water as a key component of the
manufacturing process. Our South African sites are in an area classified as high physical water risk (WWF Water Risk
Filter). Climate change is expected to exacerbate this risk in the medium term.
Impact In a situation of extreme water shortages, a lack of water could disrupt production of tiles (or significantly increase
manufacturing costs) and hence negatively impact revenues and profits, as well causing reputational risk to the business.
Mitigation Continued improvement in the water efficiency of the manufacturing process including exploring the possibility of
drilling bore holes for alternative water supplies, continue existing pH neutralising water treating and recycling methods
to minimise water use.
TCFD REPORT CONTINUED
Strategic report
Norcros plc Annual Report and Accounts 202258
Climate-related risks continued
Risk Cost of capital linked to sustainability criteria
Description Providers of capital (investors and banks) have been steadily incorporating sustainability into their lending assessments,
which represents a risk to the availability and cost of capital if Norcros loses its competitive position in ESG performance
and disclosure. Over the medium term, we expect lenders will apply punitive charges if ongoing targets on emissions
reduction are not met.
Impact The cost of debt is likely to increase. However, Norcros’ facilities have recently been renewed at rates in line with
the market.
Mitigation Remain in continued dialogue with lenders to ensure climate change disclosure is in line with the latest regulatory
requirements and make progress toward setting a net zero target and transition plan.
Risk Customer and consumer pressure
Description The UK’s net zero carbon target is driving new building regulation and more environmentally friendly industry standards.
Additionally, consumers are demanding more eco-friendly products for their homes. Our product design must continue
to be innovative, reducing hot water and energy consumption in homes, in order to remain market leaders.
Impact Norcros’ relative size and competitive position in the market mean that the Group is well placed to react to key client
guidelines and any industry trends. However, failure to pay attention to developing consumer trends and a lack of
further investment in R&D could leave Norcros vulnerable to losing out on a market that is increasingly growing to cater
for consumers’ sustainable demands and regulatory requirements.
Mitigation The Group must continue to monitor key client guidelines (of homebuilders and retailers) including any announcement
on targets for their Scope 3 emissions to ensure compliance. Continued consumer surveys allow us to remain in touch
with the latest consumer trends. Collaboration across the Group to ensure we are well placed to respond to increasing
ESG requirements when clients are making purchasing decisions.
Risk Rising temperatures
Description In South Africa, mean annual temperatures have increased at least 1.5 times the observed global average increase
of0.65°C during the last 50 years, and mean average temperature is expected to continue to rise.
Impact Projected increases in temperatures can cause heat stress for employees working outside and increased demand
for air conditioning and cooling equipment during hot weather which may overload the grid or drive higher costs by
increasing electricity demand when electricity prices are at their highest. At this stage, the projected annual increase
in temperatures for South Africa is not expected to trigger dramatic enough increases in temperature to change
operations or working practice.
Mitigation Norcros has already installed back-up generators in the event of power outages which can maintain operations.
TheCompany is also investigating the use of on-site renewable power to become less dependent on grid energy.
Risk Extreme weather events
Description Norcros’ operations have been assessed and deemed not to be at major risk from extreme weather events. However,
risks to Norcros could occur if the supply chain is subject to physical risks resulting from climate change e.g. extreme
weather events or water scarcity.
Impact In a situation of extreme weather events, such as flooding or water scarcity, supply of input materials or finished
products could have a negative impact on the ability of Norcros to provide the appropriate level of stock for consumers.
This could impact revenues and profits, as well causing reputational risk to the business.
Mitigation Norcros has a high level of resilience in its supply chain which, for example, experienced no significant disruption during
the COVID-19 pandemic, despite a large supplier network in China. The diversity of supply sources and de-centralised
model (suppliers and representative offices are located near the factories they supply) contribute to this resilience.
Environmental, social and governance continued
TCFD REPORT CONTINUED7
Strategic report
Annual Report and Accounts 2022 Norcros plc 59
Climate-related opportunities
Opportunity Product design – resource efficient manufacturing
Description Products manufactured though an energy efficient process or with recycled raw materials can significantly help lower
our GHG emissions over the medium term.
Impact/
examples
Johnson Tiles manufactures a “greener” tile which is thinner than the standard tile and hence consumes less energy
in the firing process and less water in the production process. As it is lighter, it requires less packaging and is cheaper
totransport.
Opportunity Product design – resource efficient products
Description Products that are designed with energy and water saving features are expected to see revenues grow ahead of the
market. We expect products with energy saving ratings to take market share, as increasing environmental regulatory
requirements is putting pressure on smaller suppliers.
Impact/
examples
The Abode Swich water filter diverter can transform any tap into a filtered water tap, enabling households to live more
sustainably by reducing their use of plastic water bottles. The product won the SBID International Design Award and an
Ideal Home Award for sustainability, recognising its contribution to promoting sustainable living.
Triton’s electric showers are A-rated energy efficiency products, with an opportunity to take a greater market share
ofanincreasingly environmentally driven market.
Opportunity Water, waste and energy savings
Description Reduce energy and water intensity of our manufacturing processes and reduce waste generated. This is an ongoing
process within our operations across all sites. As “best practice” examples are shared across all divisions, there is scope
to further reduce our resource efficiency.
Impact/
examples
Opportunities exist to recycle heat generated from the kilns and use this for the drying processes. Currently, various
energy saving practices are being implemented including LED lighting, HVAC control systems and polycarbonate
sheeting in South Africa. Packaging is recycled with innovative “eco-packaging” solutions, like that in Merlyn where
single-use plastic has been eliminated and been replaced by fully recyclable alternatives.
Opportunity Renewable energy
Description A medium-term opportunity exists to reduce our dependence on conventional energy sources and replace them with
renewable sources. In-house solar photovoltaic (PV) systems would make operations less dependent on the national
grid and sourcing energy under a power purchase agreement (PPA) would make use of clean sources of electricity,
lowering emissions.
Impact/
examples
Johnson Tiles SA is currently reviewing proposals for solar power both on and off site. Although this involves some
additional capex, the longer-term emissions reduction potential is considerable.
Opportunity Lower transport related emissions
Description Norcros is exposed to carbon price impacts on transportation costs, within Scope 1 and 3 emissions. The main source
of transport related emissions relates to the diesel emissions from Triton’s fleet of service engineers. There has also
been an increase in the proportion of goods air freighted recently to compensate for longer lead times resulting from
COVID-19. Although Norcros only uses air freight for a small proportion of its transport, shifting this to sea freight would
reduce our transportation emissions (Scope 3).
Impact/
examples
We estimate that if Triton’s entire service fleet was transitioned over to EV it would reduce net emissions significantly,
as the decrease in Scope 1 emissions would be much greater than the increase in Scope 2 emissions (electricity).
Initial analysis indicates that 1 tonne shipped by air on our routes generates 50–80 times the emissions of 1 tonne
shipped by sea.
Metrics and targets
Norcros monitors Scope 1 and 2 greenhouse gas emissions, calculated in line with the GHG Protocol, as per page 51 ofthis report.
We recognise the requirement to outline targets for our emissions and energy and water consumption. By the end of 2022, we will have
developed an updated ESG strategy and plan and we will consider sustainability KPIs and targets, including those for net zero. This will
require developing a fuller understanding of our Scope 3 emissions to quantify our value chain emissions impacts.
TCFD REPORT CONTINUED
Strategic report
Norcros plc Annual Report and Accounts 202260
Stakeholder engagement
Shareholder support for our
strategy is essential for the Group’s
long-term success.
Why and how we engage:
• We aim to provide a transparent,
clear, consistent message on
both our performance and our
plans to create value, across our
communication channels.
• We engage to ensure the Group
responds to the changing needs
and interests of shareholders
and to ensure our strategy
remains relevant.
• We engage through investor
roadshows and give our
shareholders the opportunity
for contact with our Board on
aregular basis.
Outcomes of our
engagementinclude:
• Following the results of the 2021
AGM, the Board followed up on the
points raised regarding Directors’
remuneration to understand if any
action was required.
• Engagement with our shareholders
has influenced our acquisition
and capital investment strategy
and progressive, albeit prudent,
dividend policy.
• The acquisition of the Grant
Westfield business was partly
funded through equity, the demand
for which was extremely strong,
demonstrating support for the
Group’s strategy.
Engaging with our stakeholders.
Shareholders
Statement by the Directors in relation to their statutory duty inaccordance with Section 172(1)
oftheCompanies Act 2006.
Section 172 statement
The Board of Directors of Norcros plc consider that they, both
individually and collectively, have acted in a way that would be most
likely to promote the success of the Company for the benefit of its
members as a whole (having regard to the stakeholders and matters
set out in Section 172(1) (a–f) of the Companies Act 2006) in the
decisions they have taken during the year ended 31 March 2022.
In making this statement the Directors have had regard to the
longer-term consideration of stakeholders and the environment
and have taken into account the following:
a) the likely consequences of any decisions in the long term;
b) the interests of the Company’s employees;
c) the need to foster the Company’s business relationships
withsuppliers, customers and others;
d) the impact of the Company’s operations on the community
and the environment;
e) the desirability of the Company maintaining a reputation
forhigh standards of business conduct; and
f) the need to act fairly as between members of the Company.
The Board’s understanding of the interests of the Company’s
stakeholders is informed by the programme of stakeholder
engagement detailed below. Section 172 considerations are
embedded in decision making at Board level and throughout the
Group. The Directors fulfil their duties by ensuring that there is
a strong governance structure and process running through all
aspects of the Group’s operations. The strategy for the Group has
been carefully considered by the Board in conjunction with the
Group’s Executive Management teams.
The consideration of all stakeholder interests in the context of the
COVID-19 pandemic has been a particular area of focus for the
Board in recent years. The Board dedicated time for it to consider
all stakeholder interests, primarily those of its shareholders as a
whole, but also employees, suppliers, customers and the members
of the Group’s pension schemes. All these stakeholders (amongst
others) have been impacted in different ways by the pandemic
andthe Board has had regard to this and has formulated a number
of measures to address stakeholder interests in a balanced way.
Strategic report
Annual Report and Accounts 2022 Norcros plc 61
Our commitment to customer service
remains critical to our success.
Why and how we engage:
• We engage to develop customer-
focused solutions, ensuring the
Group understands and responds
to evolving customer needs. This
helps us retain our customers and
attract new ones.
• We also engage with customers
to understand the environmental
challenges they face.
• We engage through our
experienced customer service
teams, engaging with customers on
a daily basis and regular monitoring
of performance against service level
agreements and quality standards.
Outcomes of our
engagementinclude:
• The Group proactively invested into
inventory to protect our service and
stock availability in light of exceptional
supply chainchallenges.
• New product launches in response
to customer needs.
• Obtaining accreditations such as
WRAS approval so that our hot
water taps can be used in new
build markets.
Customers
At Norcros, sustainability is at the centre
of our strategy. We aim to manage our
societal and environmental impact by
conducting business to the highest
standards as well as using resources
more efficiently.
Why and how we engage:
• We engage to better understand
environmental challenges and how
we can contribute to meeting them
and minimise the impact of the
Group on the environment.
• This also enables us to adhere to
relevant environmental legislation
and regulations and to ensure that
high environmental standards
are respected at each of the
Group’s sites.
• We engage with customers,
suppliers and other stakeholders
to understand the environmental
challenges they face and look for
ways to improve the efficiency
ofour businesses.
Outcomes of our
engagementinclude:
• We recognised that our
shareholders are also placing
increasing importance on
environmental issues and want
to understand the actions of the
Group. We developed our ESG
plan to provide an overarching
framework to the work we do.
• We have established a
strong governance structure,
including business level ESG
Forums, to co-ordinate our
sustainability strategy.
• We carried out a full Carbon Trust
carbon footprint assessment across
the whole Group, establishing a
Scope 1 and 2 emissions baseline.
Environment
Our commitment to the society in
which we operate is deep. Every
Group business has programmes of
social engagement, including many
charitable activities.
Why and how we engage:
• We engage to have a positive
impact on the local communities
inwhich our businesses operate.
• We empower our businesses
to support local charities and
initiatives, and community projects,
and also provide local employment.
• The Executive Management
of the Group supports this
commitment to our society and
reviews each business’ activities
onamonthly basis.
Outcomes of our
engagementinclude:
• Charitable activities and initiatives
across the Group.
• Our business in South Africa
launched its first female graduate
scheme to continue the significant
progress towards achieving
gender equality.
• Triton, as one of the area’s largest
employers, has continued to invest
in its apprenticeship scheme giving
school leavers the opportunity to
earn as they learn.
Society
Strategic report
Norcros plc Annual Report and Accounts 202262
Stakeholder engagement continued
Approval
The Group Strategic Report on
pages2 to 62 of Norcros plc was
approved by the Board and signed
onits behalf by:
Nick Kelsall
Chief Executive Officer
8 June 2022
Strategic Report
To the members of Norcros plc
The Strategic Report provides a review
of the business for the financial year and
describes how we manage risks.
The report outlines the developments
and performance of the Group during the
financial year and the position at the end
of the year and discusses the main trends
and factors that could affect the business
in the future.
Key performance indicators are published
to show the performance and position of
the Group. Also provided is an outline of
the Group’s vision, strategy and objectives,
along with the business model.
NORCROS SA
Norcros SA’s Diversity
&Inclusion Program
Launches its first female
graduate scheme
There is no doubt that South Africa has made significant
progress towards achieving gender equality, however, a lot
still remains to be done. Today, organisations are becoming
more diverse, creating workplaces that embrace more
innovation and creativity, thus fuelling growth and aiding
inthe sustainability of the organisation.
As part of its Diversity and Inclusion program, Norcros SA
has launched its first female graduate scheme and we are
excited to extend a warm welcome to the 2022 graduates
and look forward to their valuable contribution.
The Board continues to regard our
employees as our most valuable
asset. The Group’s strategy and
business model are underpinned by
the commitment and efforts of all
ouremployees.
Why and how we engage:
• We engage to ensure that all
employees are valued and are given
the opportunity to provide feedback
and participate in shaping the
development of the Group.
• This helps us underpin our culture of
safety and ensures that employees
at all levels in the business play a
role in promoting and upholding a
strong focus on health and safety,
for the benefit of the Group and the
wider community.
• We engage with staff throughout
the Group through our divisional
structure. Engagement is led by
Alison Littley as the designated
Non-executive Director for
workforce engagement
(seepages48 and 49).
Outcomes of our
engagementinclude:
• The Group’s culture has been a
particular focus of the Board and is
embodied in how we endeavour to
go about our business. All members
of the Board undertake regular
site visits and receive reports and
other information to enhance
theirunderstanding.
• Employees are encouraged to
be involved in the Company’s
performance through employee
share schemes, and other means
ofincentivisation and reward.
Employees
Annual Report and Accounts 2022 Norcros plc 63
Corporate
governance
64 Board of Directors
66 Corporate governance
70 Audit and Risk Committee report
75 Nomination Committee report
76 Remuneration Committee
annual statement 2022
79 Directors’ remuneration policy report
87 Annual report on remuneration
97 Directors’ report
99 Statement of Directors’ responsibilities
Johnson Tiles: Melrose features a rustic structure combined with a glossy glaze to give a
handcrafted aesthetic. With natural variation in colour and texture suitable for any interior
space, Melrose offers 5 neutral tones of Bone, Pewter, Slate, Moss and Stone, providing a
modern look ideal for any interior space.
Corporate governance
Norcros plc Annual Report and Accounts 202264
Board of Directors
Re-election of allDirectors
It is proposed that each Director will seek election or re-election at the 2022 AGM. The Board is satisfied that the Directors,
individually and collectively, have the balance of technical expertise, skills and experience to manage the Company’s affairs and to
further the Group’s strategic objectives. In particular, each Director has experience of growing an international business, organically,
as well as by acquisition. A detailed CV for each Director, including their particular areas of experience and expertise, is available on
the Company’s website, www.norcros.com.
The Board notes that, if re-elected, David McKeith will before the 2023 AGM have reached a tenure of over nine years. The reasons
forthis are explained on page 66. David McKeith will not seek re-election at the 2023 AGM.
A strong leadership team committed
todriving our strategy for growth.
Nick Kelsall
Chief Executive Officer
James Eyre
Chief Financial Officer
Gary Kennedy
Chair
Date of appointment
Joined the Board as Non-executive Chair
on 8 December 2021
Date of appointment
Chief Executive on 1 April 2011 having
previously served as Chief Financial Officer on
appointment to the Board inOctober 1996
Date of appointment
Appointed Chief Financial Officer in
August 2021
Length of tenure
One year
Length of tenure
Eleven years
Length of tenure
One year
Skills andexperience
Gary is also non-executive chair at
Greencore Group plc, where he assumed
the role of executive chair from 31 March
2022 and will fulfil that role until a new
CEO takes office in September 2022.
Gary has extensive executive experience
along with a wealth of non-executive
director experience. He is currently chair
of Goodbody Stockbrokers (Ireland), and
in the past has served as chair of Connect
Group plc and Green REIT plc and on the
boards of Elan plc, Allied Irish Bank, Friends
First Holdings and the IDA Ireland. He was
also government appointed director of
Irish Bank Resolution Corporation. Gary
is a fellow of the Institute of Chartered
Accountants in Ireland and a council
member of the Institute of Directors
in Ireland.
Skills andexperience
Nick joined Norcros as Finance Director
of H&R Johnson Tiles Limited in 1993.
Nick was promoted to Chief Financial
Officer in October 1996, before being
appointed to Chief Executive Officer on
1April 2011. Formerly, Nick held a number
of senior financial management positions
with Touche Ross, Manchester, and,
immediately prior to joining Norcros, with
Waterford Wedgwood Group plc. Nick has
extensive international senior management
and M&A experience and has been a listed
company director since 1996. He is a fellow
of the Institute of Chartered Accountants in
England and Wales.
Skills andexperience
James joined Norcros as Director of
Corporate Development and Strategy
in 2014 before being promoted to Chief
Financial Officer in August 2021. He
began his career at Arthur Andersen and
subsequently has held a number of senior
financial positions with Bank of Scotland,
Rothschild & Co, Bank of Ireland and,
immediately prior to joining Norcros, with
AstraZeneca. James became a trustee
of the David Lewis Centre in 2012 and
stepped down from this role in 2016. He
is a member of the Institute of Chartered
Accountants in England and Wales. James
has extensive experience in international
M&A, business development and strategy.
N R
Annual Report and Accounts 2022 Norcros plc 65
Corporate governance
A Audit and Risk Committee N Nomination Committee R Remuneration Committee
Chair of Committee
Alison Littley
Non-executive Director
Richard Collins
Company Secretary
A RN
Date of appointment
Appointed to the Board in July 2013
Date of appointment
Appointed to the Board in May 2019
Date of appointment
Joined the Company in June 2013 as
Company Secretary and Group Counsel
Length of tenure
Eight years
Length of tenure
Three years
Length of tenure
Nine years
Skills andexperience
David is Senior Independent Director and
Chair of the Audit and Risk Committee.
From April 2021 he acted as Board
Chair pending the appointment of Gary
Kennedy as Chair on 8 December 2021.
David was the senior partner of the
Manchester and Liverpool offices of
PricewaterhouseCoopers LLP and served
on its UK supervisory board. David was
until 2016 a non-executive director and
audit committee chairman of Sportech plc,
and is the chairman of the Halle Orchestra,
Manchester. He is a fellow of the Institute
of Chartered Accountants in England
and Wales.
Skills andexperience
Alison was appointed a Non-executive
Director in May 2019 and appointed Chair
of the Remuneration Committee in July
2019. Alison has substantial experience in
multinational manufacturing and supply
chain operations, and a strong international
leadership background gained through a
variety of senior management positions in
Diageo plc and Mars Inc and an agency to
HM Treasury where she was chief executive
officer. She is currently a non-executive
director at MusicMagpie plc and Xaar
plc. Alison was formerly a non-executive
director of James Hardie Industries Plc,
Headlam Group plc, Geoffrey Osborne
Group and Weightmans LLP.
Skills andexperience
Richard qualified as a solicitor in 1988 and
was previously company secretary and
director of risk and compliance at Vertex
Financial Services. Prior to that, Richard
was company secretary and head of
legal with Tribal Group plc, Blick plc and
Aggregate Industries plc.
David McKeith
Non-executive Director
A N R
Annual Report and Accounts 2022 Norcros plc 67
Corporate governance
Audit and Risk Committee
David McKeith (C)
Alison Littley
Remuneration Committee
Alison Littley (C)
David McKeith
Gary Kennedy (served on Committee
from 8 December 2021)
Nomination Committee
Gary Kennedy (C) (served on
Committee from 8 December 2021)
David McKeith (Acting Chair from
15April 2021 to 7 December 2021)
Alison Littley
The Board
Gary Kennedy (C) (appointed as NED and Board Chair on 8 December 2021)
David McKeith (Acting Board Chair from 15 April 2021 to 7 December 2021)
Governance structure
All Directors are supplied, in a timely manner, with all relevant
documentation and financial information to assist them in the
discharge of their duties by the making of well-informed decisions
that are in the best interests of the Company as a whole. The Board
regularly reviews the management and financial performance
of the Company, as well as long-term strategic planning and risk
assessment. Regular reports are given to the Board on matters
such as pensions, health and safety, and litigation.
Any concerns that a Director may have about how the Group is
being run or about a course of action being proposed by the Board
will, if they cannot be resolved once those concerns have been
brought to the attention of the other Directors and the Board Chair,
be recorded in the Board minutes. In the event of the resignation
of a Non-executive Director, that Director is encouraged to send a
written statement setting out the reasons for the resignation to the
Chair who will then circulate it to the other members of the Board
and the Company Secretary.
Board Chair and Chief Executive Officer
The positions of Chair and Chief Executive Officer are held by
separate individuals and the Board has clearly defined their
responsibilities. The Chair is primarily responsible for the effective
working of the Board, ensuring that each Director, particularly the
Non-executive Directors, is able to make an effective contribution.
The Chief Executive Officer has responsibility for running the
Group’s businesses and for the implementation of the Board’s
strategy, policies and decisions.
Board, Committee and Director evaluation
The performance of the Board is appraised by the Chair. The
Executive and Non-executive Directors are evaluated individually
by the Chair. The Board, led by the Senior Independent Non-
executive Director, appraises the Chair, and the Board evaluates
the performance of its three Committees. Evaluation processes are
conducted periodically and they are organised to fit in with Board
priorities and succession planning activity. A formal evaluation
took place in respect of the year under review in accordance with
the requirements of the Code. This evaluation was conducted
by means of detailed questionnaires, the results of which were
then considered as appropriate, combined with meetings and
discussions. The Chair is responsible for the review of each
Director’s development and ongoing training requirements
toensure that the performance of each Director continues to
be effective. The overall results of the evaluation process were
satisfactory, and the outcomes of it indicated the following areas
offocus for the Board and its Committees going forward:
• succession planning;
• development of remuneration policy; and
• promotion of diversity.
Advice for Directors
Procedures have been adopted for the Directors to obtain access
through the Company Secretary to independent professional
advice at the Company’s expense, where that Director judges it
necessary in order to discharge their responsibilities as a Director
of the Company.
All Directors have access to the advice and services of the
Company Secretary, who is responsible to the Board for ensuring
that Board policies and procedures are complied with. Both the
appointment and removal of the Company Secretary are matters
reserved for decision by the Board.
Board procedures
The Board has a formal schedule of matters specifically reserved
to it for decision which it reviews periodically. This ensures the
Board makes all major strategy, policy and investment decisions
affecting the Company. In addition, it is responsible for business
planning and risk management policies and the development of
policies for areas such as safety, health and environmental policies,
Directors’ and senior managers’ remuneration and ethical issues.
The Board provides direction to the management of the Company,
and it is ultimately accountable for the performance of the Group.
The Board operates in such a way as to ensure that all decisions
are made by the most appropriate people in a timely manner
that will not unnecessarily delay progress. The Board has formally
delegated specific responsibilities to Board Committees,
namely the Nomination Committee, Audit and Risk Committee
and Remuneration Committee. The Terms of Reference of
those Committees are published on the Company’s website
atwww.norcros.com.
Corporate governance
Norcros plc Annual Report and Accounts 202268
Corporate governance continued
Board procedures continued
The report of the Nomination Committee is on page 75, the report
of the Audit and Risk Committee is on pages 70 to 74 and the
report of the Remuneration Committee is on pages 76 to 96.
The Board will also appoint committees to approve specific
processes as deemed necessary, such as aspects of corporate
transactions, or to authorise share option administrative actions.
The directors and management teams of each Group company
are responsible for those business entities. They are tasked with
the delivery of targets approved by the Board on budgets, strategy
and policy.
Directors’ roles
The Executive Directors work solely for the Group. However, in
appropriate circumstances, Executive Directors are encouraged to
take on one non-executive directorship in another non-competing
company or organisation. The Chief Executive Officer and the
Chief Financial Officer have no non-executive directorships.
The terms and conditions of appointment of the Non-executive
Directors are available upon written request from the Company.
All the Non-executive Directors confirm that they have sufficient
time to meet the requirements of their role. They also confirm to
disclose to the Company their other commitments and to give an
indication of the time involved in each such commitment.
The annual evaluation process includes an assessment of whether
the Non-executive Director is spending enough time to fulfil their
duties. If a Non-executive Director is offered an appointment
elsewhere, the Board Chair is informed before any such offer
isaccepted and the Chair will subsequently inform the Board.
The Board has suitable procedures in place for ensuring that its
powers to authorise conflict situations are operated effectively.
Such powers are operated in accordance with the Company’s
Articles of Association by means of each Director having a
responsibility to notify the Board of any conflict situation and for
the Board to deal with that situation as appropriate.
The Board ensures that all new Directors (including Non-executive
Directors) will receive a full, formal and tailored induction on joining
the Company. As part of that induction procedure, the Chair will
ensure that major shareholders have the opportunity to meet a
new Non-executive Director. The Chair also periodically assesses
the training and development needs of all Directors and ensures
that any suitable training and updates are provided to Directors.
Retirement by rotation
Each of the Directors is subject to election by shareholders at the
first Annual General Meeting after their appointment. Thereafter,
in accordance with the Company’s Articles of Association, all of
the Directors are subject to retirement by rotation such that one
third of the Directors retire from the Board each year and each
Director must seek re-election at intervals of no more than three
years. However, the Board has decided that every Director should,
where appropriate, offer themselves for re-election at each Annual
General Meeting. Accordingly, each continuing Director will seek
re-election at the next Annual General Meeting. Biographical
details of all of the Directors are set out on pages 64 and 65, where
there is also a statement on the Directors’ suitability forre-election.
Financial reporting
When releasing the annual and interim financial statements the
Directors aim to present a fair, balanced and understandable
assessment of the Group’s results and prospects. The Directors
have a collective responsibility for the preparation of the Annual
Report and Accounts which is more fully explained in the
Statement of Directors’ Responsibilities on page 99.
Attendance by individual Directors at meetings
oftheBoard and itsCommittees
There was full attendance of Directors at the Board and principal
Board Committee meetings during the year, as detailed in the
table below:
Main
Board
8 meetings
Audit and Risk
Committee
3 meetings
Remuneration
Committee
8 meetings
Nomination
Committee
6 meetings
Gary Kennedy, Chair
1
3/8 — 2/8 2/6
David McKeith
2
8/8 3/3 8/8 6/6
Alison Littley 8/8 3/3 8/8 6/6
Nick Kelsall 8/8 — — —
James Eyre
3
5/8 — — —
Shaun Smith
4
3/8 — — —
1 Gary Kennedy was appointed to the Board as Board Chair on 8 December 2021.
2 David McKeith acted as Board Chair from 15 April 2021 to 7 December 2021.
3 James Eyre was appointed to the Board as Chief Financial Officer on 1 August 2021.
4 Shaun Smith acted as Chief Financial Officer until 31 July 2021.
Relations with shareholders
The Company recognises the importance of maintaining good
communications with shareholders. The Company actively
engages with shareholders on specific matters and takes a
number of other steps to ensure that the Board and, in particular,
the Non-executive Directors develop an understanding of the
views of major shareholders about the Company. Directors have
regular meetings with the Company’s major shareholders and
received regular feedback on the views of those shareholders
through the Company’s broker. Reports of these meetings, and
any shareholder communications during the year, are given to
the Board. In addition, the Company publishes any significant
events affecting the Group and updates on current trading. The
Board Chair and the Non-executive Directors are also offered the
opportunity to attend meetings with major shareholders and the
Non-executive Directors, and in particular the Senior Independent
Director, would attend such meetings if requested to do so by any
major shareholder.
The Board regularly receives copies of analysts’ and brokers’
briefings. The Annual and Interim Reports, together with all
announcements issued to the London Stock Exchange, are
published on the Company’s website at www.norcros.com.
The Notice of the Annual General Meeting is sent to shareholders
at least 20 working days before the meeting. It is the Company’s
practice to propose separate resolutions on each substantially
separate issue.
Annual Report and Accounts 2022 Norcros plc 69
Corporate governance
For each resolution, proxy appointment forms should provide
shareholders with the option to direct their proxy to vote either for
or against the resolution or to withhold their vote. The Company
ensures that all valid proxy appointments received for general
meetings are properly recorded and counted. For each resolution
the Company ensures that the following information is given at the
meeting and made available as soon as reasonably practicable on
a website which is maintained by or on behalf of the Company:
• the date of the meeting;
• the text of the resolution;
• the number of votes validly cast;
• the proportion of the Company’s issued share capital
represented by those votes;
• the number of votes cast in favour of the resolution;
• the number of votes against the resolution; and
• the number of shares in respect of which the vote was withheld.
The Board Chair seeks to arrange for the Chairs of the Audit and
Risk, Remuneration and Nomination Committees (or a deputy if
any of them is unavoidably absent) to be available at the Annual
General Meeting to answer any questions relating to the work of
these Committees.
Accountability and audit
The respective responsibilities of the Directors and auditor in
connection with the financial statements are explained in the
Statement of Directors’ Responsibilities on page 99 and the
Auditor’s Report on pages 101 to 106. The Directors ensure the
independence of the auditor by requesting annual confirmation of
independence which includes the disclosure of all non-audit fees.
Risk management and internal control
The Board is responsible for the Group’s system of internal control
and for reviewing its effectiveness (covering all material controls
including financial, operational, risk management and compliance).
This is undertaken via an annual programme to review the internal
control environment at each business unit. Each review is carried
out by the Group Head of Internal Audit and Risk Assurance, who is
independent of that business unit. The results of these reviews are
communicated to the Audit and Risk Committee.
The Board has carried out a robust assessment in order to identify
and evaluate what it considers to be the principal risks faced by
the Group and has also assessed the adequacy of the actions
taken to manage these risks. This process has been in place for
the period under review and up to the date of the approval of the
Annual Report and Accounts. The principal risks are disclosed
onpages36 to 40.
The Group’s insurance continues to be managed and co-ordinated
centrally with the assistance of insurance brokers. This gives
the Group full visibility of both claims history and the insurance
industry’s perception of the Group’s overall risk via the respective
insurance premiums. The Company examines the size and trend
of these premiums and the extent to which it can mitigate the risk
and reduce the overall risk burden in the business by considering
the appropriate level of insurance deductible and the potential
benefit of self-insurance in some areas.
Viability
In accordance with the Code, the Board has assessed the
prospects of the Company, using a three-year assessment
timescale, and concluded that there is a reasonable expectation
that the Company will be able to meet its liabilities and continue in
operation. The full Viability Statement is contained on page 41.
Operational structure, review and compliance
In addition to the Chief Financial Officer, the Group has Senior
Financial Managers at its Head Office. The current Group Head
of Internal Audit and Risk Assurance was appointed in March
2020 and he is responsible for the Internal Audit and Risk
Assurance function for the Group. Further information on the
work of this function is in the Audit and Risk Committee Report on
pages 70 to 74.
The key elements of the controls framework within which the
Group operates are:
• an organisational structure with clearly defined lines
of responsibility, delegation of authority and reporting
requirements;
• an embedded culture of openness of communication between
operational management and the Company’s Executive
Management on matters relating to risk and control;
• defined expenditure authorisation levels; and
• a comprehensive system of financial reporting. An annual
budget for each business unit is prepared in detail and approved
by the Group Executive Management. The Board approves the
overall Group’s budget and plans. Monthly actual results are
reported against budget and the prior year and the forecast for
the year is revised where necessary. Any significant changes
and adverse variances are reviewed by the Board and remedial
action is taken where appropriate. There is weekly cash and
treasury reporting to the Chief Financial Officer and periodic
reporting to the Board on the Group’s tax and treasury position.
The system of internal control is designed to manage rather
thaneliminate the risk of failing to achieve business objectives
andcan only provide reasonable and not absolute assurance
against material misstatement or loss. It is tested and developed
asappropriate by the Group Head of Internal Audit and Risk
Assurance working in conjunction with the Audit and
RiskCommittee.
The control framework as outlined above gives reasonable
assurance that the structure of controls in operation is appropriate
to the Group’s situation and that risk is kept to acceptable levels
throughout the Group.
Takeover directive
Share capital structures are included in the Directors’ Report
onpages 97 and 98.
Approved by the Board of Directors on 8 June 2022 and signed
onits behalf by:
Gary Kennedy
Chair
8 June 2022
Corporate governance
Norcros plc Annual Report and Accounts 202270
Audit and Risk Committee report
David McKeith
Chair of the Audit
andRiskCommittee
During the year, the Committee continued to focus on
oversight and monitoring of key risks and risk management
policies and procedures.
Role of the Audit and RiskCommittee
The main responsibilities of the Audit and Risk Committee are:
• reviewing the Company’s financial reporting;
• monitoring the Company’s risk management and internal
control procedures;
• overseeing the appointment and work of the
external auditor;
• overseeing the work of Internal Audit and Risk
Assurance; and
• advising the Board on whether the Annual Report
andAccounts are fair, balanced and understandable.
Responsibilities
The Committee’s Terms of Reference are in compliance with the
UK Corporate Governance Code 2018, and provide full details
of its role and responsibilities. A copy can be obtained from the
Company’s website, www.norcros.com.
The Committee is a sub-committee of the Board whose main
responsibilities include:
• monitoring the integrity of the financial statements of the
Company and any formal announcements relating to the
Company’s financial performance, and reviewing significant
financial reporting judgements contained in them;
• providing advice (where requested by the Board) on whether
the Annual Report and Accounts, taken as a whole, is fair,
balanced and understandable, and provides the information
necessary for shareholders to assess the Company’s position
and performance, business model and strategy;
• reviewing the Company’s internal financial controls and internal
control and risk management systems;
• monitoring and reviewing the effectiveness of the Company’s
Internal Audit function;
• at the appropriate time, conducting the tender process and
making recommendations to the Board about the appointment,
re-appointment and removal of the external auditor, and
approving the remuneration and terms of engagement of the
external auditor;
• reviewing and monitoring the external auditor’s independence
and objectivity;
• reviewing the effectiveness of the external audit process, taking
into consideration relevant UK professional and regulatory
requirements;
• developing and implementing policy on the engagement of the
external auditor to supply non-audit services, ensuring there is
prior approval of non-audit services, considering the impact this
may have on independence, taking into account the relevant
regulations and ethical guidance in this regard, and reporting
tothe Board on any improvement or action required; and
• reporting to the Board on how it has discharged its responsibilities.
Monitoring the Company’s
reporting and risk management.
Members
During the year to 31 March 2022, the Committee has consisted
only of independent Non-executive Directors. Biographies of
all members of the Committee appear on pages 64 and 65. On
15April 2021, David McKeith assumed the role of Acting Board
Chair following Mark Allen’s decision to step down from the Board.
David remained in this role until the appointment of Gary Kennedy
as Board Chair on 8 December 2021.
The Chair of the Committee, David McKeith, is considered to have
recent and relevant financial experience as he is a fellow of the
Institute of Chartered Accountants in England and Wales and a
former senior partner of PricewaterhouseCoopers LLP. He also
acted as chair of the audit committee for Sportech plc, where he
was a non-executive director until he resigned from that position
inAugust 2016.
The Board is satisfied that the Committee has the appropriate
level of expertise to fulfil its Terms of Reference. The Committee
reviewed its own Terms of Reference, performance and
constitution during the year.
Annual Report and Accounts 2022 Norcros plc 71
Corporate governance
Significant financial reporting matters in the 2022
Annual Report
The significant financial reporting matters that the Committee
considered in the year are detailed below:
Reporting of COVID-19
COVID-19 continued to have an impact (albeit reducing) on both
operational decisions and financial reporting in 2022. The Group
has reported the impacts of COVID-19 on the business in this
and the prior years’ Annual Report and Accounts and on the
actions taken by management throughout the pandemic. The
Strategic Report on pages 2 to 62 includes commentary on the
impacts and actions on employees, operations, financing and
commercial trading.
The Committee is of the view that the commentary provided by
management is fair, balanced and understandable and provides
shareholders and stakeholders with clear and timely information on
any COVID-19 impacts on trading and the Group’s financial liquidity.
Going Concern and Viability Statement
The Group has prepared a Going Concern and Viability Statement
reflecting the potential impact of principal risks and uncertainties,
including any future COVID-19 pandemic related disruption, on
liquidity and solvency. This has been performed by modelling a
reasonable worst-case scenario and then applying a reverse stress
test on the Group’s current forecasts. Further details are included
on page 41 and on page 112.
The Committee, alongside the Board, has reviewed and
considered the detailed forecast scenarios and agrees with
management’s conclusions.
Defined benefit pension plan liabilities
The Group’s UK defined benefit pension scheme is significant both
in terms of its context in the overall Balance Sheet and the results
of the Group. The Group’s UK defined benefit pension scheme
(ascalculated under IAS 19R) shows a surplus of £19.6m at
31March 2022 from a deficit position of £18.3m at 31 March 2021.
The valuation of the present value of scheme liabilities involves
significant judgement and expertise particularly in respect of the
assumptions used. In order to value the liabilities, management has
engaged an independent firm of qualified actuaries, Isio (formerly
KPMG Pensions). The Committee reviewed the outputs from this
work and benchmarked the assumptions, particularly the net
discount rate, with those applied by other companies with defined
benefit pension schemes with similar characteristics and having
the same measurement date. The Committee concurred with the
assumptions put forward by management to value the liabilities.
The Committee considered the approach and judgement taken
by management in determining the value of the provision and
concurred with management’s view.
Fair, balanced and understandable
The Committee formally reviews the Company’s annual and
interim financial statements and associated announcements,
and considers significant accounting principles, policies and
practices and their appropriateness, financial reporting issues and
significant judgements made, including those summarised above.
The Committee also advises the Board on whether it considers
that the Annual Report and Accounts, taken as a whole, is fair,
balanced and understandable, and provides the necessary
information for shareholders to assess the Company’s financial
position and performance, strategy and business model.
The Committee concluded that these disclosures, and the
processes and controls underlying their production, meet the
latest legal and regulatory requirements for a listed company
and that the 31 March 2022 Annual Report and Accounts are fair,
balanced and understandable.
Meetings of the Committee
The Committee met formally three times during the year ended
31 March 2022. By invitation, the Board Chair, Chief Executive
Officer, Chief Financial Officer, Company Secretary, Group
Head of Internal Audit and Risk Assurance and Group Financial
Controller also attended each of these meetings together with the
engagement partner and other members of the audit team from
the external auditor.
The Committee may invite other individuals either from within the
Company or external technical advisers to attend meetings to
provide information or advice as it sees fit.
At each meeting the Committee had the opportunity to discuss
matters with the external and internal auditor without management
being present. The Chair of the Committee also has regular
discussions with the external audit partner outside of the formal
Committee process, and he met with the Group Head of Internal
Audit and Risk Assurance without management being present.
At each of its meetings the Committee reviews any financial
communications issued to the market.
Corporate governance
Norcros plc Annual Report and Accounts 202272
Audit and Risk Committee report continued
Principal activities of the Audit and Risk Committee during the year
A wide variety of issues were addressed in the year; they are summarised in the table below:
Area Activities
Financial reporting Review of the Company’s trading updates and other financial communications
Review of the Company’s interim results for the six months ended 30 September 2021
Review of the Company’s Annual Report and Accounts for the year ended 31 March 2022, including
consideration of:
• significant financial reporting matters;
• whether the Annual Report and Accounts are fair, balanced and understandable; and
• the requirements of the going concern assessment and Viability Statement
Review of changes to corporate reporting requirements
Review of the potential further impairment of assets at Johnson Tiles UK due to the impact of the energy prices
Review of onerous lease provision
External audit Review of the external auditor’s proposed audit work plan for the year ended 31 March 2022, including its
assessment of the principal financial reporting risks
Review of the external auditor’s terms of engagement and proposed fees
Assessment of the external auditor’s independence, objectivity, qualifications and expertise, including a review
ofits internal quality control checks
Review of the findings from the external audit for the year ended 31 March 2022
Internal audit Review of the internal audit work programme for 2021/22
Approval of the annual internal audit programme for 2022/23
Review of current internal audit resource levels
Assessment of the work carried out to test and review internal controls and IT security, together with the status
ofrecommendations identified
Review of findings and agreed actions arising from internal audit assignments
Compliance Review of the whistleblowing incidents log
Review of the fraud and attempted fraud log
Review of the data protection log including data incidents, data subject access requests, etc.
Risk management Review of the Group’s reported principal risks and uncertainties
Approval of the addition of environmental, social and governance (ESG) as a principal risk including defining
itsrisk appetite level
Review of the actions taken by the Group to manage risks arising from ESG risks including climate change
Governance Conducted an appraisal of the performance of the Committee
Review of the Group’s policy in respect of the employment of former employees of the external auditor
Review of the Group’s policy in respect of the engagement of the external auditor for non-audit services
andnon-audit services provided by the external auditor during the year
Review of the Committee’s Terms of Reference and constitution in line with current best practice
Annual Report and Accounts 2022 Norcros plc 73
Corporate governance
Internal audit framework
The Group has a dedicated Group-wide Internal Audit and Risk
Assurance function that is led by an experienced Group Head of
Internal Audit and Risk Assurance. This role is supported by a small
dedicated internal audit team based in South Africa focused on
the particular risks faced by the Group’s retail and manufacturing
operations in South Africa. Internal audit resources are kept under
constant review to ensure an appropriate level of independent
assurance is obtained by the Committee.
The Group operates a rolling twelve-month audit plan prepared
by the Group Head of Internal Audit and Risk Assurance, which
is based on risk assessments carried out by the Group, includes
senior management input, and is reviewed and approved by
the Committee. At each meeting, the Committee considers the
results of the audits undertaken during the preceding period
and the adequacy of management’s response to matters raised.
Additionally, the related mitigations against issues and actions raised
from these audits are systematically followed up in subsequent
Committee meetings until they are adequately resolved.
The Group control and risk self-assessment questionnaires, which
are completed annually by each business unit, are reviewed by the
Group Head of Internal Audit and Risk Assurance and the Group
Financial Controller. This includes a management representation
requiring each division to confirm that it has applied and followed
all required policies and procedures in the year. Key control issues
that arise from this review are raised with the Committee, with
the results of this assessment also feeding into the audit plan
andindividual audit engagements.
Group Internal Audit and Risk Assurance activities
during the year
The Group Internal Audit and Risk Assurance team provided
assurance across a wide range of risks during the year in line
with the standards set out in the approved audit charter. The
annual audit plan included Business Reviews of operational units,
assessing the effectiveness of key internal controls in place over
selected systems and processes. In South Africa (SA), the primary
focus was on the controls in place at retail outlets with completion
of a cycle of operational reviews across all stores. The SA team
was expanded during the year along with the audit plan, which
also covers SA Head Office financial and other risk-based reviews.
The plan also covered following up on previous audits to confirm
management’s progress with agreed actions.
Other key activities included: sourcing and implementation of an
online awareness training programme for all employees covering
anti-bribery, information security and data protection, liaison with
our insurers on a range of risk management projects including
cyber security and business continuity and disaster recovery
planning, facilitation of annual control self-assessments covering
financial and information security controls and other key risks,
data protection controls validation and anti-bribery and corruption
controls validation.
Summaries of all findings and actions, and updates on all audit
work and other key activities, are provided at each Audit and Risk
Committee meeting.
Risk management framework
Our risk management framework is highlighted on page 35 of our
Strategic Report. The Audit and Risk Committee’s role in the risk
management framework can be summarised as:
1. review of current and future (emerging) risk through the
discussion of risk and mitigating actions with divisional
management in annual strategic reviews;
2. annual review of the risk management reporting process and
associated outputs to ensure they are robust and effective and
include strategic and operational risks that could threaten the
business model and future strategy; and
3. review of the Annual Report to ensure that it is a fair reflection
of risk assessments undertaken.
Internal control and risk management review
The Board has overall responsibility for the Group’s system
of internal control and risk management and for reviewing its
effectiveness. The internal control systems are designed to meet
the needs of the Group and to manage rather than eliminate the
risk of failure to achieve business objectives. Such systems can
only provide reasonable and not absolute assurance against
material misstatement or loss.
The Committee undertakes a review, at least annually, of the
effectiveness of the Company’s system of internal controls
and risk management and the Board will take into account the
Committee’s report, conclusions and recommendations in this
regard. The Board confirms that it has reviewed the effectiveness
of the internal control system, including financial, operational and
compliance controls and risk management in accordance with the
UK Corporate Governance Code, for the period from 1 April 2021
to the date of approval of the Annual Report and Accounts for the
year ended 31 March 2022.
Fraud and whistleblowing
The Group maintains a whistleblowing policy and engages two
independent confidential whistleblowing service providers,
one covering South Africa specifically and the other covering
all other locations. Reports on the use of these services, any
significant concerns that have been raised, details of investigations
carried out and any actions arising as a result are reported to the
Committee at each meeting.
The Committee also receives papers on incidents of fraud or
attempted fraud and reviews them at each meeting. At least
annually, the Committee conducts an assessment of the
adequacy of the Group’s procedures in respect of compliance,
whistleblowing and fraud.
Corporate governance
Norcros plc Annual Report and Accounts 202274
Audit and Risk Committee report continued
External auditor
The Committee has primary responsibility for making
recommendations to the Board on the appointment, re-appointment
and removal of the external auditor. The Committee keeps under
review the scope and results of the audit and its effectiveness,
aswell as the independence and objectivity ofthe auditor.
The Committee is aware of the need to safeguard the auditor’s
objectivity and independence and the issue is discussed by the
Committee and periodically with the audit engagement partner
from BDO LLP. In accordance with Auditing Practices Board
requirements, external auditor independence is maintained by the
rotation of the engagement partner every five years. The current
audit engagement partner, Gary Harding, was appointed following
the change of auditor in 2020.
Policies on the award of non-audit work to the external auditor
andthe employment of ex-employees of the external auditor are
in place and reviewed annually. Additionally, the approval of the
Chair of the Committee is required prior to awarding high value
non-audit work to the external auditor, and the non-audit work
planned and performed is monitored by the Committee at each
meeting. There was no non-audit work awarded to the external
auditor during the year.
The external audit starts with the design of a work plan that
addresses the key risks of the audit which were confirmed at the
March 2022 meeting of the Committee. The Committee also
agreed the terms of engagement and the fees payable for the
engagement. At each meeting the Committee had the opportunity
to discuss matters with the external auditor without management
being present. The Chair of the Committee also has regular
discussions with the external audit partner outside the formal
Committee process.
For the year ended 31 March 2022, the Committee was satisfied
with the independence, objectivity and effectiveness of the
relationship with BDO LLP as external auditor.
External audit tender and appointment of auditor
The external auditor, BDO LLP, was appointed at the 2020 AGM
inJuly 2020 following a competitive tender process.
On behalf of the Audit and Risk Committee.
David McKeith
Chair of the Audit and Risk Committee
8 June 2022
Annual Report and Accounts 2022 Norcros plc 75
Corporate governance
Nomination Committee report
Gary Kennedy
Chair of the
NominationCommittee
Role of the Nomination Committee
The main responsibilities of the Nomination Committee are:
• evaluating the balance of skills, knowledge, independence,
diversity and experience of the Board;
• succession planning for the Board and at senior
management level;
• determining the scope of the role of a new Director and the skills
and time commitment required and making recommendations
to the Board about filling Board vacancies; and
• appointing additional Directors.
The Terms of Reference of the Committee are available for
inspection upon written request to the Company and on its
website at www.norcros.com.
The Nomination Committee and the Board seek to maintain an
appropriate balance between the Executive and Non-executive
Directors. The Nomination Committee is chaired by the Chair of
the Board and consists of all the Non-executive Directors. The
Board Chair will not chair the Committee when it deals with the
appointment of a successor to that role.
During the year under review, the Nomination Committee led
the process to find a new Non-executive Director to serve as
Board Chair.
Another principal activity of the Committee was the appointment
to the Board of James Eyre, as Group Chief Financial Officer. The
Committee also oversaw the creation of the new senior executive
level role of Business Director – UK.
The Nomination Committee also evaluates the balance of skills,
knowledge, diversity and experience of the Board. If a new
appointment to the Board is required, the Committee will use the
appropriate selection process and will determine the scope of the
role of a new Director and the skills and time commitment required
and make recommendations to the Board about filling Board
vacancies and appointing additional Directors.
In selecting candidates due regard will be given to the balance
of the Board, and to the benefits of different backgrounds and
experience, and to diversity on the Board including gender.
Appointments will be made on the basis of merit and the most
appropriate experience against objective criteria in the best
interests of shareholders. The Board endeavours to ensure that
these principles are applied throughout the Group.
In the year under review the Committee has, in addition to its
routine responsibilities, continued to focus on succession planning
issues, and it is satisfied that there are in place appropriate
plans for succession planning for Board members and senior
management across the Group.
Gary Kennedy
Chair of the Nomination Committee
8 June 2022
Evaluating the Board and succession
planning for a sustainable future.
Corporate governance
Norcros plc Annual Report and Accounts 202276
Remuneration Committee annual statement 2022
Alison Littley
Chair of the
RemunerationCommittee
Role of the Remuneration Committee
The main responsibilities of the Remuneration
Committee are to:
• determine the remuneration policy and keep it under
review, including consulting with, and obtaining approval
from, shareholders as appropriate;
• implement the approved remuneration policy as regards
Executive Director remuneration, benefits and incentives,
including the setting of targets for, and determination of
payouts of, all incentive arrangements;
• ensure alignment of the remuneration structure for senior
executives to the Executive Director remuneration policy,
including approval of changes to packages;
• keep under review the Executive Director remuneration
policy (and the approach to implementation) in the context
of pay policies and practices across the wider workforce,
and the Group’s culture; and
• prepare the Annual Remuneration Report, to
be approved by the members of the Company
attheAnnualGeneral Meeting.
Dear shareholders,
On behalf of the Board, I am pleased to present the Directors’
Remuneration Report for the year ended 31 March 2022.
Firstly, I would like to acknowledge the feedback received
from shareholders over the last twelve months in relation to
remuneration outcomes for the year ended 31 March 2021. The
Board was naturally disappointed as to the voting outcome on
the resolution to approve last year’s Remuneration Report. We
engaged with our principal shareholders prior to the AGM and
subsequently, to understand their specific perspectives on our
approach. The Committee discussed in detail the feedback
received through this helpful process, for which I am grateful
to those shareholders who contributed. Whilst there was some
divergence in the views put forward, there was also consistency
in the expectation that remuneration decisions be demonstrably
aligned with the interests of wider stakeholder groups. The
Committee has taken on board this feedback, and will strive to
continue to balance this important perspective with its obligations,
as steward of the Group, to ensure remuneration is:
• fit for purpose;
• competitive without being excessive;
• able to incentivise and fairly reward delivery of our short
andlonger-term ambitions; and
• applied consistently throughout the Group.
I hope this report clearly explains how we have sought to achieve
this aim for the year in review and the current financial year.
The performance context for remuneration in the year
Following the unprecedented challenges posed by the COVID-19
pandemic over the past two financial years, the year ended 31
March 2022 saw the Group continue its recovery off the solid
platform embedded by swift management actions during
2020 and 2021. As reported earlier in this Annual Report,
highlights include:
• strong market outperformance with a significant increase in
revenue compared to 2021; 22.2% on a reported basis and 20.6%
on a constant currency basis;
• record underlying operating profit of £41.8m; an increase
of23.7% compared to 2021;
• a very strong balance sheet with £8.6m net cash (pre-IFRS 16),
significant liquidity and funding headroom; and
• total dividend of 10.0p per share, reflecting the Board’s
confidence in the Group’s prospects.
This performance is testament to the Group’s proven business
model and leading customer service proposition, the proactive
management and the leadership of our CEO and CFO, and the
commitment of all of our people.
Fairly rewarding contribution
tothe success of the Group.
Annual Report and Accounts 2022 Norcros plc 77
Corporate governance
Remuneration for the year in review
Due to the continued strong performance summarised above, the Committee is pleased to note that the operating profit targets set
for the annual bonus were achieved in full, resulting in the bonus payments for our Executive Directors detailed on page 89. In keeping
with our normal practice, the Committee reviewed the formulaic outcome in the context of alignment with the Group’s underlying
performance, as well as the experience of other stakeholder groups. Noting the recent feedback from shareholders, the Committee’s
assessment of this outcome is explained in detail below:
Aspect reviewed Evaluation by the Committee
The toughness of targets
set at the start of the year
The targets were set at the start of the financial year (at a time of ongoing uncertainty) to span an appropriate
range of possible performance outcomes identified in the budgeting process. The Committee reviewed
the actual outturn in the context of the assumptions underlying the budgeting process at the time, and
concluded that these – and therefore the targets built off them – remained representative of trading conditions.
The Group’s longer-term
performance trajectory
Notwithstanding the formulaic outcome, the Committee evaluated performance in the context of this being
a record performance for the Group, and concluded that the formulaic payout of 100% was warranted.
Shareholder experience
We continued to deliver against our stated and progressive dividend policy. The Group’s TSR has
outperformed the FTSE All-Share Construction and Materials Index over the one, three and five-year periods
to 31March 2022.
Employee experience
We continued to prioritise the safety, health and wellbeing of all our people and the wider communities in
which we operate. This is detailed on pages 46 and 47. During the year, we protected jobs, did not furlough
any staff, and did not make use of government support.
Customer experience
We maintained the highest standards of service to our customers, particularly given the global challenges
tosupply chains.
In this context, the Committee is satisfied that the bonus targets
were challenging and that the outcomes reflect the exceptional
leadership and hard work of the Executive Directors and the wider
workforce to produce these excellent results, notwithstanding
well-documented supply chain challenges and exceptional
costinflation.
Owing to the impact of the COVID-19 pandemic on the Group’s
EPS performance in the 2020 and 2021 financial years, the
three-year cumulative EPS performance targets for the 2019
APSP awards were not achieved, and therefore these will lapse
in full. APSP awards for the year in review were made in July
2021 and suitably challenging EPS targets set (see page 90
forfurther details).
The Committee concluded that no discretion was required to be
exercised to ensure alignment of incentive outcomes for the year
in review with the Group’s performance over the relevant period.
Remuneration for the year to 31 March 2023
The workforce
During the year in review, the Group’s workforce remuneration
practices were reviewed against our philosophy that pay should:
be competitive without being excessive; be aligned with our
strategy; and enable Norcros to attract, motivate and retain talent
to support delivery of our strategic objectives and longer-term
value creation for shareholders. This review identified that our
pay levels and practices have fallen, in some cases significantly,
behind competitive market norms; as Norcros has evolved over
time in terms of market capitalisation, scale and complexity. The
below-market positioning of pay is inconsistent with our culture
and values of setting total remuneration at around market median
levels. In this context, correctional adjustments to salary levels have
been implemented across the Group with effect from 1 April 2022,
to bring these more into line with market and recognise individuals’
relative experience, performance and contribution to the ongoing
success of Norcros. This also includes a material cost of living
increase for FY 2023 of circa 5% on average across the workforce.
The Executive Directors
Against this backdrop, the Committee has also reviewed its
approach to executive remuneration. The Committee’s review
was informed by a number of relevant reference points, including:
our stated pay principles; the approach taken for the wider
workforce; and our recent experience of competing for talent
in the recruitment into our CFO and Chair roles. To validate the
conclusions of the review, a detailed benchmarking exercise of
CEO and CFO remuneration levels was also undertaken.
The Committee concluded that the structure of executive
remuneration remains appropriate within the life of the current
policy, but that the base salaries of the Executive Directors (and
therefore the fair value of total remuneration) are misaligned with
their performance and contribution to the leadership of the Group.
Salary inflation has been no more than the average inflationary
increase awarded to the wider UK workforce, since Executive
Director base salaries were last adjusted following a review of fixed
pay levels in 2014. As a result, pay levels were far below market
norms and not easily brought into line over time. Consistent with
the approach of making correctional salary adjustments below
Board level, the Committee therefore engaged with its largest
shareholders in early 2022 on the following changes to Executive
Director remuneration:
Current salary
(effective 1 April
202l)
New salary
(effective1 April
2022)
Proposed salary
(effective 1 April
2023)
CEO –
Nick Kelsall £388,000
£476,000
22.7% increase
CFO –
James Eyre £261,000
£290,000
11.1% increa se
£320,000
10.3% increase,
subject to
continued
performance
Corporate governance
Norcros plc Annual Report and Accounts 202278
Review of remuneration policy
The year ending 31 March 2023 is the final year of the three-
year life of our current remuneration policy. In keeping with the
requirement to put our remuneration policy to a new binding vote
at the 2023 AGM, the Committee will be conducting a complete
review of the policy later this year in line with a broader review
of the entire workforce to ensure that the philosophy of pay and
reward across the Group is consistent. I look forward to engaging
with shareholders throughout this process.
Concluding remarks
On behalf of the Committee, we hope that we can count on your
support for the resolution to approve this Directors’ Remuneration
Report at the 2022 AGM, where I will be available to answer any
questions in relation to this report.
Alison Littley
Chair of the Remuneration Committee
8 June 2022
Remuneration Committee annual statement 2022 continued
Remuneration disclosure
This Directors’ Remuneration Report has been prepared in
accordance with the provisions of the Companies Act 2006
and Schedule 8 of the Large and Medium-sized Companies
and Groups (Accounts and Reports) (Amendment)
Regulations 2013. The report meets the requirements of
the UK Listing Authority’s Listing Rules and the Disclosure
and Transparency Rules. In this report, we describe how
the principles of good governance relating to Directors’
remuneration, as set out in the UK Corporate Governance
Code (the Code), are applied in practice. The Remuneration
Committee confirms that throughout the financial year the
Group has complied with these governance rules and best
practice provisions set out in the Code except as regards the
alignment of Executive Director pension contributions with
those for the workforce as a whole. As described elsewhere
in this Report, the CFO’s pension contribution is aligned with
the average for the wider UK workforce, and the CEO has
volunteered a reduction to his pension contribution to bring
this in line with the UK workforce average from 1 January 2023.
Remuneration for the year to 31 March 2023
continued
The Executive Directors continued
Moving the CEO’s salary broadly into line with median in one step is
considered by the Committee to reflect Nick Kelsall’s considerable
experience and tenure as CEO, effective leadership, consistently
strong performance and his ongoing valued contribution to
the Group. The proposed two-stage increase for James Eyre is
considered appropriate in enabling the Committee to assess the
second phase of the adjustment in the context of James Eyre’s
ongoing development and contribution in his role as CFO.
The Committee has also accepted a proposal from the CEO to
voluntarily reduce his pension contribution to 8% of salary (i.e.
the UK workforce average) from 1 January 2023. This follows a
previous reduction in Nick Kelsall’s pension contribution to 15% of
salary (from that to which he had been contractually entitled and
reflected his membership previously of the Group’s UK defined
benefit scheme), following the review of fixed pay levels in 2014
and prior to the evolving market focus on aligning executive
pensions with the majority of employees. James Eyre’s pension
contribution was reduced from 15% to 8% of salary when he was
appointed as CFO.
No changes are proposed to the annual bonus or APSP in FY 2023.
The Committee believes that, in Nick Kelsall and James Eyre,
Norcros has two talented, driven and very committed Executive
Directors, who continue to perform strongly and lead the delivery
of the Group’s strategy. We are mindful of the optics of large
increases in the current environment, but believe our proposals are
fair, equitable with the approach adopted for the wider workforce,
and not excessive in terms of absolute salary levels or the overall
remuneration opportunity.
The Board Chair
The Committee is also responsible for setting the remuneration of
the Board Chair, a role to which Gary Kennedy was appointed in
December 2021. In doing so, it adopts a consistent set of principles
to those for executive and workforce remuneration. Therefore,
the Committee recently reviewed the Board Chair’s annual fee
in the context of Gary’s proven business leadership credentials
and broad range of relevant experience, and concluded that it
should be brought more into line with the median for companies
of comparable scale, complexity and sector. The Committee has
therefore resolved to increase the Board Chair’s fee from £132,612
p.a. to £145,000 p.a., from 1 April 2022.
Annual Report and Accounts 2022 Norcros plc 79
Corporate governance
Directors’ remuneration policy report
Directors’ remuneration policy
This section of the report sets out the remuneration policy for Executive Directors and Non-executive Directors, which was approved by a
binding shareholder vote at the 2020 AGM. The policy came into effect on that date and will remain effective for up to a three-year period
ending on the date of the 2023 AGM. Minor amendments have been made to the drafting of this policy report from the version approved
by shareholders in 2020 (which can be found in the 2020 Annual Report) including: (i) the description of the opportunity under Pension,
to reflect the implementation of Policy during the 2023 financial year, (ii) the data used in the pay-for-performance scenarios; (iii) page
references; and (iv) the section on Non-executive Director letters of appointment, to reflect changes in Board composition during the
2022 financial year.
Executive Director remuneration policy table
This policy has been designed to support the principal objective of enabling the Group to attract, motivate and retain the people it needs
to maximise the value of the business.
Component and objective Operation Opportunity Performance measures
Base salary
To enable the Group to
attract, motivate and
retain the people it needs
to maximise the value of
the business
Generally reviewed each year,
withincreases effective 1 April with
reference to salary levels at other
FTSE companies of broadly similar
size or sector to Norcros.
The Committee also considers
the salary increases applying
across the rest of the UK business
when determining increases for
ExecutiveDirectors.
Base salary increases are applied
inline with the outcome of the
annualreview.
Salaries in respect of the year
under review (and for the
following year) are disclosed
inthe Annual Report
onRemuneration.
Salary increases for Executive
Directors will normally not
exceed those of the wider
workforce over the period
this policy will apply. Where
increases are awarded in
excess of the wider employee
population, for example if
there is a material change
in the responsibility, size
or complexity of the role,
the Committee will provide
the rationale in the relevant
year’s Annual Report
onRemuneration.
n/a
Pension
To provide a level of
retirement benefit that
is competitive in the
relevant market
Executive Directors receive pension
contributions (either as a direct
payment or a cash allowance).
Base salary is the only element of
remuneration that is pensionable.
The CEO currently receives
a Company contribution
of 15% of base salary and
has volunteered to reduce
this to 8% of salary – in
line with the UK workforce
average – from 1 January
2023. The CFO receives a
Company contribution of 8%
of salary, in line with the UK
workforceaverage.
Executive Director
appointments from
1April 2020 will receive
aCompany contribution
inline with that available
for the wider workforce
intherelevantmarket.
n/a
Assessment of policy against the 2018 UK Corporate Governance Code (the Code)
The Committee believes that the proposed policy complies with
the six pillars set out in paragraph 40 of the Code.
Clarity: The Committee believes that the disclosure of the
remuneration arrangements is transparent with clear rationale
provided on its maintenance and any changes to policy. The
Committee remains committed to consulting with shareholders
on the policy and its implementation.
Simplicity: The policy and the Committee’s approach to
implementation is simple and well understood. The performance
measures used in the incentive plans are well aligned to the
Group’s strategy.
Risk: The Committee has ensured that remuneration
arrangements do not encourage and reward excessive risk
taking by setting targets to be stretching and achievable, with
discretion to adjust formulaic bonus and APSP outcomes.
Predictability and proportionality: The link of the performance
measures to strategy and the setting of targets balances
predictability and proportionality by ensuring outcomes do not
reward poor performance.
Culture: The policy is consistent with the Group’s culture as well
as strategy, therefore driving behaviours that promote the long-
term success of the Company for the benefit of all stakeholders.
Corporate governance
Norcros plc Annual Report and Accounts 202280
Directors’ remuneration policy report continued
Component and objective Operation Opportunity Performance measures
Benefits
Provision of benefits
inlinewith the market
Executive Directors are provided
with a company car (or a cash
allowance in lieu thereof) and
medical insurance. Other benefits
may be introduced from time to
time to ensure the benefits package
is appropriately competitive and
reflects the needs and circumstances
of the Group and individual
ExecutiveDirector.
Benefits may vary by role, and
the level is determined each
year to be appropriate for the
role and circumstances of each
individual ExecutiveDirector.
It is not anticipated that the
cost of benefits (as set out
in the Annual Report on
Remuneration) would increase
materially over the period for
which this policy will apply.
The Committee retains the
discretion to approve a
higher cost in exceptional
circumstances (e.g. relocation
expenses or an expatriation
allowance on recruitment,
etc.) or in circumstances
where factors outside the
Company’s control have
changed materially (e.g. market
increases in insurance costs).
n/a
Annual bonus
andDeferred Bonus
Plan(DBP)
To focus Executive
Directors on achieving
demanding annual
targets relating to
Group performance and
encourage retention
Performance targets are set at the
start of the year and aligned with the
annual budget agreed by the Board.
At the end of the year, the Committee
determines the extent to which these
targets have been achieved.
50% of the total bonus payment is
paid in cash, and 50% is converted
into nil-cost options over Norcros
shares under the Deferred Bonus Plan
(DBP). These options are exercisable
after three years, subject to
continued employment and malus (in
whole or in part) during the deferral
period in the event of a material
misstatement in accounting records,
gross misconduct, calculation error
or corporate failure.
Cash bonuses may be subject
to clawback over the deferral
period insimilar circumstances as
identifiedabove.
A payment equivalent to the dividends
that would have accrued on deferred
bonus awards that vest will be made
to participants on vesting.
Maximum opportunity: 100%
of base salary.
Target opportunity: 50% of
base salary.
For threshold performance,
thebonus payout is up to 25%
of maximum.
The bonus will be based primarily
on the achievement of financial
performance targets but may,
from time to time, include non-
financial performance measures
(the weighting of which, if any,
will be capped at 20% of the
total opportunity). Details of the
measures on which the bonus
will be based shall be disclosed
in the relevant Annual Report
onRemuneration.
The Committee has discretion
to adjust the formulaic bonus
outcomes (including down to zero)
within the limits of the scheme
to ensure alignment of pay
withperformance.
Further details including targets
attached to the bonus for the
year under review are given on
page 89 of the Annual Report
onRemuneration.
Approved Performance
Share Plan (APSP)
To incentivise Executive
Directors to deliver long-
term performance by
aligning their performance
with shareholders’ interests
APSP awards comprise annual
conditional awards of nil-cost options
following the announcement of the
Group’s final results.
Awards normally vest after three
years, subject to the achievement
of a performance condition and
continued employment with the
Group until the vesting date.
Maximum opportunity: 100%
of base salary.
Threshold performance results
in 25% vesting.
Details of actual APSP awards
in respect of each year will be
disclosed in the Annual Report
on Remuneration.
Vesting of APSP awards is
dependent upon the Group’s
financial performance over a
three-year period. Details of the
measures attaching to each
award cycle will be disclosed in
the relevant Annual Report on
Remuneration. At the start of
each cycle, the Committee will
determine the targets that will
apply to an award.
Executive Director remuneration policy table continued
Annual Report and Accounts 2022 Norcros plc 81
Corporate governance
Component and objective Operation Opportunity Performance measures
Approved Performance
Share Plan (APSP)
(continued)
To the extent an award vests,
Executive Directors will be required
to hold net vested shares for
an additional holding period of
twoyears.
A payment equivalent to the
dividends that would have accrued
on APSP awards that vest will be
made to participants on vesting.
APSP awards are also subject to
malus over the vesting period
and clawback over the holding
period (in both cases in whole or
in part) in the event of a material
misstatement in accounting records,
gross misconduct, calculation error
orcorporate failure.
If the performance targets are not
met at the end of the performance
period, awards will lapse.
The Committee has discretion
to adjust the formulaic APSP
outcomes within the limits of
the scheme if certain relevant
events take place (e.g. a
capital restructuring, a material
acquisition/divestment, etc.) with
any such adjustment to result in the
revised targets being no more or
less challenging to achieve.
The Committee will consult major
shareholders on changes to the
APSP, although it retains discretion
to make non-significant changes to
the performance measure without
reverting to a full shareholder vote.
Further details, including the
targets attached to the APSP
in respect of each year, are
disclosed in the Annual Report
onRemuneration.
SAYE
To encourage the ownership
of Norcros plc shares
An HMRC-approved scheme where
employees (including Executive
Directors) may save up to the
individual monthly limit set by HMRC
from time to time over three years.
Options are granted at a discount of
up to 20%.
Savings capped at the
individual monthly limit set by
HMRC (or other such lower
limit as the Committee may
determine) from time to time.
n/a
Shareholding
requirements
To align Executive Director
and shareholder interests
and reinforce long-term
decision making, including
for a period following
cessation of employment
Executive Directors are required to
retain at least 50% of any DBP or
APSP awards that vest (net of tax)
until they have built up a personal
holding of Norcros plc shares worth a
defined multiple of their salaries (of at
least 100% of salary).
Details of the in-post shareholding
requirements that apply to the
Executive Directors are set out in the
Annual Report on Remuneration.
From 1 April 2020, Executive Directors
will additionally be required normally
to maintain a holding in Norcros
plc shares for a period of two years
after they cease to be a Director
of the Group. For the first year this
shareholding guideline will be equal
to the lower of a Director’s actual
shareholding at the time of their
departure and the shareholding
requirement in effect at the date of
their departure, and for the second
year 50% of that figure.
The specific application of this
shareholding guideline will be at
the Committee’s discretion. Only
shares that are held beneficially by an
Executive Director or their spouse or
partner, or nil-cost options granted
under the DBP on or after 27 July 2017
count in the assessment of whether
an Executive Director has met the
required ownership level.
n/a n/a
Corporate governance
Norcros plc Annual Report and Accounts 202282
Directors’ remuneration policy report continued
Notes to the policy table
Payments from previous awards
For the avoidance of doubt the Group will honour any commitment entered into, and Executive Directors will be eligible to receive
payment from any award made, prior to the approval and implementation of the remuneration policy detailed in this report. Details of
these awards are, and will be, disclosed in the Annual Report on Remuneration.
Performance measure selection and approach to target setting
The measures used in the annual bonus will be selected by the Committee to directly reinforce our medium-term growth-orientated
strategy (see pages 18 and 19 for further details of the strategy; details of the measures selected for use in the bonus for the year in review
and for the coming year are set out in the Annual Report on Remuneration). For the APSP, the Committee shall select measures that are
transparent, objective and effective measures of performance that are in the long-term interests of all of our shareholders (further details
of the APSP measures are set out in the Annual Report on Remuneration).
Targets applying to the annual bonus and APSP are reviewed annually, based on a number of internal and external reference points.
Annual bonus targets are aligned with the annual budget agreed by the Board. Annual bonus targets are considered to be commercially
sensitive but will be disclosed retrospectively in next year’s Annual Report on Remuneration (see page 89 of the Annual Report on
Remuneration). APSP targets reflect industry context, expectations of what will constitute appropriately challenging performance levels
and factors specific to the Group. The Committee will determine the APSP targets at the time awards are made and these targets (along
with other relevant details of the grant) will be disclosed in next year’s Annual Report on Remuneration.
Differences from remuneration policy for other employees
The remuneration policy for other employees is based on broadly consistent principles as described above. Annual salary reviews across
the Group take into account Group performance, local pay and market conditions, and salary levels for similar roles in comparable companies.
Executives and senior managers are eligible to participate in annual bonus schemes. Opportunities and performance measures vary by
organisational level, geographical region and an individual’s role. Other members of the Group senior leadership team participate in the
APSP on similar terms as the Executive Directors, although award sizes may vary by organisational level. All UK and Republic of Ireland
employees are eligible to participate in the Group’s SAYE scheme on identical terms.
Performance scenario charts
The graphs above provide estimates of the potential future reward opportunity for Executive Directors, and the potential mix between the
different elements of remuneration under four different performance scenarios: “Minimum”, “On target”, “Maximum” and “Maximum + 50%
share price growth”. This information is for the current financial year, as explained below.
The potential opportunities illustrated above are based on the policy applied to the base salary at 1 April 2022. For the annual bonus, the
amounts illustrated are those potentially receivable in respect of performance for the year to 31 March 2023. It should be noted that any
bonus deferred into the DBP and APSP awards do not normally vest until the third anniversary of the date of grant. This is intended to
illustrate the relationship between executive pay and performance. The values of the DBP and APSP assume no increase in the underlying
value of the shares (except the APSP value under the “Maximum + 50% share price growth (SPG)” scenario) and actual pay delivered will
further be influenced by changes in factors such as the Group’s share price and the value of dividends paid.
Valuation assumptions
The “Minimum” scenario reflects base salary, pension and benefits (i.e. fixed remuneration), being the only elements of the Executive
Directors’ remuneration package not linked to performance.
The “On target” scenario reflects fixed remuneration as above, plus target bonus payout (50% of salary) and APSP threshold vesting at
25% of the maximum award level.
The “Maximum” scenario reflects fixed remuneration, plus full payout under all incentives (100% of salary under each of the annual bonus
and APSP).
The “Maximum + 50% share price growth” scenario reflects fixed remuneration, plus full payout under all incentives (100% of salary under
each of the annual bonus and APSP). The value of the APSP additionally reflects 50% share price growth over the vesting period.
Minimum Minimum
£555k
£326k
£912k £543k
£1,745k
£1,507k
£1,051k
£906k
On target On target
Maximum
+50% SPG
Maximum
Maximum
+50% SPG
Maximum
Chief Executive Officer Chief Financial Officer
Fixed pay APSP Total Annual bonus
100%
100%
13%26%
61%
13%27%
60%
41%27%32%
32%32%36%
41%28%31%
32%32%36%
Annual Report and Accounts 2022 Norcros plc 83
Corporate governance
Approach to Executive Director recruitment and remuneration
External appointment
In cases of hiring or appointing a new Executive Director from outside the Group, the Remuneration Committee may make use of all
existing components of remuneration, as follows:
Component Policy
Base salary The base salaries of new appointees will be determined by reference to relevant market data, experience and skills
of the individual, internal relativities and the current salary of the incumbent in the role.
Where a new appointee has an initial base salary set below market, the Committee may make phased increases over
a period of three years, subject to the individual’s development and performance in the role.
Benefits As set out in the policy table, benefits may include (but are not limited to) the provision of a company car or car
allowance, medical insurance, and any necessary expatriation allowances or expenses relating to an executive’s
relocation.
Pension New appointees will receive pension contributions into a defined contribution pension arrangement or an
equivalent cash supplement, or a combination of both. Executive Director appointments from 1 April 2020 will
receive a Company contribution in line with that available for the wider workforce in the relevant market.
SAYE New appointees will be eligible to participate on identical terms to all other employees.
Annual bonus The bonus structure described in the policy table will apply to new appointees. The maximum opportunity will
be 100% of salary, pro-rated in the year of joining to reflect the proportion of that year employed. Performance
measures may include strategic and operational objectives tailored to the individual in the financial year of joining.
50% of any bonus earned will be deferred into the DBP on the same terms as other Executive Directors.
APSP New appointees will be granted annual awards under the APSP on the same terms as other Executive Directors,
asdescribed in the policy table. In exceptional circumstances, such as to facilitate the recruitment of an external hire,
the Committee may, in its absolute discretion, make awards up to 150% of salary.
In determining the appropriate remuneration structure and level for the appointee, the Remuneration Committee will take into
consideration all relevant factors to ensure that arrangements are in the best interests of our shareholders. It is not the intention of the
Committee that a cash payment such as a “golden hello” would be offered. However, the Committee may make an award in respect of a
new appointment to “buy out” incentive arrangements forfeited on leaving a previous employer, over and above the approach and award
limits outlined in the table above. Any such award will be made under existing incentive structures, where appropriate, and will be subject
to the normal performance conditions of those incentives. The Committee may also consider it appropriate to make “buy out” awards
under a different structure, using the relevant Listing Rule, where necessary, to replicate the structure of forfeited awards. Any “buy out”
award (however this is delivered) would have a fair value no higher than that of the awards forfeited, taking into account relevant factors
including performance conditions, the likelihood of those conditions being met and the proportion of the vesting period remaining.
Details of any such award will be disclosed in the first Annual Report on Remuneration following its grant.
Internal promotion to the Board
In cases of appointing a new Executive Director by way of internal promotion, the policy will be consistent with that for external
appointees detailed in the table above (i.e. excluding the flexibility to make “buy out” awards). Where an individual has contractual
commitments made prior to their promotion to the Board, and it is agreed that a commitment is to continue, the Group will continue
to honour these arrangements even if there are instances where they would not otherwise be consistent with the prevailing Executive
Director remuneration policy at the time of promotion.
Service contracts and policy for payment for loss of office
Executive Directors have signed rolling contracts, terminable on twelve months’ notice by either the Group or the Director. The Group
entered into a contract with Nick Kelsall on 1 April 2011, and with James Eyre on 1 August 2021. Copies of these contracts are available to
view at the Group’s registered office.
The Committee’s policy for Directors’ termination payments is to provide only what would normally be due to Directors had they remained
in employment in respect of the relevant notice period, and not to go beyond their normal contractual entitlements. Any incentive
arrangements will be dealt with subject to the relevant rules, with any discretion exercised by the Committee on a case by case basis
taking into account the circumstances of the termination. Termination payments will also take into account any statutory entitlement
at the appropriate level, to be considered by the Committee on the same basis. The Committee will monitor and where appropriate
enforce the Directors’ duty to mitigate loss. When the Committee believes that it is essential to protect the Group’s interests, additional
arrangements may be entered into (for example post-termination protections above and beyond those in the contract of employment)
onappropriate terms.
Under the service contracts for each Executive Director, the Company has the discretion to terminate the employment lawfully without
any notice by paying to the Director a sum equal to, but no more than, the salary and other contractual benefits of the Director. The
payment would be in respect of that part of the period of notice which the Director has not worked, less any appropriate tax and other
statutory deductions. The Director would be entitled to any holiday pay which may otherwise have accrued in what would have been the
notice period. The Company may pay any sums due under these pay in lieu of notice provisions as one lump sum or in instalments of
what would have been the notice period. If the Company elects to pay in instalments, the Director is under an express contractual duty
tomitigate their losses and to disclose any third party income they have received or are due to receive.
Corporate governance
Norcros plc Annual Report and Accounts 202284
Directors’ remuneration policy report continued
Service contracts and policy for payment for loss of office continued
The Company reserves the right to reduce the amount of the instalments by the amount of such income. The Committee would
expect to include similar pay in lieu of notice provisions in any future Executive Director’s service contract. In the case of Nick Kelsall’s
service contract, these pay in lieu of notice provisions can also be activated by Mr Kelsall if he exercises his contractual right to
terminate his employment upon a change of control of the Company or a transfer of his employment to an acquirer of the Company’s
business. TheCommittee would not envisage including a similar right to terminate in any future Executive Director’s service contract,
andthereisno such provision in James Eyre’s service contract.
Also under their service contracts, if the Director’s employment is terminated for whatever reason, they agree that they are not entitled to any
damages or compensation to recompense them for the loss or diminution in value of any actual or prospective rights, benefits or expectations
under or in relation to the APSP, the DBP, the SAYE plan or the annual discretionary bonus scheme. This is without prejudice to any of the rights,
benefits or entitlements which may have accrued to the Director under such arrangements at the termination of employment.
The table below summarises how awards under the annual bonus, DBP and APSP are typically treated in specific circumstances,
withthefinal treatment remaining subject to the Committee’s discretion:
Reason for cessation Calculation of vesting/payment Timing of payment/vesting
Annual bonus
Voluntary resignation
orsummary dismissal
No bonus paid. n/a
All other circumstances Bonuses are paid only to the extent that the associated objectives, as
set at the beginning of the plan year, are met. Any such bonus would
normally be paid on a pro-rata basis, taking account of the period
actually worked.
At the normal payment
date unless the Committee,
in its absolute discretion,
determines that awards
should be paid out on
cessation of employment.
DBP
Summary dismissal Awards lapse. n/a
Injury, illness, disability,
death, retirement with
the agreement of the
Group, redundancy or
employing company
leaving the Group
Unvested awards vest. At the normal vesting date
unless the Committee,
in its absolute discretion,
determines that awards
should vest on cessation
ofemployment.
Voluntary resignation
or other reason not
stated above
Unvested awards lapse unless the Committee, in its absolute discretion,
determines that an award should vest.
If the Committee determines
that an award should vest,
then awards will vest on their
normal vesting date, unless
the Committee, in its absolute
discretion, determines
that awards should vest on
cessation of employment.
Change of control Unvested awards will be pro-rated for the portion of the vesting
period elapsed on change of control, unless the Committee, in its
absolute discretion, determines otherwise. Awards may alternatively be
exchanged for new equivalent awards in the acquirer, where appropriate.
On change of control.
APSP
Summary dismissal Awards lapse. n/a
Voluntary resignation,
injury, retirement with
the agreement of the
Group, redundancy or
other reason that the
Committee determines
in its absolute discretion
Unapproved option awards lapse unless the Committee, in its absolute
discretion, determines otherwise. Awards that do not lapse will continue
to be eligible to vest on the normal vesting date, subject to being pro-
rated for time to the date of cessation of employment and performance
over the complete performance period. The Committee may, in its
absolute discretion, determine that awards shall vest on cessation in
exceptional circumstances, subject to being pro-rated for time and
performance to the date of cessation of employment.
Approved option awards lapse, except in the case of retirement with the
agreement of the employer, when awards will vest, subject to pro-rating
as stated above.
Any awards in a holding period will normally remain subject to the
holding requirement until the period ends.
On cessation of employment
unless the Committee,
in its absolute discretion,
determines otherwise.
Annual Report and Accounts 2022 Norcros plc 85
Corporate governance
Reason for cessation Calculation of vesting/payment Timing of payment/vesting
APSP (continued)
Death Unapproved option awards vest in full but may be subject to the
application of the performance conditions attached to them. Approved
option awards are pro-rated for time and performance to that date.
Immediately.
Change of control Unapproved option awards vest in full, but may be subject to the
application of the performance conditions attached to them. Approved
option awards are pro-rated for time and performance to that date.
Any awards in a holding period will normally be released.
Awards vest, subject to being pro-rated for time and performance to
the date of cessation of employment, unless the Committee determines
otherwise. Awards may alternatively be exchanged for new equivalent
awards in the acquirer, where appropriate.
On change of control.
External appointments
Executive Directors are permitted to take up non-executive positions on the boards of other companies, subject to the prior approval of
the Board. The Executive Directors may retain any fees payable in relation to such appointment. Details of external appointments and the
associated fees received are included in the Annual Report on Remuneration.
Consideration of employment conditions elsewhere in the Group
The Group seeks to promote and maintain good relations with employees and (where relevant) their representative bodies as part of its
broader employee engagement strategy. See pages 48 and 49. The Committee is mindful of salary increases applying across the rest
of the business in relevant markets when considering salaries for Executive Directors but does not currently consult with employees
specifically on executive remuneration policy and framework.
Consideration of shareholder views
The Committee considers shareholder views received during the year and at the Annual General Meeting each year, as well as guidance
from shareholder representative bodies more broadly, in shaping remuneration policy. The vast majority of shareholders continue
to express support for remuneration arrangements at Norcros. The Committee keeps the remuneration policy under regular review,
to ensure it continues to reinforce the Group’s long-term strategy and aligns Executive Directors with shareholders’ interests. We will
continue to consult shareholders before making any significant changes to our remuneration policy.
Non-executive Director remuneration policy
Non-executive Directors (including the Board Chair) have letters of appointment which specify an initial term of at least three years,
although these contracts may be terminated at one month’s notice by either the Company or Director. In line with the UK Corporate
Governance Code guidelines, all Directors are subject to re-election annually at the AGM.
Details of terms and notice periods for Non-executive Directors are summarised below:
Non-executive Director
Date of
appointment Notice period
Gary Kennedy 8 December 2021 1 month
David McKeith 24 July 2013 1 month
Alison Littley 1 May 2019 1 month
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Norcros plc Annual Report and Accounts 202286
Directors’ remuneration policy report continued
Non-executive Director remuneration policy continued
It is the policy of the Board of Directors that Non-executive Directors are not eligible to participate in any of the Group’s bonus, long-term
incentive or pension schemes. Details of the policy on fees paid to our Non-executive Directors are set out in the table below:
Component and objective Operation Opportunity
Performance
measures
Fees
To attract and retain Non-
executive Directors of the
highest calibre with broad
commercial experience
relevant to the Group
The fee paid to the Chair is determined by the
Committee excluding the Chair. The fees paid to
theother Non-executive Directors are determined
bytheChair and the Executive Directors.
Fee levels are reviewed periodically, with any
adjustments effective 1 April. Fees are reviewed by
taking into account external advice on best practice
and fee levels at other FTSE companies of broadly
similar size and sector to Norcros. Time commitment
and responsibility are also taken into account when
reviewing fees.
Aggregate fees are limited to
£350,000 p.a. by the Group’s
Articles of Association.
Fee increases will be applied
taking into account the
outcome of the review.
The fees paid to Non-
executive Directors in
respect of the year under
review (and for the following
year) are disclosed in
the Annual Report on
Remuneration.
n/a
Approach to Non-executive Director recruitment remuneration
In recruiting a new Non-executive Director, the Remuneration Committee will use the policy as set out in the table above. A base fee in line
with the prevailing fee schedule would be payable for serving as a Director of the Board, with additional fees payable for acting as Chair
ofthe Audit and Risk or Remuneration Committees.
Annual Report and Accounts 2022 Norcros plc 87
Corporate governance
Annual report on remuneration
The following section provides details of how our policy was implemented during the year ended 31 March 2022 and will be implemented
in the year ending 31 March 2023.
Remuneration Committee membership in the year ended 31 March 2022
The Remuneration Committee is responsible for recommending to the Board the remuneration policy for Executive Directors and
the members of the Group’s senior management, and for setting the remuneration packages for the Board Chair and each Executive
Director. The Committee’s responsibilities are set out in its Terms of Reference, which can be found on the Company’s website at
www.norcros.com.
During the year under review, the following Directors were members of the Remuneration Committee:
• Alison Littley (Committee Chair);
• David McKeith;
• Gary Kennedy (from appointment on 8 December 2021); and
• Mark Allen (until he stepped down from the Board on 15 April 2021).
All members of the Committee are independent. They serve on the Committee for a minimum three-year term and a maximum of
nine years, provided the Director remains independent. As part of an effectiveness review for the entire Board, an evaluation of the
Remuneration Committee was undertaken in the year to 31 March 2022. We are pleased to report this review concluded that the
Committee continues to operate effectively.
In addition, the Chief Executive Officer was invited to attend Committee meetings as appropriate to advise on specific questions raised
by the Committee and on matters relating to the performance and remuneration of senior managers, other than in relation to his own
remuneration. The Group Counsel and Company Secretary acts as secretary to the Committee. No individual was present while decisions
were made regarding their own remuneration.
The Committee met eight times during the year. Attendance by individual members at meetings is detailed on page 68.
Main activities of the Committee during the year ended 31 March 2022
The main activities carried out by the Committee during the year under review were:
• reviewing and setting salary levels for Executive Directors and senior management;
• determining the annual bonus outcome for the year ended 31 March 2021;
• setting operating profit targets for the annual bonus for the year ended 31 March 2022;
• determining the APSP outcome for the 2019 APSP awards (which would have vested in 2022 if targets had been achieved);
• calibrating EPS targets for, and granting of, 2021 APSP awards;
• reviewing developments in remuneration governance;
• reviewing and setting the fees payable to the Non-executive Board Chair;
• reviewing the pay policies and practices for the wider workforce; and
• reviewing and aligning, where appropriate, the compensation and benefits provided to senior management.
Advisers
During the year under review, the Committee sought independent advice from Ellason LLP and FIT Remuneration Consultants LLP.
BothEllason and FIT are members and signatories of the Code of Conduct for Remuneration Consultants, details of which can be found
atwww.remunerationconsultantsgroup.com. In the year to 31 March 2022, Ellason and FIT provided the following services:
Services provided
Fees
(excl. VAT)
£
Ellason Guidance on developments in remuneration governance and market trends (and implications for
Norcros), remuneration benchmarking for annual review and new appointments, remuneration report
drafting support and general support to the Committee throughout the year.
£13,12 0
FIT Benchmarking of Directors’ remuneration and remuneration policy review. £16 ,18 0
Neither Ellason nor FIT provide other services to the Company or its Directors and the Committee is satisfied that the advice it receives
isindependent.
Corporate governance
Norcros plc Annual Report and Accounts 202288
Annual report on remuneration continued
Summary of shareholder voting at the AGM
The following table shows the results of the advisory vote on the 2021 Annual Report onRemuneration at the 2021 AGM, and the binding
vote on the remuneration policy at the 2020 AGM:
Annual Report on Remuneration
(2021 AGM)
Remuneration policy
(2020 AGM)
Total number
of votes
% of
votes cast
Total number
of votes
% of
votes cast
For (including discretionary) 45,930,648 69.56% 51,9 8 9,10 6 96.04%
Against 20,097,340 30.44% 2,14 6 ,0 24 3.96%
Total votes cast (excluding withheld votes) 66,027,988 100.00% 5 4 ,13 5,13 0 100.00%
Votes withheld 6,000 18,388
Total votes (including withheld votes) 66,033,988 54,153,518
The Remuneration Committee and Board were obviously disappointed with the outcome of the voting on the Remuneration Report
atthe2021 AGM. Whilst we believe our executive remuneration arrangements are fully aligned with our Directors’ remuneration policy,
which was approved by a significant majority of our shareholders at the 2020 AGM, we place great value on direct engagement with and
feedback from our shareholders. We remain committed to maintaining an active dialogue with shareholders, to ensure the Committee
remains fully informed of their views and expectations. Following the 2021 AGM, the Company engaged in a further proactive consultation
process with its principal shareholders in order to understand the reasons behind the voting result. No material further comments were
received from shareholders, given the extensive consultation that took place at the time of the AGM.
Single figure for total remuneration for Executive Directors (audited information)
The following table provides a single figure for total remuneration of the Executive Directors for the year to 31 March 2022, together with
comparative figures for the year to 31 March 2021. The values of each element of remuneration are based on the actual value delivered,
where known. The value of the annual bonus includes the element of bonus deferred under the Deferred Bonus Plan.
Nick Kelsall Shaun Smith
7
James Eyre
7
2022
£
2021
£
2022
£
2021
£
2022
£
2021
£
Base salary
1
388,470 358,297 195,684 240,647 173,941 —
Taxable benefits
2
15,939 16,086 9,704 13,086 8,469 —
Annual bonus
3
388,470 377,15 5 195,684 253,313 173,941 —
Long-term incentives
4
— — — — — —
Pension benefit
5
72,910 60,723 29,353 36,097 13,915 —
SAYE
6
— 3,320 — — — —
Total fixed 47 7,319 4 3 5,10 6 234,741 289,830 196,325 —
Total variable 388,470 380,475 195,684 253,313 173,941 —
Total 865,789 815,581 430,425 543,143 370,266 —
1 Base salary for FY22 reflects an increase of 3% on FY21 salary. FY21 salaries reflect a 20% pay cut in the first three months of the year, due to the impact of COVID-19 to align
theexecutive experience with that of our employees who were furloughed during the year.
2 Taxable benefits consist of car allowance (Nick Kelsall – 2022: £15,000, 2021: £15,000; Shaun Smith – 2022: £9,000, 2021: £12,000; and James Eyre – 2022: £8,000, 2021: n/a)
andprivate medical insurance.
3 Annual bonus comprises both the cash annual bonus for performance during the year and, where applicable, the face value of the deferred bonus element on the date of deferral.
Any deferred share element is deferred for three years. See “Annual bonus in respect of performance in the year ended 31 March 2022” below for further details.
4 For 2022, the APSP value of £nil reflects the value of APSP awards granted in July 2019, which will lapse in full on 25 July 2022. For 2021, the APSP value of nil for Nick Kelsall and
Shaun Smith reflects the value of APSP awards granted in July 2018 and which lapsed in full on 25 July 2021.
5 In 2022, pension benefits comprised cash in lieu (Nick Kelsall – £58,270; Shaun Smith – £29,353; and James Eyre – £13,915) and amounts related to the defined benefit scheme
(Nick Kelsall – £14,640). See “Total pension entitlements” on page 90 for further details. The pension benefit provided to Nick Kelsall and Shaun Smith in 2021 comprises cash in
lieu (Nick Kelsall – £53,745; and Shaun Smith – £36,097) and amounts related to the defined benefit scheme (Nick Kelsall – £6,978).
6 Embedded gain on grant of Save As You Earn scheme grants made in the relevant year.
7 Figures shown for Shaun Smith relate to the period 1 April – 31 July 2021 (when he stepped down as CFO and a Board Director), and also include the value of payments made to
himover the remainder of his notice period to 31 December 2021. The figures shown for James Eyre relate to the period 1 August 2021 – 31 March 2022, i.e. from his appointment
as CFO and a Board Director.
Annual Report and Accounts 2022 Norcros plc 89
Corporate governance
Incentive outcomes for the year ended 31 March 2022 (audited information)
Annual bonus in respect of performance in the year ended 31 March 2022
The 2022 Annual Bonus Plan was based 100% on Group underlying operating profit performance for the year to 31 March 2022. The
maximum annual bonus opportunity for the year was 100% of base salary for the Chief Executive Officer and for the Chief Financial
Officer. Based on the Company’s performance in 2022, against the stretching targets set at the start of the year, the Committee approved
annual bonus payouts for the Executive Directors at maximum. Further details, including the profit targets set and actual performance,
are provided below:
Underlying
profit target
£m
Payout
(% of max.)
2022
outturn
£m
Bonus
(% of max.)
Maximum 35.2 100%
Target 32.0 50% 40.2
1
100%
Threshold 30.4 25%
1 Target was set on a pre-IFRS 16 basis; therefore, the 2022 outturn has been assessed on a similar basis, i.e. underlying operating profit of £40.2m pre-IFRS 16 (reported £41.8m).
In keeping with good practice, the Committee reviewed the formulaic outcome of the annual bonus in the context of business
performance and the wider stakeholder experience. The Committee concluded that the formulaic outcome nevertheless reflected
excellent results delivered in such challenging circumstances through exceptional leadership and the hard work of the Executive Directors
and the wider senior management team. The Committee also concluded that the outcomes are aligned with the underlying performance
of the Group more generally, and the experience of other stakeholders. Accordingly, no discretion has been exercised in relation to the
bonus outcome for the 2022 financial year.
2019 APSP awards vesting
Effective July 2019, APSP awards of 176,240 shares were granted to Nick Kelsall, and of 118,370 shares to Shaun Smith (and which was
subsequently pro-rated to reflect the period that had elapsed as at his leaving date of 31 December 2021). James Eyre was awarded a 2019
APSP award in connection with his former (non-Board) role at the same time. Vesting of these awards was based on Norcros’ aggregate
diluted underlying EPS over the three financial years to 31 March 2022. Based on performance over this period against the targets originally
set, the Committee has determined that these awards will each lapse in full on 25 July 2022, being the end of the relevant three-year vesting
period according to the APSP rules. Performance targets and actual performance against these, as determined by the Committee, are
summarised in the table below:
Aggregate
underlying EPS % vesting
Norcros’
performance
Award vesting
(% of APSP award)
Threshold 105.0p 25% 9 9.1p
1
Maximum 119.1p 100% 0%
1 On a pre-IFRS 16 basis in line with targets.
Scheme interests awarded in 2022 (audited information)
2021 DBP
During the year under review, the following DBP awards were made to the Executive Directors (relating to the annual bonus earned for
performance over the year to 31 March 2021).
Nick Kelsall Shaun Smith
Basis of award 50% of base salary 50% of base salary
Grant date 21 July 2021 21 July 2021
Number of nil-cost options granted 65,478 43,977
Grant-date share price (p) 288.0 288.0
Grant-date face value (£) 188,577 126,654
Normal vesting date 21 July 2024 21 July 2024
Performance conditions None None
James Eyre did not receive a 2021 DBP award.
Corporate governance
Norcros plc Annual Report and Accounts 202290
Annual report on remuneration continued
Scheme interests awarded in 2022 (audited information) continued
2021 APSP
During the year under review, the following APSP awards were granted to the Executive Directors:
Nick Kelsall James Eyre
Basis of award 100% of base salary 100% of base salary
Grant date 21 July 2021 21 July 2021
Number of nil-cost options granted 134,885 90,594
Grant-date share price (p) 288.0 288.0
Grant-date face value (£) 388,468 260,910
Normal vesting date 21 July 2024 21 July 2024
Performance period 1 April 2021–31 March 2024 1 April 2021–31 March 2024
Performance conditions Three-year aggregate underlying diluted EPS
to 31 March 2024
Threshold: 103.0p (25% of element vesting)
Maximum: 117.5p (100% of element vesting)
Straight-line vesting between these points
Holding period 21 July 2024–21 July 2026 21 July 2024–21 July 2026
Shaun Smith did not receive a 2021 APSP award.
As disclosed in last year’s Report, the Committee set targets for the 2020 APSP award on the basis of 2023 financial year performance only.
In keeping with its commitment to review this approach for subsequent cycles, the Committee concluded that it would be appropriate
to revert to the previous approach of calibrating EPS targets on a cumulative pence basis over the three-year performance period for 2021
APSP awards.
2022 SAYE
In the year ended 31 March 2022, none of the Executive Directors entered into a savings contract for the 2021 SAYE scheme as they were
already contracted under previous SAYE grants at the HMRC limits.
Total pension entitlements (audited information)
As part of their remuneration arrangements, Nick Kelsall and James Eyre (and, for the period he was employed by the Group, Shaun Smith)
are entitled to receive pension contributions from the Company. Under these arrangements, they can elect for those contributions to be
paid in the form of taxable pension allowance, or direct payments into a personal pension plan or the Group’s UK defined contribution
scheme. If a payment is made in the form of taxable pension allowance, the amount payable is not reduced to allow for employment taxes.
During the year Nick Kelsall elected to take a taxable pension allowance of £58,270 (2021: £53,745) with no amounts paid directly into
apension scheme (2021: £nil). Shaun Smith elected to take a taxable pension allowance of £29,353 (2021: £36,097) with no amount paid
into a personal pension plan (2021: £nil). James Eyre elected to take a taxable pension allowance in connection with his role as CFO for
part of the year of £13,915 (2021: £nil). In line with the Regulations, the single figure table reflects the total of these amounts, as well as the
capitalised increase in accrued pension (net of inflation) under the UK defined benefit scheme, of which Nick Kelsall is a deferred member.
Shaun Smith and James Eyre are not members of the UK defined benefit scheme. Details of Executive Directors’ retirement benefits under
the Group’s UK defined benefit scheme and taxable pension allowances are summarised in the following table:
Director
Accrued
pension
£
Increase in
accrued
pension
net of CPI
£
Transfer
value of net
increase
£
Additional
value of
pension
on early
retirement
£
Pension
value in the
year from
DB scheme
£
Pension value
in the year
from cash
allowance
£
Total
£
Nick Kelsall 24,926 732 27,9 6 4 — 14,640 58,270 72,910
Shaun Smith — — — — — 29,353 29,353
James Eyre — — — — — 13,915 13,915
Annual Report and Accounts 2022 Norcros plc 91
Corporate governance
Single figure for total remuneration for Non-executive Directors (audited information)
The table below sets out a single figure for the total remuneration received by each Non-executive Director for the year ended 31 March
2022 and the prior year:
Total fee
2022
£
2021
£
Gary Kennedy
1
41,500 —
Alison Littley 47,670 43,700
David McKeith
2
100,409 43,700
Mark Allen
3
16,176 93,000
1 Gary Kennedy joined the Board on 8 December 2021.
2 David McKeith assumed the role of Board Chair on an interim basis from 15 April to 8 December 2021. During this period, Mr McKeith received the Board Chair fee on a pro-rata
basis, and did not receive any additional fee for chairing the Audit and Risk Committee. Following Gary Kennedy’s appointment, Mr McKeith’s fees reverted to the NED fee policy in
force for the year under review.
3 Mark Allen stepped down from the Board on 15 April 2021 and received fees for his one-month notice period.
Fees for 2022 reflect a 3% increase on 2021. 2021 fees reflect a 20% pay cut in the first three months of the year, due to the impact
ofCOVID-19 to align the Board experience with that of our employees who were furloughed during that period.
Exit payments made in the year (audited information)
All payments to Shaun Smith in connection with his retirement are included in the single figure table above. The Committee agreed to
treat Shaun Smith as a ‘good leaver’ in respect of his outstanding DBP and APSP awards. In line with our remuneration policy, DBP awards
will continue to vest on the normal vesting date. APSP awards (which have been pro-rated to the date of cessation of employment of
31December 2021) will vest on the normal vesting date subject to the achievement of the performance conditions attaching to each
award. The applicable holding period will continue to apply.
Payments to past Directors (audited information)
No payments to past Directors were made during the year under review.
External appointments in the year
No external appointments were held by the Executive Directors during the year.
Percentage change in Director remuneration
The table below shows the percentage change in Director remuneration from 2021 to 2022, compared with the percentage change
in remuneration for all UK staff employed in continuing operations. A UK subset of employees (who are employed by the UK operating
subsidiary of Norcros plc) was selected as a suitable comparator group for this analysis because the Directors (who are employed or
engaged by Norcros plc) are based in the UK (albeit with global roles and responsibilities) and pay changes across the Group vary widely
depending on local market conditions (in particular fluctuations in the exchange rate between the South African Rand and British Pound).
The comparison uses a per capita figure and accordingly this reflects an average across the Group’s businesses. No account is therefore
taken of the impact of operational factors such as new joiners and leavers and the mix of employees.
Salary or fees
1
Benefits Bonus
Executive Directors
Nick Kelsall 8.4% (0.9%) 3.0%
Shaun Smith 8.4% (1.1% ) 3.0%
James Eyre
2
n/a n/a n/a
Non-executive Directors
Gary Kennedy
3
n/a n/a n/a
Alison Littley 8.4% n/a n/a
David McKeith
4
129.8% n/a n/a
Mark Allen 0% n/a n/a
Martin Towers n/a n/a n/a
Average of other employees 13.0% 4.0% (18.8%)
1 Salary and fee figures are annualised for this comparison. Note that the % increases reflect the impact in FY21 of a temporary voluntary waiver of 20% of salary/fees for three months
by Directors, to align with the experience of employees who were furloughed.
2 No year on year comparison is shown as James Eyre joined the Board during the 2022 financial year.
3 No year on year comparison is shown as Gary Kennedy joined the Board during the 2022 financial year.
4 Year on year comparison reflects the impact of Mr McKeith assuming the role of Board Chair from 15 April to 8 December 2021.
Corporate governance
Norcros plc Annual Report and Accounts 202292
Annual report on remuneration continued
Relative importance of spend on pay
The table below shows shareholder distributions (i.e. dividends – there were no share buybacks in either year) and Norcros’ expenditure
on total employee pay for the year under review and the prior year, and the percentage change year on year.
2022
£m
2021
£m % change
Dividends (i.e. total payments made in year) 9.1 — 100%
Dividend per share (i.e. total dividend per share in pence in respect of year) 10.0p 8.2p 21.9%
Total staff costs 65.9 52.8 24.8%
CEO pay ratio
The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (the Regulations) require certain
companies to disclose the ratio of the Chief Executive’s pay, using the amount set out in the single total figure table (shown in this report
on page 88), to that of the total remuneration of full-time equivalent UK employees at the 25th percentile, median and 75th percentile. The
required information is set out in the table below:
Year Method
25th percentile
pay ratio
Median
pay ratio
75th percentile
pay ratio
2022 Option B 1:37.6 1:35.4 1:20.3
2021 Option B 1:36.2 1:30.5 1:19.9
2020 Option B 1:29.3 1:28.8 1:16.4
CEO pay (£) P25 pay (£) P50 pay (£) P75 pay (£)
2022
Total remuneration 865,789 23,025 24,450 42,720
Base salary 388,470 21,000 23,000 3 8,15 0
2021
Total remuneration 815,581 22,505 26,772 41,080
Base salary 358,297 22,500 26,772 40,600
2020
Total remuneration 591,514 2 0,173 20,543 36,009
Base salary 37 7,15 5 19,329 19,752 35,000
The 25th percentile, median and 75th percentile figures used to determine the above ratios were selected by reference to the hourly pay
figures for the Group’s UK workforce, taken from its gender pay gap statistics for the relevant year and from these identifying the three
employees who are at each percentile point. The full-time equivalent annualised remuneration (comprising salary, benefits, pension,
annual bonus and long-term incentives) for those employees for the year ended 31 March 2022 was then calculated. This methodology
is defined in the Regulations as Option B, which was chosen as the most appropriate methodology given the employee demographics
of the Group’s UK workforce. The trend year on year of pay ratios for each percentile is that the ratios have increased slightly. This is
explained by a proportionately greater increase in the variable elements of the CEO’s remuneration, relative to the comparators and the
resulting impact of continued strong Group performance on incentive outcomes.
Annual Report and Accounts 2022 Norcros plc 93
Corporate governance
Performance graph and table
The following graph shows the ten-year TSR performance of the Company relative to the FTSE All-Share Construction & Materials Index.
This comparator was chosen because the Company is a constituent member of this index.
Total shareholder return
(Value of £100 invested on 31 March 2012)
Investment (£)
31 March
2012
31 March
2013
31 March
2014
31 March
2015
31 March
2016
31 March
2017
31 March
2018
31 March
2019
31 March
2020
31 March
2021
31 March
2022
Norcros
Construction & Materials
400
350
300
250
200
150
100
50
0
The table below details the Group Chief Executive’s single figure of remuneration over the same period:
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
CEO single figure of
remuneration (£000)
Incumbent Nick
Kelsall
Nick
Kelsall
Nick
Kelsall
Nick
Kelsall
Nick
Kelsall
Nick
Kelsall
Nick
Kelsall
Nick
Kelsall
Nick
Kelsall
Nick
Kelsall
Total remuneration £526,282 £ 9 17,5 3 0 £1,161,288 £928,764 £ 1, 0 25,15 8 £971,710 £970,860 £561,776 £815,581 £865,789
Annual bonus (asa %
of max. opportunity) 50% 54% 69% 81% 68% 50% 61% — 100% 100%
APSP vesting (asa%
of max. opportunity) n/a 100% 99% 100% 100% 100% 58% 26% — —
Implementation of Executive Director remuneration policy for the year to 31 March 2023
The Remuneration Committee conducted a thorough review of Executive Directors’ remuneration, effective 1 April 2022. The results
ofthis review are as follows:
Base salary
Base salaries were reviewed taking into account individual performance and competitive practice for similar roles in the Company’s
remuneration peer group, and remuneration awards within the Group. As explained more fully in the Annual Statement on Remuneration
on page 77, Executive Directors’ salaries were reviewed in April 2022 as part of a wider review of remuneration and on a consistent basis
asthe approach taken for the wider workforce.
The Committee concluded from this review that Executive Director pay levels were far below market norms, and that correctional salary
adjustments should also be made to their base salaries. Therefore, for the year ending 31 March 2023, base salaries will be £476,000 p.a.
for Nick Kelsall and £290,000 p.a. for James Eyre.
Pension
There is no change in the contribution percentage for James Eyre (8% of salary) for the year ending 31 March 2023. Nick Kelsall’s contribution
percentage will remain at 15% of salary until 31 December 2022. From 1 January 2023, Nick Kelsall has volunteered a reduction to his contribution
percentage to 8% of salary, to align with the average contribution percentage for the wider UK workforce.
Benefits
There is no change in the car allowance for Executive Directors for the year ending 31 March 2023, which is £15,000 p.a. for Nick Kelsall
and £12,000 p.a. for James Eyre.
Corporate governance
Norcros plc Annual Report and Accounts 202294
Annual report on remuneration continued
Implementation of Executive Director remuneration policy for the year to 31 March 2023 continued
Annual bonus
The annual bonus opportunity for Executive Directors will remain unchanged for the 2023 financial year with a maximum bonus entitlement
of 100% of salary. The bonus outcome for Executive Directors will continue to be based entirely on Group underlying operating profit. Of any
bonus earned 50% will be deferred into nil-cost options for a further three years under the DBP. Annual bonus targets will be disclosed in next
year’s Annual Report on Remuneration, subject to these no longer being considered by the Board to be commercially sensitive.
APSP
The structure of APSP awards to be made in the 2023 financial year will be unchanged from 2022. Awards with face values of 100% of salary
will be granted to the Executive Directors, with vesting subject to the achievement of suitably stretching EPS targets in accordance with the
remuneration policy. To the extent an award vests, vested shares will be subject to a further two-year holding period. The Committee will
determine targets at the time awards are made and these targets (along with other relevant details of this grant) will be disclosed in next
year’s Annual Report on Remuneration.
SAYE
Nick Kelsall and James Eyre will continue to be able to participate in any SAYE contract offered to all employees, on identical terms.
Implementation of Non-executive Director remuneration policy for the year to 31 March 2023
The Committee has reviewed the Board Chair’s fee and concluded to increase this to £145,000 p.a. from 1 April 2022, to reflect Gary Kennedy’s
proven business leadership credentials and broad range of relevant experience. The Board Chair and the Executive Directors reviewed
Non-executive Director fees at the same time and concluded that it was appropriate to increase these, as set out below, to reflect the
growing time commitment of the role. Accordingly, for the 2023 financial year, Non-executive Director fees will be as follows:
Non-executive Director
Fee at
1 April 2022
Fee from
1 April 2021
Percentage
increase
Board Chair £145,000 £128,750 12.6%
Non-executive Director £49,000 £41,200 18.9%
Additional fee for chairing Audit and Risk or Remuneration Committees £7,000 £ 6 ,18 0 13.3%
Executive Director shareholdings (audited information)
The table below shows the shareholding of each Executive Director and their respective shareholding requirement as at 31 March 2022:
Options held
Shares owned
Vested but
not exercised
Unvested
and subject
to performance
Unvested but
not subject
to performance
Shareholding
guideline
% of salary
% current
holding
Requirement
met?
Nick Kelsall 1,697,594 — 329,294 128,726 100% 1,307% Yes
James Eyre 51,007 — 13 3,18 4 10,975 100% 58% Building
Current shareholding is based on shares owned outright and valued using the average share price over twelve months ended 31March2022
of 299p.
Details of the options held are provided in the table opposite.
Annual Report and Accounts 2022 Norcros plc 95
Corporate governance
Directors’ share scheme interests (audited information)
Share options
Scheme
Date
of grant
Vested
date
Expiration
date
Exercise
price
Shares
under
option
1 April
2021
Granted
in 2022
Vested
in 2022
Exercised
in 2022
Lapsed
in 2022
Shares
under
option
31 March
2022
Nick Kelsall DBP 2 5. 07.18 25.0 7. 2 1 2 5.07. 2 8 — 41,337 — — 41,337 — —
2 3.07.19 2 3. 07.22 2 3.07.2 9 — 52,273 — — — — 52,273
21.07.21 2 1. 07. 2 4 21.07.31 — — 65,478 — — — 65,478
Total 93,610 65,478 — 41,337 — 117,751
APSP 25.0 7.18 25 .0 7. 21 25.0 7. 28 — 170,311 — — — 170,311 —
2 3.07.19 2 3. 07.22 2 3.07.2 9 — 176,240 — — — — 176,240
25.11.20 25.11.23 25.11.30 — 194,409 — — — — 194,409
21.07.21 2 1. 07. 2 4 21.07.31 — — 134,885 — — — 134,885
Total 540,960 134,885 — — 170,311 505,534
SAYE 23 .12.2 0 01.0 3.24 01.08.24 164p 10,975 — — — — 10,975
Total 10,975 — — — — 10,975
Shaun Smith DBP 2 5. 07.18 25.0 7. 2 1 2 5.07. 2 8 — 27,76 4 — — 27,76 4 — —
2 3.07.19 2 3. 07.22 2 3.07.2 9 — 3 5,10 8 — — — — 3 5,10 8
21.07.21 21. 07.24 21.07.31 — — 43,977 — — — 43,977
Total 62,872 43,977 — 27,76 4 — 79,085
APSP 25.07.18 25. 07.21 2 5.07.28 — 114,388 — — — 114,388 —
2 3.07.19 2 3. 07.2 2 2 3.0 7. 2 9 — 118,370 — — — — 118,370
25.11.20 25.11.23 25.11.30 — 130,573 — — — — 130,573
Total 363,331 — — — 114,388 248,943
SAYE 13 .12.19 01.03.23 31.08.23 208p 8,674 — — — — 8,674
Total 8,674 — — — — 8,674
James Eyre APSP 2 3.07.19 2 3. 07. 2 2 2 3 .0 7. 2 9 — 38,609 — — — — 38,609
25.11.20 25.11.23 25.11.30 — 42,590 — — — — 42,590
21.07.21 2 1. 07. 2 4 21.07.31 — — 90,594 — — — 90,594
Total 81,19 9 90,594 — — — 171,793
SAYE 23 .12.2 0 01.0 3.24 01.08.24 164p 10,975 — — — — 10,975
Total 10,975 — — — — 10,975
Three-year aggregate
EPS targets March 2023 EPS
1
Three-year
aggregate
EPS targets
Performance % vesting 2 5 . 0 7.18 a wa rd 23.0 7.19 a wa rd 25.11.20 award 21.07.21 award
Threshold 25% 9 6 .1p 105.0p 28.2p 103.0p
Maximum 100% 109.7p 119.1p 3 7.5 p 117.5 p
1 Based on outcome of final year (year to 31 March 2023).
Shareholder dilution
The Group’s share incentive plans operate in line with the Investment Association’s Principles, which require that commitments under all-
share schemes satisfied by newly issued shares must not exceed 10% of the issued share capital in any rolling ten-year period, of which up
to 5% may be used to satisfy options under executive share schemes. The Group’s position against the dilution limits at 31 March 2022 was
4.8% for the all-share schemes limit and 2.6% for executive schemes.
Corporate governance
Norcros plc Annual Report and Accounts 202296
Annual report on remuneration continued
Statement of Directors’ shareholding and share interests (audited information)
Director
31 March 2022
Ordinary shares
31 March 2021
Ordinary shares
Nick Kelsall 1,6 97,59 4 1,675,686
James Eyre 51,007 n/a
Gary Kennedy 4 3,121 —
David McKeith 17,9 41 17,9 41
Alison Littley — —
This report was approved by the Board of Directors on 8 June 2022 and signed on its behalf by:
Alison Littley
Chair of the Remuneration Committee
8 June 2022
Annual Report and Accounts 2022 Norcros plc 97
Corporate governance
Directors’ report
The Directors present their Annual Report and the audited
consolidated financial statements for the year ended
31March 2022.
Principal activities
The Company acts as a holding company for the Norcros Group.
The Company’s registered number is 3691883 and the Company
isregistered and domiciled in England.
Results and dividends
The information that fulfils the requirements of the Business
Review, which is incorporated in the Directors’ Report by reference,
including the review of the Group’s business and future prospects,
is included in the Chair’s Statement, the Chief Executive Officer’s
Statement and the Strategic Report on pages 2 to 62. Key
performance indicators are shown on page 20.
The Directors recommend a final dividend for the year ended
31March 2022 of 6.9p (2021: 8.2p). This follows the decision to pay
an interim dividend earlier in the year of 3.1p (2021: £nil).
Directors’ and officers’ liability insurance and
indemnities
The Company purchases liability insurance cover for its Directors
and officers which gives appropriate cover for any legal action
brought against them. The Company also provides an indemnity
for its Directors (to the extent permitted by the law) in respect
of liabilities which could occur as a result of their office. This
indemnity does not provide cover should a Director be proven
tohave acted fraudulently or dishonestly.
Purchase of own shares
In 2007 the Company formed the Norcros Employee Benefit
Trust (the Trust). The purpose of the Trust is to meet part of the
Company’s liabilities under the Company’s share schemes. The
Trust acquired 69,101 shares during the year (2021: 132,551). At
the Company’s 2021 Annual General Meeting, the shareholders
authorised the Company to make market purchases of up to
8,088,700 ordinary shares. At the forthcoming Annual General
Meeting, shareholders will be asked to renew the authority to
purchase its own shares for another year. Details are contained
inthe AGM Notice of Meeting on pages 146 to 152.
Employees/fostering business relations
Details of the Group’s engagement with, and policies towards,
its employees are contained on pages 48 and 49. Details of how
the Group fosters good business relations with its suppliers and
other business partners are contained on pages 60 to 62. All these
details form part of the Directors’ Report and are incorporated into
it by cross-reference.
Directors
Biographical details of the present Directors are set out on pages
64 and 65 and on the Company’s website: www.norcros.com. The
Directors who served during the year and to the date of this report
are set out below:
Director Role
Gary Kennedy Chair
(appointed 8 December 2021)
David McKeith Non-executive Director (Acting Chair from 16
April 2021 to 7 December 2021)
Alison Littley Non-executive Director
Nick Kelsall Chief Executive Officer
James Eyre Chief Financial Officer
(appointed 1 August 2021)
Shaun Smith Chief Financial Officer (until 31 July 2021)
The interests of the Directors in the shares of the Company at
31March 2022 and 31 March 2021 are shown on page 96.
Substantial shareholdings
As at 7 June 2022 the Company had received notification that the
following were interested in voting rights representing 3% or more
of the Company’s issued share capital:
Name
% of total
voting rights
Premier Miton Group 9.07
Canaccord Genuity Group Inc 8.85
J O Hambro Capital Management Ltd 8.82
FIL Ltd 6.81
SVM Asset Management 5.14
Allianz Global Investors GmbH 4.56
M&G plc 4.34
Energy and greenhouse gas emissions reporting
The Board has included emissions data in the ESG section in
order to meet the Company’s obligation under The Companies
(Directors’ Report) and Limited Liability Partnerships (Energy
and Carbon Report) Regulations 2018 to disclose the Group’s
worldwide emissions of the “greenhouse gases” (GHGs)
attributable to human activity measured in tonnes of carbon
dioxide equivalent.
Corporate governance
Norcros plc Annual Report and Accounts 202298
Directors’ report continued
Energy and greenhouse gas emissions reporting
continued
We have reported on all of the emission sources, being Scope 1 and
Scope 2 emissions. These are emissions from activities for which the
Group is responsible, plus emissions resulting from the purchase of
electricity, heat, steam or cooling by a business in the Group for its own
use. Also reported are the figures for aggregate energy consumed by
the Group, expressed in kWh. These sources use the same reporting
boundary as for our consolidated financial statements. We do not
have responsibility for any emission sources that are not included in
our consolidated financial statements. We use as our chosen intensity
measure the ratio of total emissions (measured in tonnes of CO
2
e) to
the total revenue of the Group (£396.3m). This ratio is chosen because
it enables us on a consistent basis year on year to compare energy use
relative to the overall level of business activity in revenue terms.
The Group recognises that its Scope 1 and 2 GHG emissions only
reflect a proportion of our total carbon footprint across the value
chain. A more holistic approach to reducing our indirect impacts
will be required to deliver the scale of reductions demanded by the
climate science, and we keep the embodied carbon impacts of the
materials we use and of our logistics supply chain under review.
We have used the GHG Protocol Corporate Accounting and Reporting
Standard (revised edition), data gathered to fulfil our requirements
under the CRC Energy Efficiency Scheme, and emission factors
from the UK Government’s GHG Conversion Factors for Company
Reporting 2018. We use the best information available to us, such
as invoice data or measured energy usage. Where no more suitable
data sources are available, we have used, where practicable, estimates
based on the appropriate information that is available to the Group.
Political donations
There were no political donations (2021: £nil).
Research and development
The Group’s expenditure on research and development is
disclosed in note 3 to the financial statements and is focused on
the development of new products.
Corporate governance
Details of the Group’s corporate governance are contained on
pages 66 to 69. This Corporate Governance Report forms part of
the Directors’ Report and is incorporated into it by cross-reference.
Going concern
Having taken into account the principal risks and uncertainties
facing the Group detailed on pages 36 to 40 in the Strategic
Report, the Board considers it appropriate to prepare the financial
statements on the going concern basis, as explained in note 1
tothe financial statements.
Financial risk management
The Group’s operations expose it to a variety of financial risks.
Details of the risks faced by the Group are provided in note 21
tothe financial statements.
Takeover directive
The Company has only one class of shares, being ordinary shares,
which have equal voting rights. The holdings of individual Directors
are disclosed on page 96.
There are no significant agreements to which the Company is a
party which take effect, alter or terminate in the event of a change
of control of the Company, except for the banking facilities dated
7March 2022 in respect of the £130.0m unsecured revolving
credit facility and the £70.0m accordion facility which contain
mandatory prepayment provisions on a change of control.
There are no provisions within Directors’ employment contracts
which allow for specific termination payments upon a change
of control.
Statement of disclosure of information to auditor
In the case of each of the persons who are Directors, the
following applies:
(a) so far as the Director is aware, there is no relevant audit
information of which the Company’s auditor is unaware; and
(b) they have taken all the steps that they ought to have taken as
a Director in order to make themselves aware of any relevant
audit information and to establish that the Company’s auditor
is aware of that information.
Independent auditor
A resolution to re-appoint BDO LLP as auditor to the Company
willbe proposed at the Annual General Meeting.
Annual General Meeting
The Annual General Meeting of the Company will take place at
11.00 am on 19 July 2022 at The Mere Golf Resort & Spa, Chester
Road, Mere, Knutsford, Cheshire WA16 6LJ. The notice convening
that meeting, together with the resolutions to be proposed, appears
on pages 146 to 152 of this document. The Directors recommend
that all shareholders vote in favour of all of the resolutions to be
proposed, as the Directors intend to do so in respect of their own
shares, and consider that they are in the best interests of the
Company and the shareholders as a whole.
By order of the Board
Richard Collins
Company Secretary
8 June 2022
Annual Report and Accounts 2022 Norcros plc 99
Corporate governance
Statement of Directors’ responsibilities
In respect of the Annual Report, the Directors’
Remuneration Report and the financial statements
The Directors are responsible for preparing the Annual Report, the
Directors’ Remuneration Report and the financial statements in
accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors are required
to prepare the Group financial statements in accordance with UK
adopted international accounting standards and have elected
to prepare the Company financial statements in accordance
with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards and applicable law).
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of the
profit or loss of the Group for that period. In preparing the financial
statements, the Directors are required to:
• select suitable accounting policies and then apply
themconsistently;
• state whether applicable international accounting standards
have been followed for the Group financial statements and
United Kingdom Accounting Standards, comprising FRS 101,
have been followed for the Company financial statements,
subject to any material departures disclosed and explained
inthe financial statements;
• make judgements and accounting estimates that are reasonable
and prudent;
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and
Company will continue in business; and
• prepare a Directors’ Report, a Strategic Report and Directors’
Remuneration Report which comply with the requirements
oftheCompanies Act 2006.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Company’s transactions and disclose with reasonable accuracy
at any time the financial position of the Group and Company
and enable them to ensure that the financial statements and the
Directors’ Remuneration Report comply with the Companies Act
2006 and, as regards the Group financial statements, Article 4
ofthe IAS Regulation.
They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities. The Directors are
responsible for ensuring that the Annual Report and Accounts,
taken as a whole, are fair, balanced, and understandable and
provides the information necessary for shareholders to assess the
Group’s performance, business model and strategy.
Website publication
The Directors are responsible for ensuring the Annual Report
and the financial statements are made available on a website.
Financial statements are published on the Company’s website
in accordance with legislation in the United Kingdom governing
the preparation and dissemination of financial statements, which
may vary from legislation in other jurisdictions. The maintenance
and integrity of the Company’s website is the responsibility of the
Directors. The Directors’ responsibility also extends to the ongoing
integrity of thefinancial statements contained therein.
Directors’ responsibilities pursuant to DTR4
The Directors confirm to the best of their knowledge:
• the financial statements have been prepared in accordance with
the applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit and loss
of the Group; and
• the Annual Report includes a fair review of the development and
performance of the business and the financial position of the
Group and Company, together with a description of the principal
risks and uncertainties that they face.
Nick Kelsall James Eyre
Chief Executive Officer Chief Financial Officer
8 June 2022
Norcros plc Annual Report and Accounts 2022100
Financial
statements
101 Independent auditor’s report
107 Consolidated income statement
108 Consolidated statement
ofcomprehensiveincome
109 Consolidated balance sheet
110 Consolidated cash flow statement
111 Consolidated statement of changes
inequity
112 Notes to the Group accounts
140 Parent Company balance sheet
141 Parent Company statement
ofchangesinequity
142 Notes to the Parent Company accounts
Annual General Meeting
146 Notice of Annual General Meeting
148 Explanatory notes
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Annual Report and Accounts 2022 Norcros plc 101
Financial statements
Independent auditor’s report
to the members of Norcros plc
Opinion on the financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 March 2022
andof the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards;
• the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Norcros plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended
31 March 2022 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the
consolidated and parent company balance sheets, the consolidated cash flow statement, the consolidated and parent company
statements of changes in equity and notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and
UKadopted international accounting standards. The financial reporting framework that has been applied in the preparation of the Parent
Company financial statements is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard
101Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is
consistent with the additional report to theaudit committee.
Independence
Following the recommendation of the audit committee, we were appointed by the shareholders on 30 July 2020 to audit the financial
statements for the year ended 31 March 2021 and subsequent financial periods. The period of total uninterrupted engagement including
retenders and reappointments is two years, covering the years ended 31 March 2021 to 31 March 2022. We remain independent of the
Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the
UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. The non-audit services prohibited by that standard were not provided to the Group or the
Parent Company.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and the Parent Company’s ability to
continue to adopt the going concern basis of accounting included:
• We obtained management’s assessment that supports the Directors’ conclusions with respect to the disclosures provided around
going concern and viability;
• We challenged the rationale for the assumptions utilised in the forecasts, using our knowledge of the business, the sector and wider
commentary available from competitors and peers;
• We considered the appropriateness of management’s forecasts by testing their mechanical accuracy, assessing historical forecasting
accuracy and understanding management’s consideration of downside sensitivity analysis;
• We obtained an understanding of the financing facilities from the finance agreements, including the nature of the facilities, covenants
and attached conditions;
• We assessed the facility and covenant headroom calculations, and reperformed sensitivities on management’s base case and stressed
case scenarios; and
• We reviewed the wording of the going concern disclosures, and assessed its consistency with the directors’ assessment of going
concern, including underlying management forecasts.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Group and the Parent Company’s ability to continue as a going concern for a period of
atleast twelve months from when the financial statements are authorised for issue.
In relation to the Parent Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing material
toadd or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered
itappropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections
ofthis report.
Financial statements
Norcros plc Annual Report and Accounts 2022102
Independent auditor’s report continued
to the members of Norcros plc
Overview
Coverage
94% (2021: 91%) of Group profit before tax
85% (2021: 84%) of Group revenue
88% (2021: 87%) of Group total assets
Key audit matters
2022 2021
Pension scheme assumptions
Going Concern, specifically due to Covid-19
Going Concern is no longer considered to be a key audit matter in the current year, given the general easing
of Covid-19 restrictions in the key geographies in which the group operates.
Materiality
Group financial statements as a whole
£1.6m (2021: £1.24m) based on 5% of the current year (2021: 5% on three year average basis) Profit before
tax adjusted for certain non-underlying items, including acquisition costs and exceptional items.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of
internalcontrol, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management
override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk
ofmaterialmisstatement.
Our Group audit scope focused on the Group’s principal operating locations, being those in the UK, Ireland and South Africa. In the UK
and Ireland, Norcros operates under seven separate divisions: Triton, Merlyn, Vado, Johnson Tiles, Croydex, Abode and Norcros Adhesives.
In South Africa there are four divisions: Johnson Tiles South Africa, TAL, House of Plumbing and Tile Africa.
Consistent with the group’s operations, we scoped our audit at a divisional level. In the UK, full scope audits were performed by the Group
engagement team on the significant components, Triton, Vado, Johnson Tiles, and the Parent Company.
The four South African divisions together with the Merlyn division, whose finance team is based in Ireland, were considered to be
significant components and were subject to full scope audits by BDO member firms in South Africa and Ireland respectively.
The remaining components of the Group were considered not-significant and these components were principally subject to analytical
review procedures by the Group engagement team.
Our involvement with component auditors
For the work performed by component auditors, we determined the level of involvement needed in order to be able to conclude
whether sufficient appropriate audit evidence has been obtained as a basis for our opinion on the Group financial statements as a whole.
Ourinvolvement with component auditors included the following:
The Responsible Individual and senior members of the Group audit team were involved at all stages of the audit process, directing the
planning and risk assessment work.
Detailed Group instructions were sent to the component auditors, which included the principal areas to be covered by the audits,
materiality levels, significant risks, fraud risks and other significant auditing and accounting matters, and further set out the information
tobe reported to the Group audit team.
The UK engagement team attended planning calls with both the South African and Irish teams where the scope of their work was
discussed, as well as attending planning calls with divisional management. The UK engagement team reviewed the working papers of the
overseas teams and attended meetings with the overseas teams and the respective divisional management teams following completion
of the work.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified,
including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts
of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Annual Report and Accounts 2022 Norcros plc 103
Financial statements
An overview of the scope of our audit continued
Key audit matters continued
Key audit matter How the scope of our audit addressed the key audit matter
Pension Scheme
Assumptions
Refer to Note
1 – summary
of significant
accounting policies,
key sources
of estimation
uncertainty and
critical judgements in
applying the group’s
accounting policies
and also to Note 24.
The group has a defined benefit pension plan with
a net scheme asset of £19.6m (2021 net scheme
liability: £18.3m).
We consider there to be a significant risk concerning
the appropriateness of the actuarial assumptions
applied in calculating the group’s defined benefit
pension scheme liability of £368.3m (2021: £416.1m)
as shown in Note 24.
The valuation of the group’s pension scheme liability
was performedby management’s external actuary
and involves significant judgement from the directors
and the actuary in the choice of discount rate used
and in the key sources of estimation uncertainty,
in particular in relation to the inflation assumptions
and mortality rates, as described in the group’s
accounting policies.
We obtained the report from management’s actuary used
invaluing the scheme’s liabilities, from which we assessed
the appropriateness of the assumptions underpinning the
valuation ofthe scheme liabilities.
Specifically, we challenged the discount rate, inflation and
mortality assumptions applied in the calculation by using
our auditor engaged pension experts to benchmark the
assumptions applied against comparable third-party data
and assessed the appropriateness of the assumptions in
the context of the group’s own position.
Key observations:
Based on our audit work, we considered the assumptions
used in the calculation of the pension liability were within
an acceptable range.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements.
Weconsider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions
ofreasonable users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily
be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their
occurrence, when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the Group financial statements as a whole and performance
materiality as follows:
Group Parent Company
2022
£m
2021
£m
2022
£m
2021
£m
Materiality 1.60 1.24 0.48 0.37
Basis for
determining
materiality
5% of Profit before tax
adjusted for certain
non-underlying items,
including acquisition costs
and exceptional items.
5% of three year average
ofProfit before tax
adjusted for certain
non-underlying items,
including acquisition
costs, impairment and
exceptional items
Set based on 30%
ofGroupmateriality.
Set based on 30%
ofGroupmateriality.
Rationale for the
benchmark applied
We considered that using
this basis for determining
materiality was most
appropriate based on
the underlying trading
performance of the Group,
eliminating non-recurring
items and in the interests
of the users of the
financialstatements.
We did not use a three-year
average profit before tax
figure in the current year
as profits had stabilised
and therefore using a
three year average was
notdeemedappropriate.
We considered that using
this basis for determining
materiality was most
appropriate as this
provided a consistent
year on year basis for
determining materiality
based on the underlying
trading performance of
the Group, but eliminating
non-recurring items. It also
reflects the interests of
the users of the financial
statements. A three year
average was used given
the fluctuating level of
profit before tax from
the impact of Covid-19
duringthe period.
Calculated as a
percentageof Group
materiality for Group
reporting purposes,
taking account of the
aggregation risk.
Calculated as a
percentageof Group
materiality for Group
reporting purposes,
taking account of the
aggregation risk.
Financial statements
Norcros plc Annual Report and Accounts 2022104
Independent auditor’s report continued
to the members of Norcros plc
Group Parent Company
2022
£m
2021
£m
2022
£m
2021
£m
Performance
materiality
1.1 0.80 0.34 0.24
Basis for
determining
performance
materiality
70% of materiality
This has increased from
65% in 2021 to 70%,
given this is our second
year as auditor and we
therefore can reflect on
the experience of the
prioryear when setting
thisbenchmark.
65% of materiality
This was considered
appropriate given this was
the first year that we acted
as auditor of the group.
70% of materiality
This has increased from
65% in 2021 to 70%,
given this is our second
year as auditor and we
therefore can reflect on
the experience of the
prioryear when setting
thisbenchmark.
65% of materiality
This was considered
appropriate given this was
the first year that we acted
as auditor of the group.
Parent Company statutory materiality
We set materiality for the statutory audit of the Parent Company at £3.58m which represents 3% of Net Assets. Net assets was determined
as the most appropriate measure on which to base materiality for the statutory audit of the Parent Company financial statements as the
principal activity of the company is that of a holding company. We further applied performance materiality levels of 70% of the statutory
materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated.
Component materiality
We set materiality for each component of the Group based on a percentage of between 30% and 48% of Group materiality dependent
on the size and our assessment of the risk of material misstatement of that component. Component materiality ranged from £0.48m to
£0.77m. In the audit of each component, we further applied performance materiality levels of 70% of the component materiality to our
testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £48,000 (2021: £25,000).
We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
Other information
The directors are responsible for the other information. The other information comprises the information included in the Annual Report
and Accounts 2022 other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements
does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information
is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to
be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine
whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed,
weconclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Our application of materiality continued
Annual Report and Accounts 2022 Norcros plc 105
Financial statements
Corporate governance statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the parent company’s compliance with the provisions of the UK Corporate Governance
Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements or our knowledge obtained during the audit.
Going concern
and longer-term
viability
• The Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting
and any material uncertainties identified set out on page 98; and
• The Directors’ explanation as to their assessment of the Group’s prospects, the period this assessment covers
andwhy the period is appropriate set out on page 41
Other Code
provisions
• Directors’ statement on fair, balanced and understandable set out on page 71;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out
onpage 36;
• The section of the annual report that describes the review of effectiveness of risk management and internal control
systems set out on page 73; and
• The section describing the work of the audit committee set out on page 72
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies
Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic Report
and Directors’
Report
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic report and the Directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
• the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and Parent Company and its environment obtained in
the course of the audit, we have not identified material misstatements in the strategic report or the Directors’ report.
Directors’
remuneration
In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance
with the Companies Act 2006.
Matters on which
we are required
to report by
exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires
usto report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the Parent Company financial statements and the part of the Directors’ remuneration report to be audited are not
inagreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in Statement of Directors’ responsibilities, the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary
to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Financial statements
Norcros plc Annual Report and Accounts 2022106
Independent auditor’s report continued
to the members of Norcros plc
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below:
Based on our understanding and accumulated knowledge of the Group and the sectors in which it operates we considered the risk of acts
by the Group which were contrary to applicable laws and regulations, including fraud and whether such actions or non-compliance might
have a material effect on the financial statements. These included but were not limited to those that relate to the form and content of the
financial statements, such as the Group accounting policies, international accounting standards, the UK Companies Act 2006, the Listing
Rules and the UK Corporate Governance Code; and industry related such as compliance with health and safety legislation, employment
law and taxation legislation. We communicated relevant laws and regulations to all team members, including component audit teams,
toensure they were aware of any relevant regulations in relation to their work.
We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk
of override of controls), and determined that the principal risks were related to posting inappropriate journal entries, revenue being
recognised in the correct period around the year end and management bias in accounting estimates.
Our audit procedures included, but were not limited to:
• Obtaining an understanding of the control environment in monitoring compliance with laws and regulations.
• Discussions with management and the Directors, including consideration of known or suspected instances of non-compliance with
laws and regulation and fraud;
• Reviewing minutes of Board meetings throughout the period to corroborate our enquiries and to identify any other matters not already
disclosed by management and the Directors; and
• Agreeing the financial statement disclosures to underlying supporting documentation;
• Challenging assumptions and judgements made by management in their significant accounting estimates, in particular in relation
tothe Group’s defined benefit pension scheme liabilities (see key audit matter above) and customer rebate, incentive and promotional
support accruals;
• Testing a sample of revenue transactions around the year end to supporting documentation (including invoice and proof of delivery)
forall significant components to assess if the revenue had been recorded in the correct period;
• Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations or including
specific keywords;
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of
not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit
procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected
in the financial statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Parent Company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Parent Company and the Parent Company’s members as a body, for our audit work, for this report, or for the
opinions we have formed.
Gary Harding (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Manchester
United Kingdom
8 June 2022
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Annual Report and Accounts 2022 Norcros plc 107
Financial statements
Consolidated income statement
Year ended 31 March 2022
Notes
2022
£m
2021
£m
Continuing operations
Revenue 2 396.3 324.2
Underlying operating profit 41.8 33.8
IAS 19R administrative expenses 24 () ()
Acquisition related costs 5 (4.8 ) (3.7 )
Exceptional operating items 5 0.9 (3.8 )
Operating profit 36.2 24.9
Finance costs 6 (2.8 ) (5.4 )
IAS 19R finance cost 24 () ()
Profit before taxation 33.0 18.5
Taxation 7 (7.3 ) (3.5 )
Profit for the year attributable to equity holders of the Company 25.7 15.0
Earnings per share attributable to equity holders of the Company
Basic earnings per share:
From profit for the year 9 31.8 p 18.6 p
Diluted earnings per share:
From profit for the year 9 31.2 p 18.6 p
Weighted average number of shares for basic earnings per share (millions) 9 80.9 80.6
Alternative performance measures
Underlying profit before taxation (£m) 8 39.3 30.6
Underlying earnings (£m) 8 31.5 25.1
Basic underlying earnings per share 9 38.9 p 31.2 p
Diluted underlying earnings per share 9 38.2 p 31.1 p
Financial statements
Norcros plc Annual Report and Accounts 2022108
Consolidated statement of comprehensive income
Year ended 31 March 2022
Notes
2022
£m
2021
£m
Profit for the year 25.7 15.0
Other comprehensive income and expense:
Items that will not subsequently be reclassified to the Income Statement
Actuarial gains on retirement benefit obligations 24 27.5 24.1
Items that may be subsequently reclassified to the Income Statement
Cash flow hedges – fair value gain/(loss) in year 21 3.0 (1.5 )
Foreign currency translation of foreign operations 3.6 5.3
Other comprehensive income for the year 34.1 27.9
Total comprehensive income for the year attributable to equity holders of the Company 59.8 42.9
Items in this statement are disclosed net of tax.
Annual Report and Accounts 2022 Norcros plc 109
Financial statements
Consolidated balance sheet
At 31 March 2022
Notes
2022
£m
2021
£m
Non-current assets
Goodwill 11 6 1. 2 6 0.8
Intangible assets 12 2 9 .1 3 2.8
Property, plant and equipment 13 29. 0 2 8.0
Pension scheme asset 24 19. 6 —
Right of use assets 14 19 .9 19. 6
Current assets
Inventories 15 10 0 .6 7 8 .1
Trade and other receivables 16 7 1 .1 6 4.6
Derivative financial instruments 21 1. 6 —
Cash and cash equivalents 17 2 7. 4 28.3
Current liabilities
Trade and other payables 18 (10 2 . 4 ) (9 5.4 )
Lease liabilities 19 (5.7 ) (5.4 )
Current tax liabilities (2 .7 ) (1. 0 )
Derivative financial instruments 21 — (2 .3 )
(11 0 . 8 ) (1 0 4 .1 )
Net current assets 8 9.9 6 6.9
Total assets less current liabilities 2 4 8 .7 2 0 8 .1
Non-current liabilities
Financial liabilities – borrowings 20 (18 . 8 ) (17.8 )
Pension scheme liability 24 — (18. 3 )
Lease liabilities 19 (1 8.3 ) (18 .8 )
Deferred tax liabilities 22 (9.4 ) (0 .5 )
Other non-current liabilities 26 (0.3 ) (0.3 )
Provisions 23 (1. 6 ) (4.0 )
(4 8.4 ) (5 9.7 )
Net assets 20 0.3 14 8. 4
Financed by:
Share capital 25 8 .1 8 .1
Share premium 30. 3 3 0. 2
Retained earnings and other reserves 16 1. 9 1 1 0 .1
Total equity 20 0.3 14 8. 4
The financial statements of Norcros plc, registered number 3691883, on pages 107 to 139, were authorised for issue on 8 June 2022 and
signed on behalf of the Board by:
Nick Kelsall James Eyre
Chief Executive Officer Chief Financial Officer
Financial statements
Norcros plc Annual Report and Accounts 2022110
Consolidated cash flow statement
Year ended 31 March 2022
Notes
2022
£m
2021
£m
Cash generated from operations 27 23.6 60.0
Income taxes paid (6.5 ) (3.5 )
Interest paid (2.5 ) (3.2 )
Net cash generated from operating activities 14.6 53.3
Cash flows from investing activities
Purchase of property, plant and equipment and intangible assets (5.4 ) (2.8 )
Net cash used in investing activities (5.4 ) (2.8 )
Cash flows from financing activities
Proceeds from issue of ordinary share capital 0.1 0.3
Principal element of lease payments (4.7 ) (4.3 )
Drawdown of borrowings 25.0 —
Repayment of borrowings (23.0 ) (66.0 )
Dividends paid to the Company’s shareholders 28 (9.1 ) —
Net cash used in financing activities (11.7 ) (70.0 )
Net decrease in cash at bank and in hand and bank overdrafts (2.5 ) (19.5 )
Cash at bank and in hand and bank overdrafts at the beginning of the year 28.3 47.2
Exchange movements on cash and bank overdrafts 1.6 0.6
Cash at bank and in hand and bank overdrafts at the end of the year 27.4 28.3
Annual Report and Accounts 2022 Norcros plc 111
Financial statements
Consolidated statement of changes in equity
Year ended 31 March 2022
Ordinary
share
capital
£m
Share
premium
£m
Treasury
reserve
£m
Hedging
reserve
£m
Translation
reserve
£m
Retained
earnings
£m
Total
equity
£m
At 1 April 2020 8 .1 2 9.9 (0. 4 ) — (2 1.7 ) 8 8.5 10 4. 4
Comprehensive income:
Profit for the year — — — — — 15 .0 15.0
Other comprehensive
(expense)/income:
Actuarial gain on retirement
benefit obligations — — — — — 2 4 .1 2 4 .1
Fair value loss on cash flow hedges — — — (1. 5 ) — — (1. 5 )
Foreign currency translation
adjustments — — — — 5.3 — 5.3
Total other comprehensive
(expense)/income for the year — — — (1. 5 ) 5.3 2 4 .1 27 .9
Transactions with owners:
Shares issued — 0.3 — — — — 0.3
Dividends paid — — — — — — —
Settlement of share option schemes — — 0.3 — — (0.5 ) (0.2 )
Value of employee services — — — — — 1. 0 1.0
At 31 March 2021 8 .1 3 0. 2 ( 0 .1 ) (1. 5 ) (16. 4 ) 12 8 .1 14 8. 4
Comprehensive income:
Profit for the year — — — — — 2 5 .7 2 5 .7
Other comprehensive income:
Actuarial gain on retirement
benefit obligations — — — — — 2 7. 5 2 7. 5
Fair value gain on cash flow hedges — — — 3.0 — — 3.0
Foreign currency translation
adjustments — — — — 3.6 — 3.6
Total other comprehensive
income for the year — — — 3.0 3.6 2 7. 5 3 4 .1
Transactions with owners:
Shares issued — 0 .1 — — — — 0 .1
Dividends paid — — — — — (9 .1 ) (9 .1 )
Value of employee services — — — — — 1 .1 1 .1
At 31 March 2022 8 .1 30.3 (0 .1 ) 1. 5 (12 . 8 ) 17 3 . 3 20 0. 3
Financial statements
Norcros plc Annual Report and Accounts 2022112
Notes to the Group accounts
Year ended 31 March 2022
1. Group accounting policies
General information
andinnovative bathroom and kitchen products mainly in the UK and South Africa.
The Company is incorporated in the UK as a public company limited by shares and registered in England and Wales. The shares of the
Company are listed on the premium segment of the London Stock Exchange market of listed securities. The address of its registered
office is Ladyfield House, Station Road, Wilmslow SK9 1BU, UK . The Company is domiciled in the UK .
Basis of preparation
The consolidated financial statements have been prepared under the historical cost convention, except for derivative financial
instruments which are stated at their fair value. On 31 December 2020, IFRS as adopted by the European Union at that date was brought
into UK law and became UK-adopted International Accounting Standards, with future changes being subject to endorsement by the UK
Endorsement Board. The Group transitioned to UK-adopted International Accounting Standards in its consolidated financial statements
from this date. This change constitutes a change in accounting framework. However, there is no impact on recognition, measurement
ordisclosure in the period reported as a result of the change in framework.
The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving
a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial
statements, are detailed in the section on critical estimates on page 113. Although these estimates are based on management‘s best
knowledge of amounts, events or actions, actual results may differ from expectations.
Accounting reference date
UK company law permits a company to draw up financial statements to a date seven days either side of its accounting reference date.
For operational reasons the Company has in the current financial year adopted an accounting period of 52 weeks, and as a result of this,
the exact year-end date was 3 April 2022. All references to the financial year therefore relate to the 52 weeks commencing on 5 April 2021.
Inthe previous year the accounting period was 52 weeks, beginning on 6 April 2020 and ending on 4 April 2021.
Going concern
In adopting the going concern basis for preparing the financial statements, the Directors have considered the Group’s business activities
and the principal risks and uncertainties including current macroeconomic factors in the context of the current operating environment.
TheGroup, in acknowledging its TCFD requirements, has also considered climate risks in the financial statements.
A going concern financial assessment was developed on a bottom-up basis by taking the output of the annual budgeting process built up
by individual businesses and then subjected to review and challenge by the Board. The acquisition of Grant Westfield was also reflected
in the assessment. The financial model was then stress tested by modelling the most extreme but plausible scenario, that being further
national lockdowns as a result of a resurgent COVID-19 pandemic. This has been based on the actual impact of the COVID-19 pandemic
on the Group, which at its peak saw a revenue reduction of 25% on the prior year over a six-month period. The scenario also incorporates
management actions the Group has at its disposal including a number of cash conservation and cost reduction measures including
capital expenditure reductions, dividend decreases and restructuring activities.
The Group continues to exhibit sufficient and prudent levels of liquidity headroom against our key banking financial covenants during
the twelve-month period under assessment. Reverse stress testing has also been applied to the financial model, which represents a
further decline in sales compared with the reasonable worst case. Such a scenario, and the sequence of events which could lead to it,
isconsidered to be implausible and remote.
As a result of this detailed assessment, the Board has concluded that the Company is able to meet its obligations when they fall due for a
period of at least twelve months from the date of this report. For this reason, the Company continues to adopt the going concern basis for
preparing the Group financial statements. In forming this view, the Board has also concluded that no material uncertainty exists in its use
of the going concern basis of preparation.
Summary of significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out as follows. These policies have been
consistently applied to all periods presented.
We are not aware of any new, amended or forthcoming accounting standards that will have a material impact on the financial statements
of the Group in the current year or future years.
Basis of consolidation
Subsidiaries
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to or has rights
tovariable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
The results of subsidiaries acquired or disposed of in the year are included in the consolidated financial statements from the date on
which the Group has the ability to exercise control and are no longer consolidated from the date that control ceases. Costs related
totheacquisition or disposal are not included in underlying operating profit.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring them into line with those used by the Group.
All intra-Group transactions, balances, income and expenses are eliminated on consolidation.
Annual Report and Accounts 2022 Norcros plc 113
Financial statements
1. Group accounting policies continued
Summary of significant accounting policies continued
Basis of consolidation continued
Subsidiaries continued
On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair value at the date of acquisition
and, where necessary, the accounting policies of acquired subsidiaries are adjusted to bring them in line with those of the Group. Any excess
of the consideration (excluding payments contingent on future employment) over the fair values of the identifiable net assets acquired
is recognised as goodwill. Any deficiency in the cost of acquisition below the fair values of the identifiable net assets acquired (discount
on acquisition) is credited to the Income Statement in the period of acquisition. Payments that are contingent on future employment are
charged to the Consolidated Income Statement. All acquisition costs are expensed as incurred.
Key sources of estimation uncertainty and critical judgements in applying the Group’s accounting policies
The Group’s accounting policies have been set by management and approved by the Audit and Risk Committee. The application of these
accounting policies to specific scenarios requires estimates and judgements to be made concerning the future. Under IFRS, estimates or
judgements are considered critical where they involve a significant risk that may cause a material adjustment to the carrying amounts of
assets and liabilities from period to period. This may be because the estimate or judgement involves matters which are highly uncertain,
or because different estimation methods or assumptions could reasonably have been used. Once identified, critical estimates and
judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events
that are believed to be reasonable under the circumstances.
Key sources of estimation uncertainty
The key assumption concerning the future, and other key sources of estimation uncertainty at the Balance Sheet date, that has a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year is:
• retirement benefit obligations – accounting for retirement benefit schemes under IAS 19 (revised) requires an assessment of the future
benefits payable in accordance with actuarial assumptions. The future inflation assumptions applied in the calculation of scheme
liabilities, which are set out in note 24, represent a key source of estimation uncertainty for the Group.
Critical judgements in applying the Group’s accounting policies
In the process of applying the Group’s accounting policies, the Directors have made the following judgements that have the most
significant effect on the amounts recognised in the financial statements (apart from those involving estimations, which are dealt with
above) and have been identified as being particularly complex or involve subjective assessments:
• acquired intangible fixed assets – intangible assets can only be recognised as part of a business combination where the intangible
asset is separable from goodwill, can be reliably measured and is expected to generate future economic benefits. Judgement is
required to assess whether these criteria are met and also to subsequently determine the appropriate assumptions which are used to
place a value on the intangible asset. Had different assumptions been applied, the valuation of acquired intangible assets could have
differed from the amount ultimately recognised. Judgement is also needed to determine the useful economic lives of intangible assets
and if a different period had been determined this could have resulted in amortisation charges differing from those actually recognised;
• retirement benefit obligations – accounting for retirement benefit schemes under IAS 19 (revised) requires an assessment of the future
benefits payable in accordance with actuarial assumptions. The choice of discount rate and mortality assumptions applied in the
calculation of scheme liabilities is a key judgement in applying the Group’s accounting policy. Details of the accounting policies applied
in respect of retirement benefit schemes are set out in note 24;
• defined benefit pension scheme surplus – management has concluded that the Group has an unconditional right to a refund from
the UK defined benefit pension scheme once the liabilities have been discharged and that the trustees of the scheme do not have the
unilateral right to wind up the scheme. Therefore the asset is not restricted and no additional liability was recognised. See note 24 for
further details of the scheme; and
• customer rebate, incentive and promotional support accruals – a number of the Group’s customers are offered rebates, incentives
and promotional support in order to encourage trade and cement strong relationships. Accounting for such arrangements involves
judgement as agreement periods typically run for a number of months or years and may involve assumptions around volumes of
product purchased or sold into the future. However, where applicable, accrual calculations are underpinned by signed contracts
and there has historically been a strong correlation between the amounts accrued in respect of a particular period and the amounts
subsequently paid.
Revenue recognition
The Group derives revenue predominantly from the sale of goods to customers. Revenue from the sale of goods is recognised when
control of the goods has been transferred to the buyer. Control transfers when the customer has the ability to direct the use of and
substantially obtain all of the benefits of the goods. This is generally on receipt of goods by the customer.
The Group also derives revenue from services provided alongside the supply of goods, mainly installation services, which are recognised
over time and are calculated using the “input method” by reference to regular surveys of the work performed.
Revenue received in respect of extended warranties is recognised over the period of the warranty.
Revenue is measured at the fair value of the consideration received or receivable. Revenue represents the amounts receivable for goods
supplied or services provided, stated net of discounts, returns, rebates and value-added taxes. Accumulated experience is used to
estimate and provide for rebates, discounts and expected returns using the expected value method, and revenue is only recognised to
the extent that it is highly probable that a significant reversal will not occur. An accrual is made at each Balance Sheet date as a deduction
from revenue to reflect management’s best estimate of amounts to be paid in respect of arrangements in place with customers regarding
rebates, discounts and expected returns.
Financial statements
Norcros plc Annual Report and Accounts 2022114
Notes to the Group accounts continued
Year ended 31 March 2022
1. Group accounting policies continued
Summary of significant accounting policies continued
Revenue recognition continued
Incremental costs of fulfilling a contract, such as testing costs, are capitalised in “Trade and other receivables” if the cost has been
incurred and are amortised over the life of the contract if the period over which the Group obtains benefit from is over twelve months.
Contract related support costs are accrued in “Trade and other payables” if the trigger for payment has been met. Both types of cost are
recorded in the Income Statement against underlying operating profit.
Segmental reporting
The Group operates in two main geographical areas: the UK and South Africa. All inter-segment transactions are made on an arm’s length
basis. The chief operating decision maker (being the Board) assesses performance and allocates resources based on geography and
accordingly segments have been determined on this basis. Corporate costs are allocated to segments on the basis of external turnover.
Goodwill
Goodwill is recognised as an asset and reviewed for impairment at least annually or whenever there is an indicator of impairment. Goodwill
is carried at cost less amortisation charged prior to the Group’s transition to IFRS less accumulated impairment losses. Any impairment
isrecognised in the period in which it is identified and is never reversed.
Intangible assets
Acquired intangible assets comprise customer relationships, brands, trade names and patents recognised as separately identifiable assets
on acquisition as well as product certification costs and development costs which meet the criteria for capitalisation (as explained below
in the accounting policy for research and development costs). They are valued at cost less accumulated amortisation, with amortisation
being charged on a straight-line basis.
The estimated useful lives of Group assets are as follows:
Customer relationships 8–15 years
Brands, trade name and patents 8–15 years
Development costs 5 years
Product certification costs 5 years
Impairment of long-life assets
Property, plant and equipment assets are reviewed on an annual basis to determine whether events or changes in circumstances indicate
that the carrying amount of the assets may not be recoverable. If any such indication exists, the recoverable amount of the asset is
estimated as either the higher of the asset’s net selling price or value in use; the resultant impairment (the amount by which the carrying
amount of the asset exceeds its recoverable amount) is recognised as a charge in the Income Statement.
The value in use is calculated as the present value of the estimated future cash flows expected to result from the use of assets and their
eventual disposal proceeds. In order to calculate the present value of estimated future cash flows the Group uses an appropriate discount
rate adjusted for any associated risk. Estimated future cash flows used in the impairment calculation represent management’s best view
of likely future market conditions and current decisions on the use of each asset or asset group.
Property, plant and equipment
Property, plant and equipment is initially measured at cost. Cost comprises the purchase price (after deducting trade discounts and
rebates) and any directly attributable costs. Property, plant and equipment is stated at cost less accumulated depreciation and any
provision for impairment in value. Impairment charges are recognised in the Income Statement when the carrying amount of an asset is
greater than the estimated recoverable amount, calculated with reference to future discounted cash flows that the assets are expected
to generate when considered as part of an income-generating unit. Land is not depreciated. Depreciation on other assets is provided
on a straight-line basis to write down assets to their residual value evenly over the estimated useful lives of the assets from the date
ofacquisition by the Group.
The estimated useful lives of Group assets are as follows:
Buildings 25–50 years
Plant and equipment 3–15 years
The assets’ residual values and useful lives are reviewed and adjusted if appropriate at each Balance Sheet date.
Investment property
Investment property comprises mainly land and relates to property which is either sub-let to a third party or is not being utilised in the
Group’s core operations. Investment property is held at cost less depreciation on buildings (land is not depreciated). Investment property
is depreciated over 50 years.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials, and, where applicable, labour and
overheads that have been incurred in bringing the inventories to their present location and condition. Net realisable value is the estimated
selling price in the ordinary course of business, less applicable variable selling expenses. Provisions are made for slow-moving and
obsolete items.
Taxation
Current tax, which comprises UK and overseas corporation tax, is provided at amounts expected to be paid (or recovered) using the tax
rates and laws that have been enacted or substantively enacted by the Balance Sheet date.
Annual Report and Accounts 2022 Norcros plc 115
Financial statements
1. Group accounting policies continued
Summary of significant accounting policies continued
Taxation continued
Deferred tax is the tax expected to be payable or recoverable on the difference between the carrying amounts of assets and liabilities
inthe Balance Sheet and the corresponding tax bases used in the computation of taxable profits and is accounted for using the Balance
Sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent
that it is probable that taxable profit will be available against which deductible temporary differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised and
is charged in the Income Statement, except where it relates to items charged or credited to equity via the Statement of Comprehensive
Income, when the deferred tax is also dealt with in equity and is shown in the Statement of Comprehensive Income.
Provisions
Warranty provisions – provision is made for the estimated liability on products under warranty. Liability is recognised upon the sale
ofaproduct and is estimated using historical data.
Restructuring provisions – provision is made for costs of restructuring activities to be carried out by the Group when the Group is
demonstrably committed to incurring the cost in a future period and the cost can be reliably measured.
Property provisions – where the Group has vacated a property but is committed to a leasing arrangement, a provision is made to cover
unavoidable costs including dilapidation costs net of any expected future sub-lease income.
Provisions are measured at the best estimate of the amount to be spent and discounted where material.
Employee benefits
The Group operates various post-employment schemes, including both defined benefit and defined contribution pension plans
andpost-employment medical plans.
(a) Pension obligations
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has
no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the
benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined
contribution plan.
Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent
onone or more factors such as age, years of service and compensation.
The liability recognised in the Consolidated Balance Sheet in respect of defined benefit pension plans is the present value of the defined
benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually
by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by
discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are denominated in the currency
in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. Surpluses
are only recognised to the extent that they are recoverable.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity
inother comprehensive income in the period in which they arise, net of the related deferred tax.
Past service costs are recognised immediately in income.
For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a
mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The
contributions are recognised as an employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the
extent that acash refund or a reduction in the future payments is available.
(b) Other post-employment obligations
Some Group companies provide post-retirement healthcare benefits to their retirees. The entitlement to these benefits is usually conditional
on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these
benefits are accrued over the period of employment using the same accounting methodology as used for defined benefit pension plans.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in
other comprehensive income in the period in which they arise. These obligations are valued annually by independent qualified actuaries.
(c) Termination benefits
Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an
employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits at the earlier of
the following dates: (a) when the Group can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs
for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits. In the case of an offer made to
encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the
offer. Benefits falling due more than twelve months after the end of the reporting period are discounted to their present value.
(d) Profit sharing and bonus plans
The Group recognises a liability and an expense for bonuses and profit sharing, based on a formula that takes into consideration the profit
attributable to the Company’s shareholders after certain adjustments. The Group recognises a provision where contractually obliged or
where there is a past practice that has created a constructive obligation.
Financial statements
Norcros plc Annual Report and Accounts 2022116
Notes to the Group accounts continued
Year ended 31 March 2022
1. Group accounting policies continued
Summary of significant accounting policies continued
Exceptional items
Exceptional items are disclosed separately in accordance with the requirements of IAS 1, ‘Presentation of financial statements’. They
include profits and losses on disposal of non-current assets outside the normal course of business, restructuring costs and large or
significant one-off items which in management’s judgement need to be disclosed to enable the user to obtain a proper understanding
ofthe Group’s financial performance.
IAS 19R administrative expenses
The administrative expenses incurred by the Trustee in connection with managing the Group’s pension schemes are recognised in the
Consolidated Income Statement. These costs are excluded from underlying operating profit.
Acquisition related costs
Acquisition related costs include deferred remuneration, amortisation of acquired intangibles and professional advisory fees. These costs
are excluded from underlying operating profit.
Financial assets and liabilities
Borrowings
The Group measures all borrowings initially at fair value. This is taken to be the fair value of the consideration received. Transaction costs
(any such costs that are incremental and directly attributable to the issue of the financial instrument) are included in the calculation of the
effective interest rate and are, in effect, amortised through the Income Statement over the duration of the borrowing.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least
twelve months after the Balance Sheet date.
Derivative financial instruments
The Group’s activities expose it primarily to the financial risks of changes in foreign exchange rates and to fluctuations in interest rates.
TheGroup uses derivative financial instruments (solely foreign currency forward contracts) to hedge its risks associated with foreign
currency fluctuations relating to certain firm commitments and forecasted transactions.
The Group documents, at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as
its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment,
both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective
in offsetting changes in fair values or cash flows of hedged items. The Group designates net positions and hedge documentation is
prepared in accordance with IFRS 9.
The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors, which provide written principles
in the use of financial derivatives consistent with the Group’s risk management strategy. The Group does not use derivative financial
instruments for speculative purposes.
Derivative financial instruments are initially measured at fair value at the contract date and are re-measured to fair value at subsequent
reporting dates. Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash
flows are recognised directly in other comprehensive income, and any ineffective portion is recognised immediately in the Income Statement.
Cash and cash equivalents
Cash and cash equivalents in the cash flow statement include cash in hand, deposits held at call with banks and bank overdrafts. Cash
and cash equivalents are offset against overdrafts and borrowings only when there is a legally enforceable right to do so and there is a
clear intention to undertake settlement of such overdrafts or borrowings held with the same counterparty within a short timeframe after
the year end.
Trade receivables
Trade receivables are amounts due from customers for goods sold in the ordinary course of business. If collection is expected in one year
or less they are classified as current assets; otherwise they are presented as non-current assets. Trade receivables are recognised initially
at the amount of consideration that is unconditional.
The Group holds the trade receivables with the objective of collecting the contractual cash flows, and so it measures them subsequently
at amortised cost using the effective interest method, less appropriate allowances for estimated credit losses (provision for impairment).
The Group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortised cost.
The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be
recognised from initial recognition of the receivables. To measure the expected credit losses, trade receivables are grouped based on
shared credit risk characteristics and the length of time overdue. An estimate is made of the expected credit loss based on the Group’s
past history, existing market conditions as well as forward-looking estimates at the end of each reporting period. The maximum exposure
at the end of the reporting period is the carrying amount of these receivables.
Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Annual Report and Accounts 2022 Norcros plc 117
Financial statements
1. Group accounting policies continued
Summary of significant accounting policies continued
Fair value estimation
The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the Balance Sheet date.
TheGroup determines the fair value of its remaining financial instruments through the use of estimated discounted cash flows. The fair
value of interest rate and cross-currency swaps is calculated as the net present value of the estimated future cash flows.
The carrying values less impairment provision of trade receivables and payables are assumed to approximate to their fair values due to
their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash
flows at the current market interest rate that is available to the Group for similar financial instruments.
Research and development
Expenditure on research is charged against profits for the year in which it is incurred. Development costs are capitalised once the technical
feasibility of a project has been established and a business plan, which demonstrates how the project will generate future economic
benefits, has been approved. Development costs are amortised on a straight-line basis over their expected useful lives from the point
atwhich the asset is capable of operating in the manner intended by management.
Dividend distribution
Dividend distributions to the Company’s shareholders are recognised as a liability in the Group’s financial statements in the period
inwhich the dividends are approved by the Company’s shareholders, or when paid if earlier.
Foreign currency transactions
Functional currency
Items included in the financial statements of each entity in the Group are measured using the currency that best reflects the economic
substance of the underlying events and circumstances relevant to that entity (the functional currency). The consolidated financial
statements are presented in Sterling, which is the functional and presentational currency of the parent entity.
Transactions and balances
Monetary assets and liabilities expressed in currencies other than the functional currency are translated at rates applicable at the year end
and trading results of overseas subsidiaries at average rates for the year. Exchange gains and losses of a trading nature are dealt with in
arriving at operating profit.
Translation of overseas net assets
Exchange gains and losses arising on the retranslation of overseas net assets and results are taken directly to reserves.
Share capital
Issued share capital is recorded in the Balance Sheet at nominal value with any premium at the date of issue being credited to the share
premium account.
Treasury shares
The cost of the purchase of own shares is taken directly to reserves and is included in the treasury reserve.
Hedging reserve
The hedging reserve represents the accumulated movements in the Group’s derivative financial instruments that have been designated
as hedging instruments. Amounts are transferred in and out of the reserve on the revaluation, or realisation, of identified hedging
instruments.
Share-based payments
The Group operates a number of equity-settled, share-based compensation plans. The fair value of the employee services received in
exchange for the grant of options is recognised as an expense. The total amount to be expensed over the vesting period is determined
by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions. Non-market vesting
conditions are included in assumptions about the number of options that are expected to vest. At each Balance Sheet date, the Company
revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision to original estimates, if
any, in the Income Statement, with a corresponding adjustment to equity.
Share-based payments are settled through the Norcros Group Employee Benefit Trust that holds shares in Norcros Group plc that have
either been purchased on the market or issued by the Company and satisfies awards made under various employee incentive schemes.
The shareholding of the Group Employee Benefit Trust is consolidated within the consolidated accounts of the Group.
Government assistance
As a result of the COVID-19 pandemic, the Group benefited from £4.3m of government assistance programmes relating to employee job
retention costs in the prior year. Government assistance received related to employee job retention and was presented net against the
applicable staff costs within cost of sales and overheads in the Income Statement.
Financial statements
Norcros plc Annual Report and Accounts 2022118
Notes to the Group accounts continued
Year ended 31 March 2022
1. Group accounting policies continued
Summary of significant accounting policies continued
Leases
Recognition
At the date of commencement, the Group assesses whether a contract is or contains a lease by judging whether the contract is in relation
to a specified asset and to what extent the Group obtains substantially all the economic benefits from, and has the right to direct the use
of, that asset.
The Group recognises a right of use (ROU) asset and a lease liability at the commencement of the lease.
Short-term and low-value assets
The Group has elected not to recognise ROU assets and lease liabilities for leases where the total lease term is less than or equal to
twelvemonths, or for leases of assets with a value less than £5,000. The payments for such leases are recognised in the Income Statement
within cost of sales or administrative expenses on a straight-line basis over the lease term and presented within cash generated from
operations in the cash flow statement.
Non-lease components
Fees for components such as property taxes, maintenance, repairs and other services, which are either variable or transfer benefits
separate to the Group’s right to use the asset, are separated from lease components based on their relative stand-alone selling price.
These components are expensed in the Income Statement as incurred.
Lease liabilities
Lease liabilities are initially measured at the present value of future lease payments at the commencement date. Lease payments are
discounted using the interest rate implicit in the lease, or where this cannot be readily determined, the lessee’s incremental borrowing
rate. Lease payments include the following payments due within the non-cancellable term of the lease, as well as the term of any
extension options where these are considered reasonably certain to be exercised:
• fixed payments;
• variable payments that depend on an index or rate; and
• the exercise price of purchase or termination options if it is considered reasonably certain these will be exercised.
Subsequent to the commencement date, the lease liability is measured at the initial value, plus an interest charge determined using the
incremental borrowing rate, less lease payments already made such as deposits. The interest expense is recorded in finance costs in
the Income Statement. The liability is re-measured when future lease payments change, when the exercise of extension or termination
options becomes reasonably certain, or when the lease is modified.
Payments for the principal element of recognised lease liabilities are presented within cash flows from financing activities in the cash flow
statement. The interest element is recognised in net cash generated from operations.
Right of use assets
The ROU asset is initially measured at cost, being the value of the lease liability, plus the value of any lease payments made at or before
the commencement date, initial direct costs and the cost of any restoration obligations, less any incentives received. The ROU asset is
subsequently measured at cost less accumulated depreciation and impairment losses. The ROU asset is adjusted for any re-measurement
of the lease liability. The ROU asset is subject to testing for impairment where there are any impairment indicators.
IFRS 16, ‘COVID-19 related rent concessions’
During the prior year the IASB published an amendment to IFRS 16, ‘COVID-19 related rent concessions’, amending the standard to
provide lessees with an exemption from assessing whether a COVID-19 related rent concession is a lease modification, effective for
annual reporting periods beginning on or after 1 June 2020. The Group applied the COVID-19 related rent concessions practical expedient
and accounted for the concessions as though they were variable lease payments.
Annual Report and Accounts 2022 Norcros plc 119
Financial statements
2. Segmental reporting
The Group operates in two main geographical areas: the UK and South Africa. All inter-segment transactions are made on an arm’s length
basis. The chief operating decision maker (being the Board) assesses performance and allocates resources based on geography and
accordingly segments have been determined on this basis. Corporate costs are allocated to segments on the basis of external turnover.
Finance income and costs are not split between the segments.
Year ended 31 March 2022
UK
£m
South
Africa
£m
Group
£m
Revenue 256.7 139.6 396.3
Underlying operating profit 30.9 10.9 41.8
IAS 19R administrative expenses (1.7) — (1.7)
Acquisition related costs (4.6) (0.2) (4.8)
Exceptional operating items 0.9 — 0.9
Operating profit 25.5 10.7 36.2
Finance costs (3.2)
Profit before taxation 33.0
Taxation ( 7.3)
Profit for the year 25.7
Net cash 8.6
Segmental assets 252.9 106.6 359.5
Segmental liabilities (116.9) (42.3) (159.2)
Additions to property, plant and equipment 2.9 2.4 5.3
Depreciation and amortisation 8.0 5.0 13.0
Year ended 31 March 2021
UK
£m
South
Africa
£m
Group
£m
Revenue 220.2 104.0 324.2
Underlying operating profit 26.9 6.9 33.8
IAS 19R administrative expenses (1.4) — (1.4)
Acquisition related costs (3.5) (0.2) (3.7)
Exceptional operating items (3.6) (0.2) (3.8)
Operating profit 18.4 6.5 24.9
Finance costs (net) (6.4)
Profit before taxation 18.5
Taxation (3.5)
Profit for the year 15.0
Net cash 10.5
Segmental assets 221.4 90.8 312.2
Segmental liabilities (125.6) (38.2) (163.8)
Additions to property, plant and equipment 1.6 0.9 2.5
Depreciation and amortisation 8.5 4.6 13.1
Financial statements
Norcros plc Annual Report and Accounts 2022120
Notes to the Group accounts continued
Year ended 31 March 2022
2. Segmental reporting continued
The split of revenue by geographical destination of the customer is below:
2022
£m
2021
£m
UK 222.4 189.4
Africa 141.9 105.8
Rest of World 32.0 29.0
396.3 324.2
No one customer had revenue over 10% of total Group revenue (2021: none).
Reported revenue within the South African segment contains £3.9m (2021: £2.6m) of revenue from services performed which have been
recognised over time and within the UK segment contains £0.3m (2021: £0.4m) of extended warranty revenue that has been recognised
over time.
3. Operating profit
Operating profit is derived after deducting cost of sales of £255.5m (2021: £205.8m), distribution costs of £28.3m (2021: £21.3m)
andadministrative expenses, inclusive of exceptional and acquisition related costs, of £76.3m (2021: £72.2m).
The following items have been included in arriving at operating profit:
2022
£m
2021
£m
Staff costs (see note 4) 65.9 52.8
Depreciation of property, plant and equipment (all owned assets) 5.1 5.2
Amortisation of intangible assets 3.8 3.9
Depreciation of right of use assets 4.1 4.0
Operating lease rentals payable for short-term and low-value leases:
– plant and machinery 0.7 1.2
– other 0.4 0.6
Research and development expenditure 4.8 3.6
All items relate to continuing operations.
Auditor’s remuneration
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company’s auditor and its associates:
2022
£m
2021
£m
Audit of the Parent Company and consolidated financial statements 0.1 0.1
Audit of the Company’s subsidiaries 0.3 0.3
0.4 0.4
4. Employees
2022
£m
2021
£m
Staff costs including Directors’ remuneration:
– wages and salaries 57.6 50.3
– social security costs 3.5 2.8
– share-based payments (see note 10) 1.1 1.0
Pension costs:
– defined contribution (see note 24) 3.7 3.0
65.9 5 7.1
Furlough payments received — (4.3)
Total staff costs 65.9 52.8
Government income related to job retention assistance in the prior year is presented in the above table.
2022
Number
2021
Number
Average monthly numbers employed:
– UK 1,002 983
– overseas 1,19 4 1,072
2,19 6 2,055
Full details of Directors’ remuneration may be found in the Remuneration Report on pages 87 to 96.
Annual Report and Accounts 2022 Norcros plc 121
Financial statements
5. Acquisition related costs and exceptional operating items
An analysis of acquisition related costs and exceptional operating items is shown below:
Acquisition related costs
2022
£m
2021
£m
Intangible asset amortisation
1
3.7 3.7
Advisory fees
2
1.1 —
4.8 3.7
1 Non-cash amortisation charges in respect of acquired intangible assets.
2 Professional advisory fees incurred in connection with the Group’s business combination activities.
Exceptional operating items
2022
£m
2021
£m
COVID-19 related restructuring
1
— 3.8
Release of UK property provision
2
(0.9) —
(0.9) 3.8
1 Exceptional costs of £3.8m were incurred in the prior year in relation to COVID-19 related restructuring programmes across the Group as a result of the impact of COVID-19
ontheeconomies we trade in.
2 The UK property provision related to the only remaining surplus and legacy onerous property lease at Groundwell, Swindon. In the year, the Group reached agreement with the
landlord to exit the lease early. A cash settlement payment of £1.3m including dilapidation obligations was made in the period. The remaining £0.9m of the related provision has
been released as an exceptional operating item.
6. Finance costs
2022
£m
2021
£m
Interest payable on bank borrowings 0.8 1.5
Interest on lease liabilities 1.7 1.7
Movement on fair value of derivative financial instruments — 2.0
Property lease discount 0.1 —
Amortisation of costs of raising debt finance 0.2 0.2
Finance costs 2.8 5.4
7. Taxation
Taxation comprises:
2022
£m
2021
£m
Current
UK taxation 3.6 0.4
Overseas taxation 4.7 3.7
Prior year adjustment (0.1) (0.2)
Total current taxation 8.2 3.9
Deferred
Origination and reversal of temporary differences (0.9) (0.4)
Total tax charge 7.3 3.5
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate
applicable to profits of the consolidated entities as follows:
2022
£m
2021
£m
Profit before tax 33.0 18.5
Tax calculated at domestic tax rates applicable to profits in the respective countries 6.8 3.4
Tax effects of:
– adjustments in respect of prior years (0.1) (0.2)
– expenses not deductible for tax purposes 0.4 0.3
– tax rate differences 0.2 —
Total tax charge 7.3 3.5
The weighted average applicable tax rate was 20.6% (2021: 18.4%); the increase relates to the increased proportional profits in South Africa
and the UK relative to Ireland. The standard rate of corporation tax in the UK is 19% (2021: 19%), in South Africa 28% (2021: 28%) and in
Ireland 12.5% (2021: 12.5%).
Taxation on items taken directly to equity was a debit of £9.2m relating to deferred tax on pensions (see note 22) and a debit of £0.6m
ofdeferred tax in relation to foreign exchange cash flow hedges.
Financial statements
Norcros plc Annual Report and Accounts 2022122
Notes to the Group accounts continued
Year ended 31 March 2022
8. Alternative performance measures
The Group makes use of a number of alternative performance measures to assess business performance and provide additional useful
information to shareholders. Such alternative performance measures should not be viewed as a replacement of, or superior to, those
defined by Generally Accepted Accounting Principles (GAAP). Definitions of alternative performance measures used by the Group and,
where relevant, reconciliations from GAAP-defined reporting measures to the Group’s alternative performance measures are provided below.
The alternative performance measures used by the Group are:
Measure Definition
Underlying operating profit Operating profit before IAS 19R administrative expenses, acquisition related costs
andexceptional operating items.
Underlying profit before taxation Profit before taxation before IAS 19R administrative expenses, acquisition related costs,
exceptional operating items, amortisation of costs of raising finance, net movement on
fair value of derivative financial instruments, discounting of property lease provisions
and finance costs relating to pension schemes.
Underlying taxation Taxation on underlying profit before tax.
Underlying earnings Underlying profit before tax less underlying taxation.
Underlying capital employed Capital employed on a pre-IFRS 16 basis adjusted for business combinations where
relevant and the average impact of exchange rate movements.
Underlying operating margin Underlying operating profit expressed as a percentage of revenue.
Underlying return on capital employed (ROCE) Underlying operating profit on a pre-IFRS 16 basis expressed as a percentage
oftheaverage of opening and closing underlying capital employed.
Basic underlying earnings per share Underlying earnings divided by the weighted average number of shares for basic
earnings per share.
Diluted underlying earnings per share Underlying earnings divided by the weighted average number of shares for diluted
earnings per share.
Underlying EBITDA Underlying EBITDA is derived from underlying operating profit before depreciation
andamortisation excluding the impact of IFRS 16 in line with our banking covenants.
Underlying operating cash flow Cash generated from continuing operations before cash outflows from exceptional
items and acquisition related costs and pension fund deficit recovery contributions.
Underlying net (debt)/cash Underlying net (debt)/cash is the net of cash, capitalised costs of raising finance
andtotal borrowings. IFRS 16 lease commitments are not included in line with our
banking covenants.
Pro-forma underlying EBITDA An annualised underlying EBITDA figure used for the purpose of calculating banking
covenant ratios.
Pro-forma leverage Net debt expressed as a ratio of pro-forma underlying EBITDA.
Reconciliations from GAAP-defined reporting measures to the Group’s alternative performance measures
Consolidated Income Statement
(a) Underlying profit before taxation and underlying earnings
2022
£m
2021
£m
Profit before taxation 33.0 18.5
Adjusted for:
– IAS 19R administrative expenses 1.7 1.4
– acquisition related costs (see note 5) 4.8 3.7
– exceptional operating items (see note 5) (0.9) 3.8
– amortisation of costs of raising finance 0.2 0.2
– net movement on fair value of derivative financial instruments — 2.0
– property lease discount 0.1 —
– IAS 19R finance cost 0.4 1.0
Underlying profit before taxation 39.3 30.6
Taxation attributable to underlying profit before taxation (7.8) (5.5)
Underlying earnings 31.5 2 5.1
Annual Report and Accounts 2022 Norcros plc 123
Financial statements
8. Alternative performance measures continued
Reconciliations from GAAP-defined reporting measures to the Group’s alternative performance measures continued
Consolidated Income Statement continued
(b) Underlying operating profit and EBITDA (pre-IFRS 16)
2022
£m
2021
£m
Operating profit 36.2 24.9
Adjusted for:
– IAS 19R administrative expenses 1.7 1.4
– acquisition related costs 4.8 3.7
– exceptional operating items (see note 5) (0.9) 3.8
Underlying operating profit 41.8 33.8
– depreciation and amortisation (owned assets) 5.2 5.4
– depreciation of leased assets 4.1 4.0
– lease costs (5.7) (5.3)
Underlying EBITDA (pre-IFRS 16) 45.4 3 7.9
Consolidated Cash Flow Statement
(a) Underlying operating cash flow
2022
£m
2021
£m
Cash generated from operations (see note 27) 23.6 60.0
Adjusted for:
– cash flows from exceptional items and acquisition related costs (see note 27) 1.7 2.5
– pension fund deficit recovery contributions (see note 27) 3.3 3.3
Underlying operating cash flow 28.6 65.8
Consolidated Balance Sheet
(a) Underlying capital employed and underlying return on capital employed
2022
£m
2021
£m
Net assets 200.3 148.4
Adjusted for:
– pension scheme (asset)/liability (net of associated tax) (14.7) 14.8
– right of use assets (IFRS 16) (19.9) (19.6)
– lease liabilities (IFRS 16) 24.0 24.2
– onerous lease provision (IFRS 16) — (0.8)
– cash and cash equivalents (27.4) (28.3)
– financial liabilities – borrowings 18.8 17.8
181.1 156.5
Foreign exchange adjustment (1.7) 0.8
Underlying capital employed 179.4 15 7.3
Average underlying capital employed 168.3 178.9
Underlying operating profit (pre-IFRS 16) 40.2 32.5
Underlying return on capital employed 23.9% 18.2%
Financial statements
Norcros plc Annual Report and Accounts 2022124
Notes to the Group accounts continued
Year ended 31 March 2022
9. Earnings per share
Basic EPS is calculated by dividing the profit attributable to shareholders by the weighted average number of ordinary shares in issue
during the year, excluding those held in the Norcros Employee Benefit Trust.
For diluted EPS, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potential dilutive ordinary
shares. At 31 March 2022 the potential dilutive ordinary shares amounted to 1,504,604 (2021: 201,781) as calculated in accordance with IAS 33.
The calculation of EPS is based on the following profits and numbers of shares:
2022
£m
2021
£m
Profit for the year 25.7 15.0
2022
Number
2021
Number
Weighted average number of shares for basic earnings per share 80,887,24 0 80,575,242
Share options 1,504,604 201,781
Weighted average number of shares for diluted earnings per share 82,391,844 80,777,023
2022 2021
Basic earnings per share:
From profit for the year 31.8p 18.6p
Diluted earnings per share:
From profit for the year 31.2p 18.6p
Basic and diluted underlying earnings per share
Basic and diluted underlying earnings per share has also been provided which reflects underlying earnings from continuing operations
divided by the weighted average number of shares set out above.
2022
£m
2021
£m
Underlying earnings (see note 8) 31.5 2 5.1
2022 2021
Basic underlying earnings per share 38.9p 31.2p
Diluted underlying earnings per share 38.2p 31.1p
10. Share-based payments
Exercise
price
per share
Weighted
average
share price
at date of
exercise
1 April
2021 Granted Exercised Lapsed
31 March
2022
Date from
which
exercisable
Expiry
date
Approved Performance Share Plan
2017 (APSP) 299p 173p 6,959 — (1,488) (3,370) 2,101 16.11.20 16.11.27
Approved Performance Share Plan
2018 (APSP) Nil 173p 777,403 — — (777,403) — 25.0 7. 21 25.0 7. 28
Approved Performance Share Plan
2019 (APSP) Nil — 819,084 — — (9,744) 809,340 2 3. 07.22 2 3.07. 2 9
Approved Performance Share Plan
2020 (APSP) Nil — 970,695 — — (18,247) 952,448 25.11.23 25.11.30
Approved Performance Share Plan
2021 (APSP) Nil — — 705,555 — (5,972) 699,583 2 0. 07. 2 4 2 0.07.3 0
Deferred Bonus Plan 2018 (DBP) Nil — 6 9,10 1 — (6 9,10 1) — — 25.07.21 2 5. 07. 2 8
Deferred Bonus Plan 2019 (DBP) Nil — 87,381 — — — 87,381 23.07. 2 2 23.07. 2 9
Deferred Bonus Plan 2021 (DBP) Nil — — 109,455 — — 109,455 25.11.23 25.11.30
Save As You Earn Scheme (10) (SAYE) 160p 227p 73,299 — (64,277) (9,022) — 01.03.21 31.08.21
Save As You Earn Scheme (11) (SAYE) 201p — 73,872 — (41,417) (1,254) 31,201 01.03.22 31.0 8.22
Save As You Earn Scheme (12) (SAYE) 208p — 187,871 — (4,216) (50,889) 132,766 01.03.23 31.08.23
Save As You Earn Scheme (13) (SAYE) 164p — 6 87,421 — (1,219) (62,399) 623,803 01.03.24 31.08.24
Save As You Earn Scheme (14) (SAYE) 266p — — 173,385 — (6,766) 166,619 01.03.25 31.08.25
Details of the terms of the APSP, DBP and SAYE schemes are disclosed in the Directors’ Remuneration Report.
Annual Report and Accounts 2022 Norcros plc 125
Financial statements
10. Share-based payments continued
In accordance with IFRS 2, the fair value of equity-settled share-based payments to employees is determined at the date of grant and is
expensed on a straight-line basis over the vesting period based on the Group’s estimate of shares that will eventually vest. A charge of
£1.1m was recognised in respect of share options in the year (2021: £1.0m) including £0.4m (2021: £0.4m) in respect of the Directors’ share
options. The highest paid Director’s share options accounted for £0.2m (2021: £0.2m) of the charge. The Group uses a Black-Scholes
pricing model to determine the annual charge for its share-based payments. The assumptions used in this model for each share-based
payment are as follows:
SAYE (10) SAY E (11) SAYE (12) SAYE (13) SAYE (14)
Date of grant 14 .12 .17 14 .12 .18 13.12.19 2 3.12 . 2 0 2 0.12 . 21
Initial exercise price 160p 201p 208p 164p 266p
Number of shares granted initially 345,599 120,220 306,649 692,908 173,385
Expected volatility 3 5.1% 30.0% 31.0 % 42.2% 44.5%
Expected option life 3 years 3 years 3 years 3 years 3 years
Risk free rate 0.9% 0.9% 0.3% 1.3% 1.9 %
Expected dividend yield 4.0% 4 .1% 4.0% 3.8% 2.8%
APSP 2017 APSP 2018 APSP 2019 APSP 2020 APSP 2021
Date of grant 16 .11.17 2 5.07.18 2 3. 07.19 25.11.20 21.07.21
Initial exercise price Nil Nil Nil Nil Nil
Number of shares granted initially 1,083,055 861,023 861,447 970,695 700,458
Expected volatility 3 5.1% 30.0% 31.0 % 42.2% 44.5%
Expected option life 3 years 3 years 3 years 3 years 3 years
Risk free rate 0.9% 0.9% 0.9% 1.3% 1.9 %
Expected dividend yield 4.0% 4 .1% 4.0% 3.8% 2.8%
DBP 2018 DBP 2019 DBP 2021
Date of grant 25.0 7.18 23.07.19 21.07.21
Initial exercise price Nil Nil Nil
Number of shares granted initially 6 9,101 87,3 81 109,455
Expected volatility 30.0% 31.0 % 44.5%
Expected option life 3 years 3 years 3 years
Risk free rate 0.9% 0.9% 1.9%
Expected dividend yield 4 .1% 4.0% 2.8%
The share price at 31 March 2022 was 258p. The average price during the year was 299p. Expected volatility is the Company’s three-year
historical share price volatility.
11. Goodwill
2022
£m
2021
£m
At 1 April 60.8 6 0.1
Additions — —
Exchange differences 0.4 0.7
At 31 March 61.2 60.8
Goodwill is allocated to the Group’s cash-generating units (CGUs). A summary of the goodwill allocation is presented below:
2022
£m
2021
£m
Croydex 7.8 7. 8
Abode 0.8 0.8
Triton Showers 19.1 19.1
Merlyn 25.5 25.5
Tile Africa 3.0 2.8
House of Plumbing 5.0 4.8
61.2 60.8
The recoverable amount of a CGU is determined by a value-in-use calculation. These calculations use cash flow projections derived from
data and metrics used on an ongoing basis, with the key assumptions being those regarding discount rates, growth rates, future gross
margin improvements and cash flows.
Financial statements
Norcros plc Annual Report and Accounts 2022126
Notes to the Group accounts continued
Year ended 31 March 2022
11. Goodwill continued
The key assumptions for the value-in-use calculations are:
• cash flows before income taxes are based on approved budgets and management projections for the first five years;
• long-term growth rates of 2.0% (2021: 2.0%) for Croydex, Abode, Merlyn and Triton Showers and 4.0% (2021: 4.0%) for Tile Africa
and House of Plumbing applied to the period beyond which detailed budgets and forecasts do not exist, based on macroeconomic
projections for the geographies in which the entities operate; and
• pre-tax discount rates of 11.4% (2021: 11.0%) in the UK and 16.8% (2021: 16.7%) in South Africa based upon the risk free rate for
government bonds adjusted for a risk premium to reflect the increased risk of investing in equities and investing in the Group’s specific
sectors and regions.
Management has applied sensitivities to the key assumptions, including discount rates and growth rates, and believes that there are no
reasonably possible scenarios which would result in an impairment of goodwill.
12. Intangible assets
Customer
relationships
£m
Brands,
trade names
and patents
£m
Development
costs
£m
Product
certification
costs
£m
Total
£m
Cost
At 1 April 2020 38.3 10.1 0.6 0.2 49.2
Exchange differences 0.3 — — — 0.3
At 31 March 2021 38.6 10.1 0.6 0.2 49.5
Exchange differences 0.1 — — — 0 .1
At 31 March 2022 38.7 10.1 0.6 0.2 49.6
Accumulated amortisation
At 1 April 2020 8.4 3.8 0.5 0.1 12.8
Charge for the year 2.9 0.8 0 .1 0.1 3.9
At 31 March 2021 11.3 4.6 0.6 0.2 16.7
Charge for the year 2.9 0.9 — — 3.8
At 31 March 2022 14.2 5.5 0.6 0.2 20.5
Net book amount at 31 March 2021 27. 3 5.5 — — 32.8
Net book amount at 31 March 2022 24.5 4.6 — — 29.1
The amortisation charge for intangibles generated on acquisition is £3.7m (2021: £3.7m) for the year and is included in the acquisition
related costs in the Consolidated Income Statement. The £0.1m (2021: £0.2m) amortisation charge for internally generated or acquired
intangibles is included in the Consolidated Income Statement.
Annual Report and Accounts 2022 Norcros plc 127
Financial statements
13. Property, plant and equipment
Land and
buildings
£m
Plant and
equipment
£m
Total
£m
Cost
At 1 April 2020 34.8 9 1.1 125.9
Exchange differences 1.0 3.3 4.3
Additions 0.1 2.4 2.5
Reclassification (2.6) 3.3 0.7
Disposals ( 0.1) (2.3) (2.4)
At 31 March 2021 33.2 9 7.8 131.0
Exchange differences 0.5 1.5 2.0
Additions 0.3 5.0 5.3
Disposals — (1.4) (1.4)
At 31 March 2022 34.0 102.9 136.9
Accumulated depreciation
At 1 April 2020 21.7 75.2 96.9
Exchange differences 0.3 2.3 2.6
Charge for the year 0.6 4.6 5.2
Reclassification (1.6) 2.3 0.7
Disposals ( 0.1) (2.3) (2.4)
At 31 March 2021 20.9 8 2 .1 103.0
Exchange differences 0.1 1.1 1.2
Charge for the year 0.6 4.5 5.1
Disposals — (1.4) (1.4)
At 31 March 2022 21.6 86.3 107.9
Net book amount at 31 March 2021 12.3 15.7 28.0
Net book amount at 31 March 2022 12.4 16.6 29.0
Plant and equipment include motor vehicles, computer equipment, and plant and machinery.
During the prior year historical assets were reclassified from plant and equipment to land and buildings at £nil net book value.
14. Right of use asset
Land and
buildings
£m
Plant and
equipment
£m
Total
£m
Cost
At 1 April 2020 21.7 4.6 26.3
Exchange differences 1.4 0 .1 1.5
Additions 0.3 0.7 1.0
Modifications 0.6 — 0.6
Disposals ( 0.1) (0.5) (0.6)
At 31 March 2021 23.9 4.9 28.8
Exchange differences 0.9 0 .1 1.0
Additions 1.9 1.2 3 .1
Modifications 0.9 — 0.9
Disposals (0.2) (0.3) (0.5)
At 31 March 2022 27.4 5.9 33.3
Accumulated depreciation
At 1 April 2020 3.3 2.4 5.7
Exchange differences ( 0.1) 0.1 —
Charge for the year 3.0 1.0 4.0
Disposals ( 0.1) (0.4) (0.5)
At 31 March 2021 6 .1 3.1 9.2
Exchange differences 0.3 0 .1 0.4
Charge for the year 3.3 0.8 4.1
Disposals ( 0.1) (0.2) (0.3)
At 31 March 2022 9.6 3.8 13.4
Net book amount at 31 March 2021 17. 8 1.8 19.6
Net book amount at 31 March 2022 17.8 2.1 19.9
Financial statements
Norcros plc Annual Report and Accounts 2022128
Notes to the Group accounts continued
Year ended 31 March 2022
15. Inventories
2022
£m
2021
£m
Raw materials and consumables 12.6 12.9
Work in progress 0.8 0.7
Finished goods 87.2 64.5
100.6 7 8.1
Provisions held against inventories totalled £9.1m (2021: £5.9m).
The cost of inventories recognised as an expense within cost of sales in the Income Statement amounted to £218.6m (2021: £173.0m).
During the year the Group charged £3.6m (2021: £1.9m) of inventory write-downs to the Income Statement within cost of sales.
16. Trade and other receivables
2022
£m
2021
£m
Trade receivables 68.1 61.3
Less: impairment loss allowance (1.2) (0.9)
Trade receivables – net 66.9 60.4
Other receivables 0.9 1.6
Prepayments and accrued income 3.3 2.6
71.1 64.6
All trade and other receivables are current. The net carrying amounts of trade and other receivables are considered to be a reasonable
approximation of their fair values.
The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:
2022
£m
2021
£m
Sterling 53.1 49.7
South African Rand 16.4 14.2
Euro 1.6 0.7
71.1 64.6
Impairment of trade receivables
31 March 2022
Not yet due
£m
0–1 month
overdue
£m
1–2 months
overdue
£m
2–3 months
overdue
£m
>3 months
overdue
£m
Total
£m
Expected credit loss rate 0.2% 2.4% 8.3% 10.0% 23.5% 1.8%
Gross trade receivables 58.4 4.1 1.2 1.0 3.4 6 8.1
Loss allowance 0.1 0.1 0.1 0.1 0.8 1.2
31 March 2021
Not yet due
£m
0–1 month
overdue
£m
1–2 months
overdue
£m
2–3 months
overdue
£m
>3 months
overdue
£m
Total
£m
Expected credit loss rate 0.2% 1.7% 6.7% 50% 22% 1.5%
Gross trade receivables 51.4 5.9 1.5 0.2 2.3 61.3
Loss allowance 0.1 0.1 0 .1 0.1 0.5 0.9
Movements on the provision for impairment of trade receivables were as follows:
2022
£m
2021
£m
At the beginning of the year 0.9 0.9
Provision for receivables impairment 0.3 0.5
Receivables written off during the year as uncollectable (0.1) (0.5)
Exchange differences 0.1 —
At the end of the year 1.2 0.9
Annual Report and Accounts 2022 Norcros plc 129
Financial statements
17. Cash and cash equivalents
2022
£m
2021
£m
Cash at bank and in hand 27.4 28.3
Credit risk on cash and cash equivalents is limited as the counterparties are banks with strong credit ratings assigned by international
credit rating agencies.
18. Trade and other payables
2022
£m
2021
£m
Trade payables 56.6 49.5
Other tax and social security payables 5.0 7.7
Other payables 1.9 1.8
Accruals and deferred income 38.9 36.4
102.4 95.4
The fair value of trade payables does not differ materially from the book value.
19. Lease liabilities
Lease liabilities recognised on the adoption of IFRS 16.
Land and
buildings
£m
Plant and
equipment
£m
Total
£m
Fair value
At 1 April 2021 21.3 2.9 24.2
Exchange differences 0.7 — 0.7
Additions 1.9 1.2 3 .1
Modifications 0.9 — 0.9
Disposals ( 0.1) ( 0.1) (0.2)
Interest charge 1.6 0 .1 1.7
Gross lease payments (5.0) (1.4) (6.4)
At 31 March 2022 21.3 2.7 24.0
Lease liabilities are split into £5.7m (2021: £5.4m) payable in less than one year and £18.3m (2021: £18.8m) payable after one year.
20. Financial liabilities – borrowings
2022
£m
2021
£m
Non-current
Bank borrowings (unsecured):
– bank loans 20.0 18.0
– less: costs of raising finance (1.2) (0.2)
Total borrowings 18.8 17.8
The fair value of bank loans equals their carrying amount, as they bear interest at floating rates.
The repayment terms of borrowings are as follows:
2022
£m
2021
£m
Not later than one year — —
After more than one year:
– between one and two years — 18.0
– between two and five years 20.0 —
– costs of raising finance (1.2) (0.2)
Total borrowings 18.8 17.8
Financial statements
Norcros plc Annual Report and Accounts 2022130
Notes to the Group accounts continued
Year ended 31 March 2022
20. Financial liabilities – borrowings continued
Capital risk management
The Group increased the amount of its committed banking facilities to £130m (plus a £70m uncommitted accordion) shortly before
theyear end. The maturity date is October 2025 with two one-year extension options.
This facility provides the Group with a sound financial structure for the medium term and, by reference to the £130m facility available
atyear end, with £133.4m of headroom being available at 31 March 2022 (2021: £124.7m), after taking into account net debt and ancillary
facilities in use of £4.0m (2021: £5.6m) and overseas cash. The Group has been in compliance with all banking covenants (leverage
andinterest cover covenants) during the year.
Interest rate profile
The effective interest rates at the Balance Sheet dates were as follows:
2022
%
2021
%
Bank loans 1.9 1.7
Overdraft 1.9 1.7
At 31 March 2022 the bank loans carried interest based on SONIA plus a margin of 1.9% (2021: LIBOR plus 1.7%). Overdrafts carry interest
atSONIA plus a margin of 1.9% (2021: LIBOR plus 1.7%).
Net cash
The Group’s net cash is calculated as follows:
2022
£m
2021
£m
Cash and cash equivalents 27.4 28.3
Total borrowings (18.8) (17.8)
8.6 10.5
Currency profile of net debt
The carrying value of the Group’s net cash/(debt) is denominated in the following currencies:
2022
£m
2021
£m
Sterling (15.4) (5.9)
Euro 0.4 0.4
US Dollar 1.4 —
South African Rand 20.1 15.2
Chinese Renminbi 2.1 0.8
8.6 10.5
21. Financial instruments
During the year the Group held financial instruments relating to the risks of the Group’s operations.
Financial risk management
The Group’s operations expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and energy price risk);
credit risk; and liquidity risk. The Group actively seeks to limit the adverse effects of these risks on the financial performance of the Group.
Currency risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currencies, primarily the US Dollar, the
Euro, the Renminbi and the South African Rand. Foreign exchange risk arises from future commercial transactions, recognised assets
andliabilities and net investments in foreign operations.
Foreign exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts.
Theforeign currency risk associated with anticipated sales and purchase transactions is hedged out up to twelve months on a rolling
basis. Basis adjustments are made to the initial carrying amounts of inventories when the inventories are initially recorded.
For the hedges of highly probable forecast sales and purchases, as the critical terms (i.e. the notional amount and life) of the foreign exchange
forward contracts and their corresponding hedged items are the same, the Group performs a qualitative assessment of effectiveness
and it is expected that the value of the forward contracts and the value of the corresponding hedged items will systematically change
in the opposite direction in response to movements in the underlying exchange rates. This means that there is an economic relationship
between the hedging instrument (the foreign exchange forward derivatives) and the hedged item (highly probable forecast sales and
purchases in foreign currency).
Annual Report and Accounts 2022 Norcros plc 131
Financial statements
21. Financial instruments continued
Currency risk continued
The notional value of the hedging instrument (the derivative) is consistent with the designated value of the underlying exposure.
Thereforehedge ratio is 1:1 in all cases. However, potential future rebalancing can be performed if needed.
The main source of hedge ineffectiveness in these hedging relationships is the effect of the counterparty and the Group’s own credit
risk on the fair value of the forward contracts, which is not reflected in the fair value of the hedged item attributable to changes in foreign
exchange rates. Other sources of ineffectiveness arising from these hedging relationships are changes in the settlement date or amount.
However, the Group reviews all hedges on every reporting date to ensure their effectiveness.
Interest rate risk
The Group’s interest rate risk arises from long-term borrowings. The Group has the ability to secure a substantial proportion of its bank
loans at fixed rates via interest rate swaps. However, due to the current low level of debt and historically low UK SONIA rates, the Group
hasdecided not to take out any such swaps at the present time. This position is regularly reassessed.
Credit risk
Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions,
as well as credit exposures to customers. Each Group business is responsible for managing and analysing the credit risk of potential
customers prior to offering credit terms and on an ongoing basis and uses independent ratings agencies, past trading experience and
other factors in order to assess the credit quality of the customer. Additionally, the Group maintains a credit insurance policy for all its
operations which covers a substantial portion of the Group’s trade debtors. For banks and financial institutions only independently rated
parties with a strong rating are accepted.
Liquidity risk
The Group’s banking facilities are designed to ensure there are sufficient funds available for current operations and the Group’s further
development plans. Cash flow forecasting is performed by the Group’s businesses on a rolling basis and is monitored centrally to ensure
that sufficient cash is available to meet operational needs while maintaining an appropriate level of headroom on undrawn committed
borrowing facilities. At 31 March 2022 the facility had £133.4m of headroom (2021: £124.7m) after taking account of ancillary facilities
andoverseas cash. The maturity date of the facility is October 2025.
Financial instruments
The Group’s financial instruments comprise borrowings, cash, trade receivables and payables and forward exchange contracts. Based
on the hierarchy defined in IFRS 7, the Group’s financial instruments are classified as level 2 instruments. Consequently, fair value
measurements are derived from inputs other than quoted prices included within level 1 that are observable for the assets or liabilities,
either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Financial liabilities
The table below analyses the value of the Group’s financial liabilities into relevant maturity groupings based on the remaining period
attheBalance Sheet date to the contractual maturity date.
Not later
than a year
£m
Later than one
year but not later
than two years
£m
Later than two
years but not later
than five years
£m
Later than
five years
£m
Total
£m
Borrowings
1
0.3 18.2 — — 18.5
Lease liabilities
2
5.4 4.8 11.5 8.9 30.6
Trade and other payables 95.4 — — — 95.4
At 31 March 2021 10 1.1 23.0 11.5 8.9 144.5
Borrowings
1
0.4 0.4 20.7 — 21.5
Lease liabilities
2
5.7 5.2 11.9 8 .1 30.9
Trade and other payables 102.4 — — — 102.4
At 31 March 2022 108.5 5.6 32.6 8.1 154.8
1 Borrowings includes interest costs calculated using the applicable interest rate at year end.
2 Lease liabilities are on an undiscounted basis.
Financial statements
Norcros plc Annual Report and Accounts 2022132
Notes to the Group accounts continued
Year ended 31 March 2022
21. Financial instruments continued
Derivative foreign currency contracts
The following table details the foreign currency forward contracts outstanding at the end of the reporting year.
Carrying
amount
£m
Notional
amount
£m
Loss
recognised in
Income
Statement
£m
Change in fair
value taken to
hedge reserve
£m
As at 31 March 2021:
Liabilities 2.3 70.8 (2.0) 2.3
As at 31 March 2022:
Assets 1.6 66.3 — 3.9
As at 31 March 2022, the aggregate amount of gains under foreign exchange forward contracts deferred in the cash flow hedge reserve
relating to these anticipated future purchase transactions is a gain of £1.6m (2021: loss £2.3m). It is anticipated that the purchases will take
place during the twelve months of the financial year ended 31 March 2022 at which time the amount deferred in equity will be removed
from equity and included in the carrying amount of the inventories which are expected to be sold within twelve months of purchase.
Set out below is the reconciliation of each component of equity and the analysis of other comprehensive income:
Hedging reserve
£m
Fair value
At 1 April 2021 (1.5)
Effective portion of changes in fair value 3.9
Amount transferred to inventories (0.3)
Tax effect (0.6)
At 31 March 2022 1.5
Sensitivity analysis
IFRS 7 requires the disclosure of a sensitivity analysis that details the effects on the Group’s profit and loss and equity of reasonably
possible fluctuations in market rates. To demonstrate these, reasonably possible variations of 1% increase or decrease in market interest
rates and 5% strengthening or weakening in major currencies have been chosen.
(a) 1% increase or decrease on market interest rates for most of the coming year
As the Group has borrowings of £20.0m, the effect of a 1% change in market interest rates would be a change in the net finance costs
ofapproximately £0.2m per annum.
(b) 5% strengthening or weakening in major currencies
A number of the Group’s assets are held overseas and as such variations in foreign currencies will affect the carrying value of these assets.
A5% strengthening or weakening of Sterling across all currencies would lead to a circa £3.2m decrease or increase in net assets respectively.
The Group’s profits and losses are exposed to both translational and transactional risk of fluctuations in foreign currency risk. The Group
seeks to mitigate the majority of its transactional risk using forward foreign exchange contracts and product pricing. Taking into account
the unmitigated translational impact, a 5% strengthening or weakening in Sterling against all other currencies would result in an increase
or decrease in reported profits of circa £0.5m respectively.
Annual Report and Accounts 2022 Norcros plc 133
Financial statements
22. Deferred tax
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income taxes relate to the same fiscal authority.
Deferred tax is calculated in full on temporary differences under the liability method. The movement on the deferred tax account
isasshown below.
The analysis of deferred tax assets and liabilities is as follows:
Accelerated tax
depreciation
£m
Retirement
benefit
obligations
£m
Intangible
£m
Other
£m
Total
£m
At 1 April 2020 0.4 9.2 (6.4) 1.5 4.7
(Charged)/credited to the Consolidated Income Statement (0.2) ( 0.1) 0.7 0.1 0.5
Charged to other comprehensive income — (5.6) — — (5.6)
Exchange differences ( 0.1) — — — ( 0.1)
At 31 March 2021 0.1 3.5 (5.7) 1.6 (0.5)
(Charged)/credited to the Consolidated Income Statement (0.2) 0.8 (0.7) 1.0 0.9
Charged to other comprehensive income — (9.2) — (0.6) (9.8)
Exchange differences — — — — —
At 31 March 2022 (0.1) (4.9) (6.4) 2.0 (9.4)
2022
£m
2021
£m
Deferred tax assets:
– to be recovered after more than twelve months 1.6 4.2
– to be recovered within twelve months 0.4 1.0
2.0 5.2
Deferred tax liabilities:
– to be charged after more than twelve months (11.0) (5.0)
– to be charged within twelve months (0.4) (0.7)
(11.4) (5.7)
Deferred tax liabilities (net) (9.4) (0.5)
Other deferred tax assets relate to share-based payment expenses, provisions and other timing differences.
At the Balance Sheet date the Group has recognised £nil (2021: £nil) in respect of tax losses. No deferred tax asset has been recognised
in respect of £6.7m (2021: £6.7m) of UK tax losses as whilst the losses are considered to have no date of expiry, the Company does not
believe that utilisation of these losses is probable.
In the year, an increase to the UK corporation tax rate from 19% to 25% from 1 April 2023 was enacted and so deferred tax assets and liabilities
have been grossed up accordingly.
23. Provisions
Warranty
provision
£m
Restructuring
provision
£m
UK property
provision
£m
Total
£m
At 1 April 2020 1.0 0 .1 2.1 3.2
Charged to the Income Statement 0.1 2.4 — 2.5
Other movement — — 0.5 0.5
Utilisation (0.1) (1.6) (0.5) (2.2)
At 31 March 2021 1.0 0.9 2.1 4.0
Credited to the Income Statement — — (0.9) (0.9)
Property lease discount — — 0.1 0.1
Utilisation (0.1) (0.2) (1.3) (1.6)
At 31 March 2022 0.9 0.7 — 1.6
The warranty provision has been recognised for expected claims on products which remain under warranty. It is expected that this
expenditure will be incurred within five years of the Balance Sheet date.
The restructuring provision relates to COVID-19 restructuring liabilities that are due to be settled within two years.
Financial statements
Norcros plc Annual Report and Accounts 2022134
Notes to the Group accounts continued
Year ended 31 March 2022
24. Retirement benefit obligations
(a) Pension costs
Norcros Security Plan
The Norcros Security Plan (the Plan), the principal UK pension scheme of the Group’s UK subsidiaries, is funded by a separate trust fund
which operates under UK trust law and is a separate legal entity from the Company. The Plan is governed by a Trustee company, which has
a board currently composed of three employer representatives and three member representatives. The Trustee is required by law to act in
the best interests of the Plan members and is responsible for setting policies together with the Company.
It is predominantly a defined benefit scheme, with a modest element of defined contribution benefits. Norcros plc itself has no employees
other than the Directors and so has no liabilities in respect of these pension schemes. The scheme closed to new members and future
accrual with effect from 1 April 2013, though active members retain a salary link. This means that employed members of the Plan who
were building up benefits at the date of closure to accrual will receive a pension based on their service to 1 April 2013 but using their
final pensionable salary at the point they leave employment or retire from the Plan. As a result of the closure a new defined contribution
pension scheme was implemented to replace the Plan from the same date.
The weighted average duration of the defined benefit obligation is approximately 15 years (2021: 15 years) and can be attributed to the
scheme members as follows:
2022 2021
Employee members 2% 3%
Deferred members 28% 29%
Pensioner members 70% 68%
Total 100% 100%
The Plan assets do not include any investments in the Company or any property or other assets utilised by the Company.
The Plan is funded by the Company based on a separate actuarial valuation for funding purposes for which the assumptions may differ
from those below. Funding requirements are formally set out in the Statement of Funding Principles, Schedule of Contributions and
Recovery Plan agreed between the Trustee and the Company.
During the year, the Group has reached agreement with the Trustee on the 31 March 2021 triennial actuarial valuation for the UK defined
benefit scheme and on a new deficit recovery plan. The actuarial deficit at 31 March 2021 was £35.8m (2018: £49.3m). Deficit repair
contributions have been agreed at £3.8m per annum from 1 April 2022 to March 2027 (increasing with CPI, capped at 5% per year).
In line with the previous agreement the Group made deficit recovery contributions of £3.3m (2021: £3.3m) into its UK defined benefit
pension scheme during the year to 31 March 2022.
Risks
The Plan exposes the Company to a number of actuarial risks which may result in a material change in the net scheme deficit and
potentially result in an increase in cash contributions in later years and higher charges being recognised in future Income Statements.
Given the long-term time horizon of the scheme’s cash flows this may result in volatility in the valuation of the net scheme deficit from
year to year. The main risks are set out below:
Mortality risk – the assumptions used by the Group allow for improvements in life expectancy. However, if life expectancy improves
at a faster rate than assumed, this would result in greater payments from the Plan and consequently an increase in scheme liabilities.
TheGroup regularly reviews the mortality assumptions to minimise the risk of using an inappropriate assumption.
Interest rate risk – a reduction in corporate bond yields would result in a lower discount rate being used to value the scheme liabilities
andconsequently result in an increase in scheme liabilities. Additionally, an increase in inflation would increase the scheme liabilities as
the majority of the pension payments increase in line with inflation, although there are a number of caps in place to ensure that the impact
of high inflation is minimised. To mitigate some of the investment volatility a proportion of the scheme assets are held in liability-driven
investments which involve hedging some of the Plan’s exposure to changes in interest rates and inflation by investing in assets that match
the sensitivity of its liabilities. This means that if interest rates or inflation expectations change, assets and liabilities rise or fall together,
andthe funding level of the Plan should be less volatile.
Investment risk and currency risk – a reduction in the value of investments caused by fluctuating exchange rates and a variety of
other market factors would result in a lower valuation of scheme assets. The scheme invests in a diversified range of asset classes to
mitigate the risk of falls in any one area of the investments and implements partial currency hedging on the overseas assets to mitigate
currency risk.
Defined contribution pension schemes
Contributions made to these schemes amounted to £3.7m (2021: £3.0m).
Annual Report and Accounts 2022 Norcros plc 135
Financial statements
24. Retirement benefit obligations continued
(b) IAS 19R, ‘Employee benefits’
Norcros Security Plan
The valuation used for IAS 19R disclosures has been based on the most recent actuarial valuation at 31 March 2021 and updated by Isio
(formerly KPMG), a firm of qualified actuaries, to take account of the requirements of IAS 19R in order to assess the liabilities of the scheme
at 31 March 2022. Scheme assets are stated at their market value at 31 March 2022.
(i) The principal assumptions used to calculate the scheme liabilities of the Norcros Security Plan under IAS 19R are:
2022
Projected
unit
2021
Projected
unit
Discount rate 2.75% 2.05%
Inflation rate (RPI) 3.70% 3.25%
Inflation rate (CPI) 2.90% 2.35%
Increases to pensions in payment (other than pre-1988 GMP liabilities) 3.55% 3 .17 %
Salary increases 3.15% 2.60%
The mortality assumptions are based on standard mortality tables which allow for future mortality improvements and are
summarised below:
2022 2021
Life expectancy at age 65:
Current pensioners – males 19.7 19.9
Current pensioners – females 22.3 22.4
Future pensioners – males (currently aged 45) 20.6 20.8
Future pensioners – females (currently aged 45) 23.4 23.5
Members are assumed to take a 25% (2021: 25%) cash commutation sum on retirement.
(ii) The amounts recognised in the Income Statement are as follows:
2022
£m
2021
£m
Included in operating profit:
IAS 19R pension administration expenses 1.7 1.4
Past service costs — —
IAS 19R finance cost 0.4 1.0
Total amounts recognised in the Income Statement 2.1 2.4
(iii) The amounts recognised in the Balance Sheet are determined as follows:
Value at
31 March
2022
£m
Value at
31 March
2021
£m
Equities 99.6 93.6
Absolute return funds 25.3 24 .1
Bonds 109.7 12 7. 2
High yield 73.6 72.2
Liability-driven investments 70.1 74.4
Cash and gilts 9.6 6.3
Total fair value of scheme assets 387.9 3 97.8
Present value of scheme liabilities (368.3) (416.1)
Pension asset/(deficit) 19.6 (18.3)
Financial statements
Norcros plc Annual Report and Accounts 2022136
Notes to the Group accounts continued
Year ended 31 March 2022
24. Retirement benefit obligations continued
(b) IAS 19R, ‘Employee benefits’ continued
Norcros Security Plan continued
(iii) The amounts recognised in the Balance Sheet are determined as follows: continued
The fair value of the scheme assets analysed by asset category and subdivided between those assets that have a quoted market price
inan active market and those that do not (such as investment funds) are as follows:
Value at 31 March 2022 Value at 31 March 2021
Quoted
£m
Unquoted
£m
Total
£m
Quoted
£m
Unquoted
£m
Total
£m
Equities — 99.6 99.6 — 93.6 93.6
Absolute return funds 18.7 6.6 25.3 18.0 6.1 24 .1
Bonds — 109.7 109.7 — 12 7. 2 127. 2
High yield — 73.6 73.6 — 72.2 72.2
Liability-driven investments — 70.1 70.1 — 74.4 74.4
Cash and gilts 9.6 — 9.6 6.3 — 6.3
Total fair value of scheme assets 28.3 359.6 387.9 24.3 373.5 3 97. 8
The majority of the Plan’s assets are invested in pooled investment vehicles, where the fair value has been determined by the individual
fund managers by applying fair value principles to the underlying investments.
(iv) The movement in the scheme deficit in the year is as follows:
2022
£m
2021
£m
Deficit at the beginning of the year (18.3) (48.9)
Employer contributions – deficit recovery 3.3 3.3
IAS 19R pension administration expenses (1.7) (1.4)
IAS 19R finance cost (0.4) (1.0)
Actuarial gains 36.7 29.7
Asset/(deficit) at the end of the year 19.6 (18.3)
(v) The reconciliation of scheme assets is as follows:
2022
£m
2021
£m
Opening fair value of scheme assets 397.8 361.9
Employer contributions – deficit recovery 3.3 3.3
Interest income 7.9 7.8
Benefits paid (23.5) (23.2)
Actuarial gains on scheme assets 4.1 49.4
IAS 19R pension administration expenses (1.7) (1.4)
Closing fair value of scheme assets 387.9 3 97.8
Annual Report and Accounts 2022 Norcros plc 137
Financial statements
24. Retirement benefit obligations continued
(b) IAS 19R, ‘Employee benefits’ continued
Norcros Security Plan continued
(vi) The reconciliation of scheme liabilities is as follows:
2022
£m
2021
£m
Opening scheme liabilities (416 .1) (410.8)
Interest cost (8.3) (8.8)
Actuarial gains/(losses) arising from changes in financial assumptions 15.3 (35.3)
Actuarial gains arising from changes in demographic assumptions 11.6 15.6
Actuarial gains arising from experience adjustment 5.7 —
Benefits paid 23.5 23.2
Closing fair value of scheme liabilities (368.3) (416.1)
(vii) Amounts recognised in the Consolidated Statement of Comprehensive Income are as follows:
2022
£m
2021
£m
Actuarial gains 36.7 29.7
Deferred tax (9.2) (5.6)
27.5 24 .1
(viii) Sensitivities
The sensitivities regarding the principal assumptions used to measure the Plan’s liabilities are as follows:
Impact on scheme obligations
Assumption
2022
£m
2021
£m
Discount rate – 0.1% decrease 4.0 5.0
Inflation rate (RPI and CPI)
1
– 0.1% increase 3.0 4.0
Increase in life expectancy by one year 17.0 19.0
1 This includes the impact on salary increase and deferred and in payment pension increase assumptions.
The above sensitivities are applied to adjust the defined benefit obligation at the end of the year. Whilst the analysis does not take
account of the full distribution of cash flows expected under the scheme, it does provide an approximation as to the sensitivity of the
assumptions shown.
No changes have been made to the method and assumptions used in this analysis from those used in the previous year.
25. Called up share capital
2022
£m
2021
£m
Issued and fully paid
2022: 81,052,426 (2021: 80,855,464) ordinary shares of 10p each 8.1 8 .1
During the year, the Company issued 196,962 10p ordinary shares in order to satisfy vesting of options under the Company’s Approved
Performance Share Plan, Deferred Bonus Plan and SAYE schemes resulting in share premium of £0.1m.
26. Other non-current liabilities
2022
£m
2021
£m
Other non-current liabilities 0.3 0.3
0.3 0.3
Other non-current liabilities relate to post-retirement healthcare liabilities in our South African business.
Financial statements
Norcros plc Annual Report and Accounts 2022138
Notes to the Group accounts continued
Year ended 31 March 2022
27. Consolidated Cash Flow Statement
(a) Cash generated from operations
The analysis of cash generated from operations is given below:
2022
£m
2021
£m
Profit before taxation 33.0 18.5
Adjustments for:
– IAS 19R administrative expenses included in the Income Statement 1.7 1.4
– acquisition related costs included in the Income Statement 4.8 3.7
– exceptional items included in the Income Statement (0.9) 3.8
– finance costs included in the Income Statement 2.8 5.4
– IAS 19R finance cost included in the Income Statement 0.4 1.0
– cash flows from exceptional items (1.7) (2.5)
– settlement of share options — (0.2)
– depreciation of property, plant and equipment 5.1 5.2
– underlying amortisation 0.1 0.2
– depreciation of right of use asset 4.1 4.0
– pension fund deficit recovery contributions (3.3) (3.3)
– IFRS 2 charges 1.1 1.0
Operating cash flows before movement in working capital 47.2 38.2
Changes in working capital:
– (increase)/decrease in inventories (22.7) 3.8
– increase in trade and other receivables (5.1) (5.0)
– increase in trade and other payables 4.2 23.0
Cash generated from operations 23.6 60.0
(b) Outflow related to exceptional items
This includes expenditure charged to exceptional provisions relating to onerous lease costs, acquisition related costs (excluding deferred
remuneration) and other business rationalisation and restructuring costs.
(c) Analysis of underlying net cash/(debt)
Cash
£m
Current
borrowings
£m
Non-current
borrowings
£m
Underlying
net (debt)/cash
£m
Lease
liabilities
£m
Net debt
£m
At 1 April 2020 47. 3 (0.1) (83.6) (36.4) ( 25.1) (61.5)
Cash flow (19.6) 0 .1 66.0 46.5 6.0 52.5
Non-cash finance costs — — (0.2) (0.2) (1.7) (1.9)
Other non-cash movements — — — — (1.6) (1.6)
Exchange movement 0.6 — — 0.6 (1.8) (1.2)
At 31 March 2021 28.3 — (17.8) 10.5 (24.2) (13.7)
Cash flow (2.5) — (2.0) (4.5) 6.4 1.9
Non-cash finance costs — — 1.0 1.0 (1.7) (0.7)
Other non-cash movements — — — — (3.8) (3.8)
Exchange movement 1.6 — — 1.6 (0.7) 0.9
At 31 March 2022 27.4 — (18.8) 8.6 (24.0) (15.4)
Non-cash finance costs relate to the movement in the costs of raising debt finance in the year.
Annual Report and Accounts 2022 Norcros plc 139
Financial statements
28. Dividends
A final dividend in respect of the year ended 31 March 2021 of £6.6m (8.2p per 10p ordinary share) was paid on 30 July 2021 and an interim
dividend of £2.5m (3.1p per 10p ordinary share) was paid on 11 January 2022. A final dividend in respect of the year ended 31 March 2022
of £6.2m (6.9p per 10p ordinary share) is to be proposed at the Annual General Meeting on 19 July 2022. These financial statements do not
reflect this dividend.
29. Capital commitments
2022
£m
2021
£m
Contracts placed for future capital expenditure not provided in the financial statements 0.3 0.3
30. Related party transactions
The Group considers its Directors to be the key management personnel. Compensation for Directors who have the sole responsibility
forplanning, directing and controlling the Group are set out in the Remuneration Report on pages 87 to 96.
31. Post balance sheet event
On 31 May 2022 the Group acquired Granfit Holdings Limited and subsidiaries, a market leading designer, manufacturer and supplier of
waterproof bathroom panels in the UK. As part of the acquisition of 100% of the share capital of Granfit Holdings Limited, provisional net
assets of £10m were acquired for consideration of £80m with an additional potential earnout of up to £12m based on certain performance
criteria. The acquisition was funded through an equity placing and utilisation of the Group’s banking facilities. At the date of approval of
these financial statements, due to the proximity of the acquisition to the reporting date, a fair value exercise has not yet been completed,
and so these values remain provisional.
Financial statements
Norcros plc Annual Report and Accounts 2022140
Parent Company balance sheet
At 31 March 2022
Notes
2022
£m
2021
£m
Non-current assets
Investments 3 177.3 17 7.3
Deferred tax assets 4 0.7 0.4
178.0 17 7.7
Current liabilities
Trade and other payables 5 (39.8) (30.3)
Net current liabilities (39.8) (30.3)
Total assets less current liabilities 138.2 14 7.4
Non-current liabilities
Financial liabilities – borrowings 6 (18.8) (17.8)
Net assets 119.4 129.6
Financed by:
Share capital 7 8.1 8 .1
Share premium account 30.3 30.2
Treasury reserve (0.1) ( 0 .1)
Retained earnings before loss for the financial year 83.4 9 4 .1
Loss for the financial year (2.3) (2.7)
Total shareholders’ funds 119.4 129.6
The financial statements of Norcros plc, registered number 3691883, on pages 140 to 145 were authorised for issue on 8 June 2022
andsigned on behalf of the Board by:
Nick Kelsall James Eyre
Chief Executive Officer Chief Financial Officer
Annual Report and Accounts 2022 Norcros plc 141
Financial statements
Parent Company statement of changes in equity
Year ended 31 March 2022
Ordinary
share
capital
£m
Share
premium
£m
Treasury
reserve
£m
Retained
earnings
£m
Total
equity
£m
At 1 April 2020 8.1 29.9 (0.4) 93.6 131.2
Comprehensive expense:
Loss for the year — — — (2.7) (2.7)
Total comprehensive expense for the year — — — (2.7) (2.7)
Transactions with owners:
Shares issued — 0.3 — — 0.3
Equity-settled share options — — 0.3 (0.5) (0.2)
Value of employee services — — — 1.0 1.0
At 31 March 2021 8.1 30.2 ( 0.1) 91.4 129.6
Comprehensive expense:
Loss for the year — — — (2.3) (2.3)
Total comprehensive expense for the year — — — (2.3) (2.3)
Transactions with owners:
Shares issued — 0 .1 — — 0 .1
Dividends paid — — — ( 9.1) ( 9.1)
Equity-settled share options — — — — —
Value of employee services — — — 1.1 1.1
At 31 March 2022 8.1 30.3 (0.1) 81.1 119.4
Financial statements
Norcros plc Annual Report and Accounts 2022142
Notes to the Parent Company accounts
Year ended 31 March 2022
1. Statement of accounting policies
General information
Norcros plc (the Company) is the ultimate holding company of the Norcros Group, which designs, manufactures and distributes a range
ofhigh quality and innovative bathroom and kitchen products mainly in the UK and South Africa.
The Company is incorporated in the UK as a public company limited by shares and registered in England and Wales. The shares of the
Company are listed on the London Stock Exchange market of listed securities. The address of its registered office is Ladyfield House,
Station Road, Wilmslow SK9 1BU, UK.
Accounting reference date
UK company law permits a company to draw up financial statements to a date seven days either side of its accounting reference date.
Foroperational reasons the Company has in the current financial year adopted an accounting period of 52 weeks, and as a result of this,
the exact year-end date was 3 April 2022. All references to the financial year therefore relate to the 52 weeks commencing on 5 April 2021.
In the previous year the accounting period was 52 weeks long, beginning on 6 April 2020 and ending on 4 April 2021.
Basis of preparation
Norcros plc is a qualifying entity able to apply FRS 101, ‘Reduced disclosure framework’. The separate financial statements of the Company
have been prepared in accordance with FRS 101, on the going concern basis and under the historical cost convention modified for fair
values, and in accordance with the Companies Act 2006 and with applicable accounting standards.
These financial statements and accompanying notes have been prepared in accordance with the reduced disclosure framework for all
periods presented. A separate profit and loss account dealing with the results of the Company has not been presented as permitted by
Section 408(3) of the Companies Act 2006.
The following exemptions from the requirements of IFRS have been applied in the preparation of these financial statements, in accordance
with FRS 101:
• the following paragraphs of IAS 1, ‘Presentation of financial statements’:
• 10(d) (statement of cash flows);
• 16 (statement of compliance with all IFRS);
• 111 (cash flow statement information); and
• 134–136 (capital management disclosures);
• IFRS 7, ‘Financial instruments: disclosures’;
• IAS 7, ‘Statement of cash flows’;
• IAS 8, ‘Accounting policies, changes in accounting estimates and errors’ – impact of future accounting standards;
• IAS 24 (paragraph 17), ‘Related party disclosures’ – key management compensation; and
• IAS 24, ‘Related party disclosures’ – the requirement to disclose related party transactions between two or more members of a group.
As the Group financial statements include the equivalent disclosures, the Company has taken the exemptions available under FRS 101
inrespect of the following disclosures:
• IFRS 2, ‘Share-based payments’, in respect of Group equity-settled share-based payments; and
• certain disclosures required by IFRS 13, ‘Fair value measurement’, and disclosures required by IFRS 7, ‘Financial instruments: disclosures’.
Critical estimates and judgements
The Directors believe that there are no critical accounting estimates relating to these financial statements.
A summary of the more important accounting policies, which have been applied consistently, is set out below.
Investments in subsidiaries
Investments held as fixed assets are stated at cost, less any provision for impairment. The Directors believe the carrying value
of investments is supported by their underlying assets and cash flow projections derived from detailed budgets and forecasts.
Dividendsreceived from investments are included within turnover and recognised on receipt of the dividend.
Foreign currency transactions
Monetary assets and liabilities expressed in foreign currencies are translated into Sterling at rates applicable at the year end.
Exchangegains and losses are dealt with in arriving at operating profit.
Taxation
Deferred taxation has been recognised as a liability or asset if transactions have occurred at the Balance Sheet date that give rise to an
obligation to pay more taxation in the future or a right to pay less taxation in the future. An asset is recognised only when the transfer
ofeconomic benefits is more likely than not to occur.
Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the financial statements in the period in which
thedividends are approved by the Company’s shareholders or when paid if earlier.
Annual Report and Accounts 2022 Norcros plc 143
Financial statements
1. Statement of accounting policies continued
Financial assets and liabilities
Borrowings – the Company measures all borrowings initially at fair value. This is taken to be the fair value of the consideration received.
Transaction costs (any such costs that are incremental and directly attributable to the issue of the financial instrument) are included in the
calculation of the effective interest rate and are, in effect, amortised through the Income Statement over the duration of the borrowing.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least
twelve months after the Balance Sheet date.
Share-based payments
The Company operates a number of equity-settled, share-based compensation plans. The fair value of the employee services received
in exchange for the grant of options is recognised as an expense. The total amount to be expensed over the vesting period is determined
by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions. Non-market vesting
conditions are included in assumptions about the number of options that are expected to vest. At each Balance Sheet date, the Company
revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision to original estimates,
ifany, in the Income Statement, with a corresponding adjustment to equity.
2. Other information
Auditor’s remuneration of £3,000 (2021: £3,000) and staff costs relating to two employees (2021: two) are borne by one of the Company’s
subsidiaries, without recharge.
Further information about the Directors’ remuneration may be found in the Annual Report on Remuneration on pages 87 to 96.
3. Investments
Shares in
subsidiaries
£m
At 1 April 2021 and 31 March 2022 17 7.3
Details of the subsidiaries owned by the Company, held both directly and indirectly, are shown in note 10.
4. Deferred tax assets
Deferred tax is calculated in full on temporary differences under the liability method. The movement on the deferred tax account is as
shown below:
2022
£m
2021
£m
Deferred tax asset 0.7 0.4
The analysis of the deferred tax asset is as follows:
2022
£m
2021
£m
Other timing differences 0.7 0.4
2022
£m
2021
£m
To be recovered after more than twelve months — —
To be recovered within twelve months 0.7 0.4
0.7 0.4
The full potential asset for deferred tax is as follows:
2022
£m
2021
£m
Other timing differences 0.7 0.4
Tax losses 4.5 4.5
5.2 4.9
No deferred tax has been recognised in the financial statements in respect of the tax losses as the Company does not believe that
utilisation of these losses is probable.
Financial statements
Norcros plc Annual Report and Accounts 2022144
Notes to the Parent Company accounts continued
Year ended 31 March 2022
5. Trade and other payables
2022
£m
2021
£m
Accruals 2.2 0.6
Amounts owed to Group undertakings 37.6 29.7
39.8 30.3
6. Financial liabilities – borrowings
2022
£m
2021
£m
Loans and bank overdrafts 20.0 18.0
Costs of raising finance (1.2) (0.2)
18.8 17.8
Repayable after more than one year:
– between one and two years — 18.0
– between two and five years 20.0 —
– costs of raising finance (1.2) (0.2)
18.8 17.8
The Group increased the amount of its committed banking facilities to £130m (plus a £70m uncommitted accordion) shortly before the year end.
The maturity date is October 2025 with two one-year extension options.
The Group has been in compliance with all banking covenants during the year.
7. Called up share capital
2022
£m
2021
£m
Issued and fully paid
2022: 81,052,426 (2021: 80,855,464) ordinary shares of 10p each 8.1 8 .1
During the year, the Company issued 196,962 10p ordinary shares in order to satisfy vesting of options under the Company’s Approved
Performance Share Plan, Deferred Bonus Plan and SAYE schemes resulting in share premium of £0.1m.
8. Dividends
A final dividend in respect of the year ended 31 March 2021 of £6.6m (8.2p per 10p ordinary share) was paid on 30 July 2021 and an interim
dividend of £2.5m (3.1p per 10p ordinary share) was paid on 11 January 2022. A final dividend in respect of the year ended 31 March 2022
of £6.1m (6.9p per 10p ordinary share) is to be proposed at the Annual General Meeting on 19 July 2022. These financial statements do not
reflect this dividend.
9. Contingent liabilities
The Company is party to an omnibus set-off agreement between Lloyds Bank plc and the Group’s UK subsidiaries.
Annual Report and Accounts 2022 Norcros plc 145
Financial statements
10. Subsidiaries
The subsidiaries included in the financial statements are disclosed below. All companies are 100% owned by the Group.
Held directly by Norcros plc
Company
Country of
incorporation
or registration Registered address
Norcros Group (Holdings) Limited England Ladyfield House, Station Road, Wilmslow SK9 1BU, United Kingdom
Held indirectly by Norcros plc
Company
Country of
incorporation
or registration Registered address
Abode Home Products Ltd England Ladyfield House, Station Road, Wilmslow SK9 1BU, United Kingdom
Bathshoponline Ltd England As above
Carlton Holdings Ltd England As above
Crittall Construction Ltd England As above
Croydex Group Ltd England As above
Croydex Ltd England As above
Eurobath International Ltd England As above
H & R Johnson (Overseas) Ltd England As above
H & R Johnson Tiles Ltd England As above
Lincolnshire Properties (Norfolk Street) Ltd England As above
Merlyn Industries UK Ltd England As above
Metlex Industries Ltd England As above
Norcros (Trustees) Ltd England As above
Norcros Adhesives Ltd England As above
Norcros Developments Ltd England As above
Norcros Estates Ltd England As above
Norcros Group Trusteeships Ltd England As above
Norcros Industry (International) Ltd England As above
Norcros Securities Ltd England As above
Norcros Services Ltd England As above
Plumbex UK Ltd England As above
Samuel Booth and Company Ltd England As above
Stonechester (Stoke) Ltd England As above
Taps Direct Ltd England As above
Triton Industry Ltd England As above
Triton plc England As above
UBM Pension Trust Ltd England As above
Vado UK Ltd England As above
Cronors Insurance Ltd Guernsey Dorey Court, Admiral Park, St. Peter Port GY1 2HT, Guernsey
Merlyn Industries Ltd Ireland Merlyn House, Purcellsinch Industrial Estate, Dublin Road, Kilkenny, Ireland
Christa 271 (Pty) Ltd Namibia 3rd Floor, 344 Independence Avenue, Windhoek, Namibia
Tile Africa Windhoek Property (Pty) Ltd Namibia 15 van Zyl Street, Suiderhof, Windhoek, Namibia
Ceracon (Pty) Ltd South Africa 4 Porcelain Road, Olifantsfontein 1665, South Africa
General Adhesives (Pty) Ltd South Africa As above
Johnson Tiles Pty Ltd South Africa As above
Lesatsi Trading (Pty) Ltd South Africa As above
Norcros SA (Pty) Ltd South Africa As above
TAL (Pty) Ltd South Africa As above
Talcor Properties (Pty) Ltd South Africa As above
Tile Adhesives (Pty) Ltd South Africa As above
Tile Africa Group (Pty) Ltd South Africa As above
Triton SA (Pty) Ltd South Africa As above
RAP Plumbing Supplies (Pty) Ltd South Africa As above
Norcros Middle East Building
Materials Trading LLC
UAE Warehouse No. 5, St. No. 4, Umm Ramool, Marrakesh Road,
P.O. Box 393937, Dubai, UAE
Norcros plc Annual Report and Accounts 2022146
Annual General Meeting
Notice of Annual General Meeting
Norcros plc (“Company”)
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
If you are in any doubt as to the action you should take, you are recommended to consult your stockbroker, bank manager, solicitor,
accountant, fund manager or other appropriate independent professional adviser who is authorised under the Financial Services and Markets
Act 2000 if you are resident in the United Kingdom or, if not, from another appropriately authorised independent professional adviser.
If you sell or otherwise transfer, or have sold or other otherwise transferred, all of your shares in the Company, please send this document
and the form of proxy (if you have a form of proxy) to the purchaser or transferee, or to the stockbroker, bank or other agent through
whom the sale or transfer was effected, for transmission to the purchaser or transferee, save that you should not send such documents
inor into any jurisdiction in which to do so would constitute a violation of that jurisdiction’s relevant laws or regulations.
If you sell or otherwise transfer, or have sold or otherwise transferred, only part of your holding of shares in the Company, you should
retain this document and the form of proxy (if you have a form of proxy) and consult the stockbroker, bank or other agent through whom
the sale or transfer was effected.
Notice is given that the 2022 Annual General Meeting of the Company (“AGM”) will be held at 11.00 am on 19 July 2022 at The Mere Golf
Resort & Spa, Chester Road, Mere, Knutsford, Cheshire WA16 6LJ for the purpose of considering and, if thought fit, passing the resolutions
set out below.
ATTENDANCE
As at the date of publication of this notice, UK Government advice and related public health guidance has been relaxed, allowing us
to hold an in-person annual general meeting for the first time in two years. The health and wellbeing of our shareholders remains of
paramount importance to us and, therefore, we may be required to change the arrangements for the AGM if there are any changes in
such advice and guidance. In the event that it is necessary or desirable to make any changes to the arrangements for the AGM, we will
seek to give shareholders as much notice as possible. Details of any changes to those arrangements will be made available on the “AGM
2022” section of the Company’s website (www.norcros.com) and, where appropriate, announced via a Regulatory Information Service.
We strongly encourage shareholders to register your proxy votes in advance of the AGM and to appoint the Chair as their proxy, to ensure
that, if the arrangements for the AGM change and they or their proxy (other than the Chair) are unable to physically attend the AGM, they
can still vote and be represented at the AGM. Details of how to complete and submit your proxy votes are set out below.
RESOLUTIONS
The following resolutions will be proposed at the meeting. Resolutions 1 to 11 (inclusive) will be proposed as ordinary resolutions
andresolutions 12 to 15 (inclusive) will be proposed as special resolutions.
1. To receive the audited accounts and the Auditor’s and Directors’ Reports for the year ended 31 March 2022.
2. To declare a final dividend of 6.9 pence per ordinary share for the year ended 31 March 2022.
3. To approve the Directors’ Remuneration Report (other than the part containing the Directors’ Remuneration Policy) for the year ended
31 March 2022 set out in the Annual Report and Accounts for the year ended 31 March 2022.
4. To elect Gary Kennedy as a Director.
5. To re-elect Alison Littley as a Director.
6. To re-elect David McKeith as a Director.
7. To re-elect Nick Kelsall as a Director.
8. To elect James Eyre as a Director.
9. To re-appoint BDO LLP as auditor of the Company to hold office until the conclusion of the next general meeting of the Company
atwhich accounts are laid.
10. To authorise the Audit and Risk Committee of the Board of Directors to agree the remuneration of the auditor of the Company.
11. That the Directors be and are generally and unconditionally authorised pursuant to Section 551 of the Companies Act 2006 to
exercise all the powers of the Company to allot shares in the Company and to grant rights to subscribe for or to convert any security
into such shares (“Allotment Rights”), but so that:
(a) the maximum amount of shares that may be allotted or made the subject of Allotment Rights under such authority are shares
withan aggregate nominal value of £5,943,526.60 of which:
(i) one half may be allotted or made the subject of Allotment Rights in any circumstances; and
(ii) the other half may be allotted or made the subject of Allotment Rights pursuant to any rights issue (as referred to in the
Financial Conduct Authority’s Listing Rules) or pursuant to any arrangements made for the placing or underwriting or other
allocation of any shares or other securities included in, but not taken up under, such rights issue;
(b) such authority shall expire at the close of business on 19 October 2023 or, if earlier, at the conclusion of the Company’s next
annual general meeting;
(c) before such expiry, the Company may make any offer or agreement which would or might require such shares to be allotted or
Allotment Rights to be granted after such expiry and the Directors may allot shares or grant Allotment Rights under any such offer
or agreement as if such authority had not expired; and
(d) all existing authorities vested in the Directors to allot such shares or to grant Allotment Rights that remain unexercised are revoked.
Annual Report and Accounts 2022 Norcros plc 147
Annual General Meeting
RESOLUTIONS continued
12 That, subject to the passing of resolution 11 in the notice of this meeting (the “Notice”), the Directors be and are empowered pursuant
to Sections 570 and 573 of the Companies Act 2006 to allot equity securities (as defined in Section 560(1) of that Act) for cash,
pursuant to the authority conferred on them by resolution 11 in the Notice or by way of a sale of treasury shares, as if Section 561
ofthat Act did not apply to any such allotment or sale, provided that such power is limited to:
(a) the allotment or sale of such equity securities in connection with any rights issue or open offer (each as referred to in the Financial
Conduct Authority’s Listing Rules) or any other pre-emptive offer that is open for acceptance for a period determined by the
Directors to the holders of ordinary shares in the Company on the register on any fixed record date in proportion to their holdings
of such ordinary shares (and, if applicable, to the holders of any other class of equity security in the Company in accordance with
the rights attached to such class), subject in each case to such exclusions or other arrangements as the Directors may deem
necessary or appropriate in relation to fractions of such securities, the use of more than one currency for making payments in respect
of such offer, any such shares or other securities being represented by depositary receipts, treasury shares, any legal orpractical
problems in relation to any territory or the regulations or requirements of any regulatory body or any stock exchange; and
(b) the allotment or sale of such equity securities (other than pursuant to paragraph (a) above) up to an aggregate nominal value
of£445,764.50 (representing approximately 5% of the issued share capital of the Company),
and shall expire on the revocation or expiry (unless renewed) of the authority conferred on the Directors by resolution 11 in the Notice,
save that, before the expiry of such power, the Company may make any offer or agreement which would or might require such equity
securities to be allotted or sold after such expiry and the Directors may allot or sell such equity securities under any such offer or
agreement as if such power had not expired.
13. That, subject to the passing of resolution 11 in the notice of this meeting (the “Notice”) and, in addition to the power contained in
resolution 12 set out in the Notice, the Directors be and are empowered pursuant to Sections 570 and 573 of the Companies Act 2006
to allot equity securities (as defined in Section 560(1) of that Act) for cash, pursuant to the authority conferred on them by resolution 11
in the Notice or by way of sale of treasury shares, as if Section 561 of that Act did not apply to any such allotment or sale, provided that
such power is:
(a) limited to the allotment or sale of such equity securities up to an aggregate nominal value of £445,764.50; and
(b) used only for the purposes of financing (or refinancing, if the power is to be exercised within six months after the date of the
original transaction) a transaction which the Directors determine to be an acquisition or other capital investment of a kind
contemplated by the Statement of Principles on Disapplying Pre-Emption Rights most recently published by the Pre-Emption
Group prior to the date of the Notice,
and shall expire on the revocation or expiry (unless renewed) of the authority conferred on the Directors by resolution 11 in the Notice
save that, before the expiry of such power, the Company may make any offer or agreement which would or might require such equity
securities to be allotted or sold after such expiry and the Directors may allot or sell such equity securities under any such offer or
agreement as if such power had not expired.
14. That the Company be and is generally and unconditionally authorised pursuant to Section 701 of the Companies Act 2006 to make
market purchases (as defined in Section 693(4) of that Act) of ordinary shares in its capital provided that:
(a) the maximum aggregate number of such shares that may be acquired under this authority is 8,915,290;
(b) the minimum price (exclusive of expenses) that may be paid for such a share is its nominal value;
(c) the maximum price (exclusive of expenses) that may be paid for such a share is the maximum price permitted under the Financial
Conduct Authority’s Listing Rules;
(d) such authority shall expire at the close of business on 19 October 2023 or, if earlier, at the conclusion of the Company’s next
annual general meeting; and
(e) before such expiry, the Company may enter into a contract to purchase such shares which would or might require a purchase to
be completed after such expiry and the Company may purchase such shares pursuant to any such contract as if such authority
had not expired.
15. That any general meeting of the Company that is not an annual general meeting may be convened by not less than 14 clear
days’ notice.
By order of the Board
Richard Collins Registered office:
Company Secretary Ladyfield House
8 June 2022 Station Road
Wilmslow
Cheshire SK9 1BU
Registered in England and Wales company number 3691883
Norcros plc Annual Report and Accounts 2022148
Annual General Meeting
Explanatory notes
Notes
1. A member who is entitled to attend and vote at the meeting is entitled to appoint another person, or two or more persons in respect
of different shares held by him, as his proxy to exercise all or any of his rights to attend and to speak and vote at the meeting. A proxy
need not be a member.
2. The right of a member to attend and vote at the meeting will be determined by reference to the register of members. A member must
be registered on that register as the holder of ordinary shares by 11.00 am on 15 July 2022 in order to be entitled to attend and vote at
the meeting as a member in respect of those shares.
3. A member wishing to attend and vote at the meeting in person should arrive prior to the time fixed for its commencement. A member that
is a corporation can only attend and vote at the meeting in person through one or more representatives appointed in accordance with
Section 323 of the Companies Act 2006. Any such representative should bring to the meeting written evidence of his appointment,
such as a certified copy of a board resolution of, or a letter from, the corporation concerned confirming the appointment.
4. Any member wishing to vote at the meeting without attending in person or (in the case of a corporation) through its duly appointed
representative must appoint a proxy to do so. Appointing a proxy will not prevent a member from attending and voting in person at
the meeting should he so wish.
A member can appoint a proxy by:
• logging onto http://www.signalshares.com and submitting a proxy appointment online by following the instructions. A member
who has not previously done so will first need to register to use this facility (using the Investor Code detailed on the member’s share
certificate or otherwise available from the Company’s registrar, Link Group); or
• submitting (if the member is a CREST member) a proxy appointment electronically by using the CREST voting service (in accordance
with the notes below).
A member who would prefer a paper form of proxy may request one from the Company’s registrar by calling the helpline number
below. A paper proxy appointment form must be completed in accordance with the instructions that accompany it and must be
delivered (together with any power of attorney or other authority under which it is signed, or a copy certified by a notary or in some
other way approved by the Board) to Link Group, 10th Floor, Central Square, 29 Wellington Street, Leeds LS1 4DL.
All proxy appointments must be received by no later than 11.00 am on 15 July 2022 to be valid. The Company’s registrar, Link Group,
can be contacted on 0371 664 0300 if calling from the UK, or +44 (0) 371 664 0300 if calling from outside of the UK. Calls are charged
at the standard geographic rate and will vary by provider. Calls outside the UK will be charged at the applicable international rate.
Thelines are open between 09:00 – 17:30, Monday to Friday excluding public holidays in England and Wales.
5. Any person to whom this Notice is sent who is currently nominated by a member of the Company to enjoy information rights under
Section 146 of the Companies Act 2006 (a “nominated person”), may have a right under an agreement between him and that member
to be appointed, or to have someone else appointed, as a proxy for the meeting. If a nominated person has no such right or does not
wish to exercise it, he may have a right under such an agreement to give instructions to the member concerned as to the exercise of
voting rights. The statement in note 1 above of the rights of a member in relation to the appointment of proxies does not apply to a
nominated person. Such rights can only be exercised by the member concerned.
6. Voting on all resolutions will be conducted by way of a poll, rather than a show of hands. This is a more transparent method of voting
as members’ votes are counted according to the number of ordinary shares held. As soon as practicable following the meeting, the
results of the voting at the meeting and the numbers of proxy votes cast for and against, together with the number of votes actively
withheld in respect of, each of the resolutions will be announced via a Regulatory Information Service and will also be placed on the
“AGM 2022” section of the Company’s website (www.norcros.com).
7. As at 7 June 2022 (being the latest practicable date prior to the printing of the Annual Report and Accounts 2022), (i) the Company’s
issued share capital consisted of 89,152,900 ordinary shares carrying one vote each and (ii) the total voting rights in the Company
were 89,152,900.
8. Each member attending the meeting has the right to ask questions relating to the business being dealt with at the meeting which,
in accordance with Section 319A of the Companies Act 2006, and subject to some exceptions, the Company must cause to be
answered. Information relating to the meeting which the Company is required by the Companies Act 2006 to publish on a website in
advance of the meeting may be viewed at the “AGM 2022” section of the Company’s website (www.norcros.com).A member may not
use any electronic address provided by the Company in the Annual Report and Accounts 2022 or in any accompanying document or
in any website for communicating with the Company for any purpose in relation to the meeting other than as expressly stated in it.
9. It is possible that, pursuant to members’ requests made in accordance with Section 527 of the Companies Act 2006, the Company
will be required to publish on a website a statement in accordance with Section 528 of that Act setting out any matter that the
members concerned propose to raise at the meeting relating to the audit of the Company’s latest audited accounts. The Company
cannot require the member(s) concerned to pay its expenses in complying with those sections. The Company must forward any
such statement to its auditor by the time it makes the statement available on the website. The business that may be dealt with at the
meeting includes any such statement.
Annual Report and Accounts 2022 Norcros plc 149
Annual General Meeting
Notes continued
10. CREST members who wish to appoint one or more proxies through the CREST system may do so by using the procedures described
in the CREST voting service section of the CREST Manual. CREST personal members or other CREST sponsored members, and those
CREST members who have appointed one or more voting service providers, should refer to their CREST sponsor or voting service
provider(s), who will be able to take the appropriate action on their behalf. In order for a proxy appointment or a proxy instruction
made using the CREST voting service to be valid, the appropriate CREST message (a CREST proxy appointment instruction) must be
properly authenticated in accordance with the specifications of CREST’s operator, Euroclear UK & International Limited (Euroclear) and
must contain all the relevant information required by the CREST Manual. To be valid, the message (regardless of whether it constitutes
the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy) must be transmitted so as
to be received by Link Group (ID RA10), as the Company’s issuer’s agent, by 11.00 am on 15 July 2022. After this time, any change of
instruction to a proxy appointed through the CREST system should be communicated to the appointee through other means. The
time of the message’s receipt will be taken to be when (as determined by the timestamp applied by the CREST Applications Host) Link
Group is first able to retrieve it by enquiry through the CREST system in the prescribed manner. Euroclear does not make available
special procedures in the CREST system for transmitting any particular message. Normal system timings and limitations apply in
relation to the input of CREST proxy appointment instructions. It is the responsibility of the CREST member concerned to take (or,
ifthe CREST member is a CREST personal member or a CREST sponsored member or has appointed any voting service provider(s),
to procure that his CREST sponsor or voting service provider(s) take(s)) such action as is necessary to ensure that a message is
transmitted by means of the CREST system by any particular time. CREST members and, where applicable, their CREST sponsors or
voting service provider(s) should take into account the provisions of the CREST Manual concerning timings as well as its section on
“Practical limitations of the system”. In certain circumstances, the Company may, in accordance with the Uncertificated Securities
Regulations 2001 or the CREST Manual, treat a CREST proxy appointment instruction as invalid.
11. The Company takes all reasonable precautions to ensure that no malicious software or computer viruses (all such things being
referred to here as “Malware”) are present in any electronic communication which it sends but does not accept responsibility for
any loss or damage arising from the opening or use of any email or attachment sent by the Company. The Company recommends
that members subject all emails and attachments to suitable Malware checking procedures prior to opening or use. Any electronic
communication received by the Company or Link Group (including the lodgement of an electronic proxy appointment) which is
believed to or is found to contain any Malware will not be accepted.
12. Copies of Directors’ service contracts and letters of appointment will be available for inspection at the registered office of the
Company during normal business hours each business day and at the place of the meeting for at least 15 minutes prior to and during
the meeting. In addition, an electronic copy of any such document is available by request from a member to the Company Secretary
(email: info@norcros.com).
13. Information regarding this meeting, including information required by Section 311A of the Companies Act 2006, is available on the
“AGM 2022” section of the Company’s website (www.norcros.com). SHAREHOLDERS ARE ENCOURAGED TO REGULARLY REVIEW
THE “AGM 2022” SECTION OF THE COMPANY WEBSITE IN CASE OF ANY CHANGES TO THE ARRANGEMENTS REGARDING
THE MEETING.
Fair Processing Notice
Norcros will only process your information for the purpose of managing AGM voting and analysis of voting patterns (not how individuals
cast their votes).This data will only be retained for 14 months before being deleted.For more information on how we look after your
personal data please see our Privacy Policy at www.norcros.com.
Norcros plc Annual Report and Accounts 2022150
Annual General Meeting
Explanatory notes continued
The 2022 Annual General Meeting of the Company will take place at 11.00 am on 19 July 2022 at The Mere Golf Resort & Spa, Chester
Road, Mere, Knutsford, Cheshire WA16 6LJ. The Directors recommend all shareholders to vote in favour of all of the resolutions to be
proposed, as the Directors intend to do so in respect of their own shares (save in respect of any matters in which they are interested),
andconsider that they are in the best interests of the Company and the shareholders as a whole.
Explanatory notes in relation to the resolutions appear below. For the purposes of these notes, reference to 7 June 2022 in relation to
theCompany’s issued share capital is a reference to the latest practicable date prior to the publication of the Company’s annual report
and accounts for the financial year ended 31 March 2022 (“Annual Report and Accounts 2022”).
Resolution 1
Report and accounts
For each financial year, the Directors are required to present the audited accounts, the Auditor’s Report and the Directors’ Report to
shareholders at a general meeting. In line with best practice, shareholders are invited to vote on the receipt of the Annual Report and
Accounts 2022.
Resolution 2
Dividend
The payment of the final dividend requires approval of shareholders in general meeting. A final dividend can only be declared by the
shareholders in general meeting and cannot exceed the amount recommended by the Directors. The Directors have recommended a
final dividend for the year ended 31 March 2022 of 6.9 pence per ordinary share.If the meeting approves resolution 2, the final dividend
of 6.9 pence per ordinary share will be paid on 29 July 2022 to ordinary shareholders who are on the register of members at the close
ofbusiness on 24June 2022.
Resolution 3
Approval of the Directors’ Remuneration Report
In accordance with the Companies Act 2006, shareholders are invited to approve the Directors’ Remuneration Report for the financial
year ended 31 March 2022. The vote on this resolution is advisory only and the Directors’ entitlement to remuneration is not conditional
onit being passed.
The Directors’ Remuneration Report is set out in full on pages 76 to 96 of the Annual Report and Accounts 2022. For the purposes of this
resolution, the Directors’ Remuneration Report does not include the Directors’ Remuneration Policy which is set out on pages 79 to 86.
Resolutions 4 to 8
Election and re-election of Directors
Resolutions 4 to 8 relate to the retirement and re-election of the Company’s Directors. The Company’s Articles of Association require a
Director who has been appointed by the Board of Directors to retire at the annual general meeting next following his or her appointment.
Gary Kennedy and James Eyre were appointed as Directors by the Board of Directors with effect from 8 December 2021 and 1 August 2021
respectively. Consequently, each of them will retire from office at the Annual General Meeting and intends to stand for election by the
shareholders for the first time.
The Company’s Articles of Association also require certain Directors to retire from office at intervals, and that at each annual general
meeting one-third of eligible Directors must retire from office by rotation. Notwithstanding the provisions of the Articles of Association,
the Board has determined that each of the remaining Directors shall also retire from office at the 2022 Annual General Meeting in line with
best practice recommendations of the UK Corporate Governance Code. Each of the remaining Directors intends to stand for re-election
by the shareholders.
The Board confirms that, following formal performance evaluation of all of the Directors, each of the Directors standing for election
or re-election continues to be an effective and valuable member of the Board, to make a positive contribution and to demonstrate
commitment to his or her role (including making sufficient time available for Board and committee meetings and other duties). The Board
believes that the considerable and wide-ranging experience of the Directors will continue to be invaluable to the Company. The Board is
satisfied that each Non-executive Director standing for re-election is independent (as defined in the UK Corporate Governance Code).
Asis more fully explained on page 66 of the Annual Report and Accounts 2022, the Board notes that David McKeith will cease to be
regarded as independent on the ninth anniversary of his appointment as a Director. Therefore, if re-elected at the 2022 Annual General
Meeting, Mr McKeith will not seek re-election at the 2023 Annual General Meeting. Brief biographical details of all of the Directors standing
for election or re-election can be found on pages 64 and 65 of the Annual Report and Accounts 2022.
Resolutions 9 and 10
Appointment and remuneration of auditor
The Company is required to appoint an auditor at each general meeting at which accounts are laid, to hold office until the end of the next
such meeting. The Audit and Risk Committee has reviewed BDO LLP’s performance as auditor of the Company during the year and has
recommended to the Board that it be re-appointed. The Audit and Risk Committee also confirmed to the Board that its recommendation
was free from third-party influence and that no restrictive contractual provisions had been imposed on the Company limiting its choice of
auditor. BDO LLP has indicated that it is willing to continue as the Company’s auditor for another year. Accordingly, the Directors propose
the re-appointment of BDO LLP. Resolution 9 therefore proposes that BDO LLP be re-appointed as the Company’s auditor to hold office
with effect from the end of the meeting until the end of the next general meeting at which accounts are laid. Resolution 10 follows best
practice in giving authority to the Audit and Risk Committee to agree the remuneration of the Company’s auditor.
Annual Report and Accounts 2022 Norcros plc 151
Annual General Meeting
Resolution 11
Authority to allot shares
Most listed companies renew their directors’ authority to issue shares at each annual general meeting. Such an authority was granted by
the Company’s shareholders last year and is due to expire at the conclusion of the 2022 Annual General Meeting. In accordance with best
practice, this resolution seeks to renew the Directors’ authority to allot shares.
Resolution 11, if passed, will renew the Directors’ authority to allot shares in the capital of the Company up to a maximum aggregate
nominal value of £5,943,526.60. This represents approximately two-thirds of the Company’s issued ordinary share capital as at 7 June 2022
and is within the limits prescribed by The Investment Association. Of this amount, ordinary shares up to an aggregate nominal value of
£2,971,763.80 (which represents approximately one-third of the Company’s issued ordinary share capital as at 7 June 2022) can only be
allotted pursuant to a rights issue.
As at 7 June 2022, the Company did not hold any shares in the Company in treasury. The renewed authority will, if passed, remain in force
until the close of business on 19 October 2023 or, if earlier, the conclusion of the Company’s next annual general meeting.
Except for the allotment and issue of shares where necessary to satisfy the exercise of share options already granted by the
Company, the Directors have no present intention of exercising this authority. The purpose of giving the Directors this authority
isto maintain the Company’s flexibility to take advantage of any appropriate opportunities that may arise.
Resolutions 12 and 13
Disapplication of pre-emption rights
The Directors are currently empowered, subject to certain limitations, to issue shares for cash without first offering them to existing
shareholders in proportion to their existing shareholdings. That power will expire at the conclusion of the 2022 Annual General Meeting
and, in accordance with best practice, resolutions 12 and 13 (which will be proposed as special resolutions) seek to renew the Directors’
power to disapply pre-emption rights as referenced below and in line with the Statement of Principles published by The Pre-Emption
Group in March 2015.
Other than in connection with a rights issue or other similar pre-emptive issue, the power contained in resolution 12 will be limited to
ordinary shares up to a maximum aggregate nominal value of £445,764.50. This amount equates to approximately 5% of the issued
ordinary share capital of the Company as at 7 June 2022.
In line with the Pre-Emption Group’s Statement of Principles, the Directors are also seeking (at resolution 13) a power to issue up to
an additional 5% of the Company’s issued ordinary share capital for cash without pre-emption rights applying. In accordance with
those Principles, the Company will only allot shares up to a maximum aggregate nominal value of £445,764.50 (representing 5% of the
issued ordinary share capital of the Company as at 7 June 2022) on a non-pre-emptive basis under this power where that allotment
is in connection with an acquisition or specified capital investment (within the meaning given in the Statement of Principles) which is
announced contemporaneously with the allotment, or which has taken place in the preceding six-month period and is disclosed in the
announcement of the allotment.
This renewed authority will, if passed, remain in force until the close of business on 19 October 2023 or, if earlier, the conclusion of the
Company’s next annual general meeting.
In accordance with the Statement of Principles (which is supported by The Investment Association and the Pensions and Lifetime Savings
Association), the Board confirms its intention that no more than 7.5% of the Company’s issued share capital will be issued for cash on a
non-pre-emptive basis during any rolling three-year period, without prior consultation with shareholders. This limit excludes any ordinary
shares issued pursuant to a general disapplication of pre-emption rights in connection with an acquisition or specified capital investment.
Resolution 14
Authority to purchase own shares
This resolution, which will be proposed as a special resolution, is to give the Company the flexibility to buy back its own ordinary shares in
the market as permitted by the Companies Act 2006. The authority limits the number of shares that could be purchased to an aggregate
maximum of 8,915,290 ordinary shares which represents approximately 10% of the Company’s issued ordinary share capital as at 7 June 2022
and sets minimum and maximum prices. The renewed authority will, if passed, remain in force until the close of business on 19 October 2023
or, if earlier, the conclusion of the Company’s next annual general meeting.
The Directors have no present intention of exercising the authority to purchase the Company’s ordinary shares, but will keep the matter
under review, taking into account other investment opportunities. The authority will be exercised only if the Directors believe that to do
so would result in an increase in earnings per share and would promote the success of the Company and be in the best interests of its
shareholders generally. To the extent that any shares so purchased are held in treasury (see below), earnings per share will be enhanced
until such time, if any, as such shares are resold or transferred out of treasury.
Any purchases of ordinary shares would be by means of market purchases through the London Stock Exchange. If any shares are
purchased, they will be either cancelled or held in treasury. Any such decision will be made by the Directors at the time of purchase on the
basis of the shareholders’ best interests. Shares held in treasury can be cancelled, sold for cash or, in appropriate circumstances, used
to meet obligations under employee share schemes. Any shares held in treasury would not be eligible to vote nor would any dividend be
paid on any such shares. If any ordinary shares purchased pursuant to this authority are not held by the Company as treasury shares, then
such shares would be immediately cancelled, in which event the number of ordinary shares in issue would be reduced.
The Directors believe that it is desirable for the Company to have this choice. Holding the repurchased shares as treasury shares gives the
Company the ability to re-issue them quickly and cost effectively and provides the Company with additional flexibility in the management
of its capital base.
Norcros plc Annual Report and Accounts 2022152
Annual General Meeting
Resolution 14 continued
Authority to purchase own shares continued
As at 7 June 2022, there were options over approximately 3,600,000 ordinary shares in the capital of the Company, which represent
approximately 4.04% of the Company’s issued ordinary share capital. If the authority to purchase the Company’s ordinary shares was
exercised in full, these options would represent approximately 4.49% of the Company’s issued ordinary share capital. As at 7 June 2022,
the Company did not hold any shares in treasury.
Resolution 15
Notice of general meetings
This special resolution is required to preserve the ability of the Company to convene general meetings (other than annual general
meetings) on not less than 14 clear days’ notice, rather than on not less than the 21 days’ notice which would otherwise be required.
In order to do so, the Company’s shareholders must approve the calling of such meetings on shorter notice. Resolution 15 seeks
such approval.
The shorter notice period would not be used as a matter of routine for general meetings, but only where the flexibility is merited by the
business of the meeting and is thought to be to the advantage of the shareholders as a whole.
The approval will be effective until the Company’s next annual general meeting, when it is intended that a similar resolution will be proposed.
Explanatory notes continued
Norcros plc’s commitment to environmental issues is reflected in this Annual
Report, which has been printed on Heaven 42 Matt, an FSC
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certified material.
This document was printed by Park Communications using its environmental
print technology, which minimises the impact of printing on the environment,
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Norcros plc
Ladyfield House
Station Road
Wilmslow
Cheshire SK9 1BU
www.norcros.com
Norcros plc Annual Report and Accounts 2022