Norcros Plc Annual Report 2012

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FY2012 Annual Report · Norcros Plc

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Annual report and
accounts 2012

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About Norcros
Focused on showers, tiles and adhesives

We have three complementary UK businesses: Triton
Showers, Johnson Tiles and Norcros Adhesives as well
as significant operations in South Africa and interests
in Australia.

Our businesses have a long, successful track record of serving consumers, architects,
designers, retailers and wholesalers. Our emphasis is on innovation, quality and service
combined with a strong understanding of our customers’ needs. We invest significantly
and continuously in our people and processes. We are a substantial Group with
consistent, high quality standards and considerable resources. We aim to use our strong
brands, our innovative products and our leading market positions to drive investment
returns and shareholder value.

We organise our Group into three geographic areas: the UK, South Africa and the Rest of the World.

Revenue share >

Operations >

Full reviews of each division on pages:

UK: 58%

South Africa: 37%

Triton
Market leader in the manufacture
and marketing of showers with a strong
position in UK electric and mixer shower
markets. Also exports to Ireland and
other overseas markets

Tile Africa
Tile Africa is our South African retailer of
tiles, adhesives, sanitaryware and bathroom
fittings. The business operates from 37
showrooms located mainly in South Africa
but also in Namibia and Botswana

Johnson Tiles
The UK market leading ceramic tile
manufacturer and a market leader in
the supply of both own manufactured
and imported tiles

Norcros Adhesives
Manufacturer and supplier of adhesives,
grouts, surface preparation and aftercare
products for fixing tiles, mosaics, natural
stone and marble

Johnson Tiles
Johnson Tiles South Africa is the number
two ceramic tile manufacturer in South Africa
supplying the Tile Africa stores as well as
other independent retailers, distributors
and contractors

TAL
Our market leading adhesives business
with manufacturing plants in Olifantsfontein,
Durban and Cape Town. TAL not only
supplies a wide range of product into the
South African market, but also exports
into sub-Saharan Africa

Norcros plc

Annual report and accounts 2011

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Review of the year
Highlights

Group revenue increased by 2.1% to £200.3m (2011: 196.1m)

Group underlying operating profits of £12.1m (2011: 11.7m)
were 3.5% ahead of the prior year

Exit of onerous legacy lease at Springwood Drive, Braintree
at a cost of £7.8m but saving £3.3m per annum in future years

Completed bank refinancing, securing £51m bank facility
on improved terms until October 2015

Sale of surplus land to WM Morrison Supermarkets plc subject
to successful planning application for approximately £2.6m

The Board is recommending a final dividend of 0.28p per share
in addition to the interim dividend of 0.14p per share, making
a full year dividend of 0.42p, a 16.7% increase on last year

Revenue

Underlying operating profit

1
.
6
9
1

3
0
0
2

£200.3m
+2.1%

0
6
1

9
7
6
1

6
9
6
1

2
4
5
1

£12.1m
+3.5%

7
.
1
1

1
.
2
1

0
7

3
7

Cash generated from operations
(before lease surrender costs)

Net debt
(before prepaid finance costs)

7
3
1

8
6

8
3
1

£13.8m
+27.8%

6
0
1

8
0
1

9
6
4

1
.
6
4

£18.5m
+49.2%

4
2
51
8
1

9
8
1

Our full financial review begins on page 12

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Rest of the World: 5%

Johnson Tiles Australia
Our business is an importer and distributor
of tiles sourced primarily from Asia and
Europe, including product sourced from
Johnson Tiles in the UK. It currently has
outlets in Melbourne, Sydney and Tasmania,
each offering a wide choice of tiles,
adhesives and related products

Contents

Review of the year
IFC
About Norcros
Highlights
1
2 Overview
Chairman’s statement
4
6
Business review
12 Financial review

Corporate governance
16
18
20
21
21
22
25
29
33

Operational risk management
Corporate social responsibility
Directors and officers
Advisers and company information
Financial calendar
Directors’ report
Corporate governance
Remuneration report
Statement of directors’
responsibilities

Group accounts
34
35
35

Independent auditors’ report
Consolidated income statement
Consolidated statement
of comprehensive income
and expense
Consolidated balance sheet
Consolidated cash flow statement
Consolidated statement of changes
in equity
Notes to the group accounts

36
37
38

Parent company accounts
61
62
63

Independent auditors’ report
Parent company balance sheet
Notes to the parent
company accounts
Notice of annual general meeting
Explanatory notes

66
70

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Overview
Our objectives and strategy

Norcros enjoys market leading positions and well
established brands in showers, tiles and adhesives.
With its strong Balance Sheet, cash generation and well
invested businesses the Group is focused on enhancing
shareholder value both by organic growth and through
acquisition in the UK and internationally.

Our strategy

Excite our customers with

Invest in organic growth

Apply the expertise we have

innovative high quality

opportunities in our three

developed in the UK and

products and services through

complementary business

South Africa to new growth

excellent product design and

streams: showers, tiles

markets and complementary

brand development

and adhesives

product streams

Read more in the business review
from page:

Full reviews of each geographic
segment can be found on pages:

Key performance indicators

Revenue

Underlying operating profit

Underlying profit before tax (£m)

3
0
0
2

1
.
6
9
1

£200.3m
+2.1%

0
6
1

9
7
6
1

2
4
5
1

6
9
6
1

7
.
1
1

1
.
2
1

0
7

3
7

£12.1m
+3.5%

7
.
1
1

7
0
1

2
0
1

£10.7m
+5.3%

2
44
3

Norcros plc

Annual report and accounts 2012

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Continue to generate cash

Deliver capital growth and a

Ensure high standards of

and further strengthen our

progressive dividend income

corporate governance and

strong balance sheet

for our shareholders

responsibility

An overview of our results can be
found in the financial review on page:

Details of this year’s dividends are in
the Chairman’s statement on page:

Refer to our Corporate social
responsibility review and Corprorate
governance section on pages:

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Cash generated from operations
(before lease surrender costs)

Net debt
(before prepaid finance costs)

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3
1

6
0
1

8
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1

8
6

8
3
1

£13.8m
+27.8%

9
6
4

1
.
6
4

£18.5m
+49.2%

9
8
1

5
8
1

4
2
1

Our new-look website holds up-to-the
minute information, including investor and
media centres. Go to www.norcros.com

Norcros plc

Annual report and accounts 2012

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Chairman’s statement
Another strong performance

The Group has made good progress during the
last twelve months despite trading conditions
that remain difficult and uncertain.

John Brown Chairman

Summary

Group revenue increased by 2.1% to £200.3m

(2011: 196.1m)

Group underlying operating profits of £12.1m

(2011: 11.7m) were 3.5% ahead of the prior year

Exit of onerous legacy lease at Springwood Drive,

Braintree at a cost of £7.8m but saving £3.3m per

annum in future years

Completed bank refinancing, securing £51m bank

facility on improved terms until October 2015

Sale of surplus land to WM Morrison Supermarkets

plc subject to successful planning application for

approximately £2.6m

The Board is recommending a final dividend of

0.28p per share in addition to the interim dividend

of 0.14p per share, making a full year dividend of
0.42p, a 16.7% increase on last year

I am pleased to report another strong
performance by Norcros in the year to
31 March 2012. Good underlying revenue
growth was achieved in difficult markets,
with underlying operating profit ahead
of last year and margins maintained.

During the year a major legacy leasehold
property obligation at Springwood Drive
was bought out on highly satisfactory
terms, an agreement was entered into
to sell an element of our surplus land to
WM Morrison Supermarkets plc subject
to planning permission and the Group’s
banking facilities were refinanced on
normal banking terms in recognition
of the Group’s sound financial position.

The Group has made good progress during
the last twelve months despite trading
conditions that remain both difficult and
uncertain. Many operational and financing
issues have been successfully resolved, as a
consequence of which the Board anticipates
being able to move forward and consider
the strategic growth opportunities open
to the Group’s businesses and its strong
market positions.

Results
The period under review consisted of 52
weeks compared to 53 weeks last year.

Norcros plc

Annual report and accounts 2012

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See how we assess risk at Norcros, on page 18

Group revenue increased by 2.1% to
£200.3m (2011: £196.1m). On a like for
like number of weeks constant currency
basis this represents a 5.6% increase.

Underlying operating profit at £12.1m
(2011: £11.7m) was 3.5% higher than the
previous year and on a like for like number
of weeks constant currency basis was 5.7%
higher. Furthermore, operating margins
were maintained at 6.0% (2011: 6.0%).

Underlying profit before taxation was
£10.7m (2011: £10.2m), driven by higher
underlying operating profits and lower
financing costs.

Profit before tax at £9.4m (2011: £7.5m)
was 25.3% higher than the previous year.

Basic earnings per share as reported were
33.3% higher at 1.6p (2011: 1.2p) and basic
underlying earnings per share were 18.8%
higher at 1.9p (2011: 1.6p).

Net cash generated from operations
before the Springwood Drive exit costs of
£7.8m was £13.8m (2011: £10.8m). Capital
expenditure at £6.7m (2011: £6.3m) included
the balance of investment in new capacity
in Johnson Tiles UK, buffer systems in
Johnson Tiles South Africa, a new adhesive
plant in Durban, South Africa, and continued
new product development expenditure in
Triton Showers.

Net debt (before prepaid finance costs) at
31 March 2012 was £18.5m (2011: £12.4m)
and increased principally as a result of the
previously announced £7.8m buyout of
the lease at Springwood Drive. This still
left leverage as measured by net debt
to EBITDA at just over one times with
all banking covenants met with
comfortable headroom.

The UK defined benefit pension scheme
deficit calculated under IAS 19 increased
to £18.7m (2011: £7.0m). Although asset
values continued to increase, liabilities
increased further driven by a significant
reduction in the discount rate.

Dividend
The Board is recommending that the
final dividend for the year be increased by
16.7% to 0.28p per share in addition to the
interim dividend of 0.14p per share which
was paid on 6 January 2012. This would
make the total dividend for the year 0.42p
per share, a 16.7% increase on the previous
year. This final dividend, if approved at the
Annual General Meeting, will be payable
on 31 July 2012 to shareholders on the
register on 29 June 2012. The shares will
be quoted ex-dividend on 27 June 2012.

Employees
Continuing to drive strong results in the
current economic climate is a testament
to the commitment, dedication and talent
of all our employees. On behalf of the
Board I would like to thank everyone in
the Group for their continued support.

Summary and outlook
Group revenue in the first two months of
the current year is in line with expectations.
Johnson Tiles UK and South Africa have
started well, but Triton has been weaker.

Our businesses continue to trade robustly
in uncertain markets and management will
continue to drive the self help strategies
that have proved successful over the last two
years. The strength of our brands, our market
positions, our customer relationships and
the encouraging operational improvements
in the latter part of the year in both the
South African and UK tiles businesses gives
the Board confidence that unless markets
deteriorate further, our businesses will
continue to make progress in the
coming year.

J. E. Brown
Chairman
21 June 2012

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Norcros plc

Annual report and accounts 2012

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Business review
UK

We have continued to invest in our businesses
through this protracted economic downturn
and succeeded in growing market share, all
of which leaves the Group well placed to
capitalise on any recovery in our markets.

Nick Kelsall Group Chief Executive

Summary

Share of Group revenue

UK revenue

Rest of the World

South Africa

7
7
0
61
4
9

8
6
1
1

0
4
1
1

7
2
0
1

£116.8m

+2.4%

Revenue increased in the year by 2.4% to
£116.8m (2011: £114.0m) or 4.3% on a like
for like number of weeks basis. Selling price
increases and strong cost control has helped
mitigate significant energy cost increases
in Johnson Tiles and has resulted in a 7.7%
increase in underlying operating profit to
£12.5m (2011: £11.6m). This represents an
improved margin of 10.7% (2011: 10.2%) and
is a creditable performance in challenging
market conditions.

Triton Showers
Triton, the UK market leading domestic
shower business, continued its strong
performance with a year of improved
profitability and cash generation, despite
a 0.9% decline in revenue on a like for
like number of weeks basis.

In the UK, revenue was 0.8% lower on a
like for like number of weeks basis and in
line with the market. After the challenging
Christmas period previously reported,
trading improved in the last two months
of the year. Our strong brand, high quality
leading products and excellent customer
relationships helped us improve our
market share in the retail sector and we
had significant success in the specification
sector with our thermostatic electric
products, particularly the Safeguard range
aimed at the care and retirement market.

Export revenue was 1.2% lower on a
like for like number of weeks basis. The
primary export market for Triton is Ireland
and although lower than last year, this is
a good result given the general economic
conditions in this market.

Norcros plc

Annual report and accounts 2012

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Bolton One leisure facility

Johnson Tiles UK used their expertise to give the pool,
spectator seating areas and separate hydrotherapy pool a
luxurious finish befitting this new £31m facility. The tiling
also included a giant 8m by 3m bespoke mural created
using Johnson Tiles’ unique Artile service.

“Virtually any image type – from photographs
to paintings and pencil sketches – can be
reproduced as tiles using our Artile service. It
gives designers endless scope to create unique,
bespoke ceramic tiles, and that’s just what’s
been achieved at Bolton One. We’ve been able
to demonstrate that when it comes to pool tile
design, anything goes.”

Phil Taylor
Johnson Tiles

Focus and attention on new product
introduction continued with the launch
in the final quarter of the year of the Triton
T80z Fast Fit range, the most significant
product launch for over ten years. The range
boasts a new “swivel fit” feature for water
inlet and a “swing fit” feature for electrical
connections which increases installation
flexibility and reduces installation time. The
range has been extremely well received by
installers and the trade sector. New product
continues to be the lifeblood of the business
and with further developments planned
for the coming year, the business is well
positioned to make further progress.

Underlying operating profits and margins
were ahead of last year reflecting cost
reduction initiatives and tight overhead
control more than offsetting input cost
increases in copper and plastics.

Johnson Tiles
Johnson Tiles, the UK market leading ceramic
tile manufacturer and a market leader in
the supply of both own manufactured and
imported tiles, saw revenue increase by
8.7% on a like for like number of weeks basis.

refurbishment of our Material Lab studio
in Central London, the re-launch of the
Absolute product portfolio and the launch of
a dedicated swimming pool range has driven
good revenue growth. Projects won in the
year include the work on the Olympic Village,
Marks & Spencer, Premier Inn, Next, Legoland
and Gleneagles Hotel. The demise of a key
competitor, Pilkington Tiles, in the middle
of 2010 means comparatives have become
more challenging in the second half
of the year but despite that this result
is still a creditable performance.

Export sales declined 1.9% with supply
issues constraining sales in the first half
of the year. These issues are now largely
resolved and export sales in the second
half of the year were ahead of the prior year.

Following the commissioning of the new
kiln in March 2011, operational problems
were encountered in various parts of the
plant which led to production inefficiencies
and customer service issues in the mid part
of the year. These problems were largely
resolved in the final quarter and efficiency
and service levels are now back to normal.

Norcros Adhesives
Norcros Adhesives, our manufacturer
and supplier of tile and stone adhesives
and ancillary products, saw revenue
grow by 17.3% in the year. Albeit from a
relatively low base, this is another year of
strong growth and still leaves a significant
addressable market to gain further share.

Notable contract wins in the year include
national specifications for Barratt Homes and
David Wilson Homes as well as refurbishment
projects at Asda, Next and H&M. To service
this project demand, seven regional and
one national distributor were appointed,
further broadening our distribution base.

Investment in new products and plant
continued in the year with the installation
of a high speed powder bagging machine
which has increased efficiency in this part
of the plant by 40%. Capacity is now in
place to accommodate significant further
revenue growth with the business focus
for this year to continue to broaden our
account base and to leverage off the
strong positions held by our other UK
businesses in the retail sector.

In the UK sales grew by 10.2% reflecting our
strong and growing presence in the retail
sector driven by our product offering, logistics
expertise and strong financial position which
all helped us to outperform the market.
Although the trade sector was a little more
subdued during the year, our continued focus
and investment in the architect and designer
segment which started last year with a

The business has experienced a 23%
increase in energy costs versus last year
which has adversely affected margins.
Selling price increases and cost savings
through headcount reduction were
implemented during the second half of
the year to help mitigate these impacts,
albeit underlying operating profits were
lower than the previous year.

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Norcros plc

Annual report and accounts 2012

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Business review
South Africa

It is pleasing to report that the difficult actions
taken in the year have substantially improved
performance in the final quarter of last year and
the early part of the current year.

Summary

Share of Group revenue

South Africa revenue

Rest of the World

South Africa

4
2
7

0
4
7

£74.0m

0
9
5

8
3
5

6
2
5

+2.2%

Revenue for the year grew 2.2% to £74.0m
(2011: £72.4m) although on a constant
currency like for like basis this represented
a 9.7% increase. Both Tile Africa, our retail
operation, and TAL, our adhesive business
have made good progress in the year and
delivered profitable results on the back of
encouraging revenue growth. Johnson Tiles
has however endured a challenging year
with major plant restructuring and significant
changes being made to the manufacturing
management team, production processes
and controls. As a consequence, our
performance in South Africa in the first nine
months of the year was materially impacted
by manufacturing inefficiencies and, together
with increased energy costs in the year,
resulted in an overall underlying operating
loss of £0.5m (2011: £0.2m profit). It is
pleasing to report however that the difficult
actions taken in the year have substantially
improved performance in the final quarter of
last year and the early part of the current year.

Tile Africa
Tile Africa, our leading retailer of wall and
floor tiles, adhesive, showers, sanitaryware
and bathroom fittings, saw revenue increase
4.8% on a constant currency like for like
number of weeks basis. An improved product
offer, continuing benefits from our store refit
programme and operational improvements
helped drive this outperformance in what
continues to be a difficult market.

Gross margins have been maintained
despite an extremely competitive trading
environment, benefiting from continued
focus on underperforming stores and
cost control, resulting in significantly
improved profitability.

Norcros plc

Annual report and accounts 2012

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Tile Africa case study

“ It is important to have a material supplier like
Tile Africa who understand our business and
brand and whom can give the right advice for
new, expansion and revamp projects. Their
intimate knowledge means they have an
understanding of the needs and requirements
to deliver the job correctly and carry back-
up stock to ensure that the revamps and
expansions are cost-effective.”

Leonard Henry
Pick ‘n’ Pay Franchise
National operations manager

The store refit programme has continued
with a further two stores upgraded to
the Lifestyle model in the year leaving
20 of our 31 owned stores now upgraded.
The store model continues to be refined
as we look to maximise the return on
our occupied space and some stores
previously reported as converted now
require some further enhancements.

Furthermore, two new franchise stores were
opened in the year, Burgersfort, South Africa
in October 2011 and Gaborone, Botswana in
November 2011, bringing the total number
of franchise stores to six. Of our 37 stores, 35
stores are located in South Africa and one
each in Namibia and Botswana.

TAL Adhesives
TAL, our market leading adhesives business
in South Africa, saw independent sector
revenue grow 14.1% on a constant currency
like for like number of weeks basis and
helped it deliver another profitable year.

Our tile adhesive division had a particularly
good year with market share growth in
the retail and wholesale sectors driven by
significant account wins in the growing retail
DIY sector such as Builders Warehouse and
Malls. Strong progress was also made in our
export business with new customers gained
in sub-Saharan Africa reflecting the success
of our recently established export sales team.

As part of our strategy to leverage our
customer relationships and move into
complementary product streams,

a new range of tiling tools was successfully
launched into Builders Warehouse in the
last quarter of the year. These have been
well received in the market.

A new tile adhesive plant was opened
in Durban, Natal, in September 2011
and is now fully commissioned. Our
manufacturing presence in Durban has
helped offset increased distribution costs
due to higher fuel costs and allowed us
to grow our share of this market.

The key focus in the coming year will
be to further grow market share both in
and outside of South Africa, continuing to
broaden our product offer and expanding
our geographical spread.

Johnson Tiles South Africa
Johnson Tiles South Africa has had a
number of key successes in the retail sector
this year with independent sector revenue
increasing 34.7% on a constant currency
like for like number of weeks basis.

Major new supply contracts have been
secured with Builders Warehouse and other
retailers during the year, with an improved
and high quality product offering helping
win the business. Another key factor in
this success has been the adoption of our
strategy of importing complementary tile
products to create a “one-stop shop” for
larger retailers, a strategy that has proved
extremely successful in Johnson Tiles UK
with our leading DIY customers.

In October 2011 a new manufacturing
management team was put in place
following an increasing number of
operational issues that were constraining
the financial performance of the business
in the first half. It is encouraging to report
that significant improvements have been
seen in the final quarter of the year and
have continued into the early part of
the current year. High levels of downtime
and poor quality output driven by inadequate
preventative maintenance programmes as
well as sub-optimal operating practices have
been addressed and capital expenditure on
buffer systems and refurbishment of presses
were implemented during the year.

In addition, energy costs increased
by 25% against the previous year and,
together with increases in raw material
prices, has added further pressure
on margins. Although the improved
operational performance in the last
quarter has fed through into financial
performance in the last quarter, the
business still recorded a loss for the year.

With a highly motivated management
team, and encouraged by the commercial
successes in the year and recent
improvements in operational performance,
the focus is on completing the transformation
of Johnson Tiles South Africa into a
profitable business.

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Norcros plc

Annual report and accounts 2012

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Business review
Rest of the World

A change in channel focus along with a major
overhaul of the product range and a strong
Australian Dollar reducing import costs have
all contributed to a return to profitability.

Summary

Share of Group revenue

Rest of the World revenue

Rest of the World

South Africa

7
9

5
9

£9.5m

9
7

0
7

4
6

-1.7%

Australia
With building approvals down 15%
compared to the previous year, the
Australian market has proved particularly
difficult this year. Against that backdrop,
Johnson Tiles Australia has performed
relatively well, with revenue in the year
reducing 1.7% to £9.5m (2011: £9.7m)
or 7.1% lower on a constant currency
like for like number of weeks basis.

A change in channel focus in the year towards
higher margin direct specification business
with builders, developers, architects and
supply and fix accounts has been successful
and this, along with a major overhaul of the
product range and a strong Australian Dollar
reducing import costs, have all contributed
to a return to profitability with underlying
operating profit at £0.1m (2011: £0.1m loss).

As noted in last year’s report, the option to
relocate the business and release cash from
the freehold site in Melbourne was investigated,
but with the weak Australian property market,
the Board decided to re-assess the position
when property markets recover.

Group summary
With our leading brands and market positions,
high quality and innovative products, strong
customer relationships, talented people and
successful self help initiatives our businesses
continue to make progress in extremely
difficult markets. The encouraging operational
improvements in both our UK and South
African tile manufacturing businesses in
the final quarter of the year provide a solid
platform to deliver a further improvement
in financial performance in the current year.

We have continued to invest in our businesses
through this protracted economic downturn
and succeeded in growing market share,
all of which leaves the Group well placed
to capitalise on any recovery in our markets.

Norcros plc

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Glasgow Housing
Association

Triton Showers supply the
appointed contractors carrying out
refurbishments and care adaptations in
Glasgow House Association dwellings.
As shower experts, Triton’s local
service engineers also deliver priority
responsive maintenance for shower
installations on behalf of contractors
City Building LLP.

“The needs of the ageing population
and ease of use for all tenants,
particularly those with limited
mobility, are issues that have to be
considered when selecting products
for home adaptations. Being able to
give the reassurance of exceptional
showering safety levels not only
means peace of mind but also
ensures greater independence from
carers wherever possible. The Triton
Safeguard showers have answered
three points as we look to the future
of adapting homes. Firstly they
deliver temperature stability for all
installations. Installation is quick
and simple keeping disruption to a
minimum. Lastly the user-friendly
design features ensure they can
be used by all, giving that extra
independence that is so important
to so many.”

Ronnie Reagan
Manager of the Assisted Living Section
at City Building LPP

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Business review
Financial review

The Board is recommending a final dividend
of 0.28p per share, which, together with
the interim dividend of 0.14p, makes a total
dividend of 0.42p in respect of the year
ended 31 March 2012.

Martin Payne Group Finance Director

Summary

Group revenue increased by 2.1% to £200.3m

(2011: 196.1m)

Group underlying operating profits of £12.1m

(2011: 11.7m) were 3.5% ahead of the prior year

Exit of onerous legacy lease at Springwood Drive,

Braintree at a cost of £7.8m but saving £3.3m per

annum in future years

Completed bank refinancing, securing £51m bank

facility on improved terms until October 2015

Sale of surplus land to WM Morrison Supermarkets

plc subject to successful planning application for

approximately £2.6m

The Board is recommending a final dividend of

0.28p per share in addition to the interim dividend

of 0.14p per share, making a full year dividend of
0.42p, a 16.7% increase on last year

All results, reports, presentations and share price
information can be found on our new website at
www.norcros.com

Norcros plc

Annual report and accounts 2012

Revenue
Group revenues increased on a reported
basis by 2.1% or by £4.2m to £200.3m
(2011: £196.1m). The underlying increase
on a constant currency like for like number
of weeks basis was 5.6% reflecting the
translation impact of the South African
Rand and Australian Dollar against Sterling
and a 53 week period last year. The Group
recorded increases in revenue in its UK
businesses of 4.3% on a like for like number
of weeks basis and an increase on a constant
currency like for like number of weeks basis
in South Africa of 9.7%. On the same basis
revenue fell in Australia by 7.1%.

Underlying operating profit
Underlying operating profit, as reported,
increased by 3.5% to £12.1m (2011: £11.7m)
and on a constant currency basis by 5.7%
(2011 restated to constant currency: £11.4m).
Our UK businesses continued their strong
performance with underlying operating
profits of £12.5m against £11.6m last
year despite the continuing tough market
conditions. Our South African business
made an underlying loss of £0.5m against
a profit of £0.2m last year. The challenging
year endured by Johnson Tiles in South Africa
was the major reason for the disappointing
result. In Australia an underlying operating
profit of £0.1m compares to an equivalent
loss in the prior year. Overall operating
margins were stable at 6.0%.

Exceptional items and operating profit
Net exceptional items were £nil in the year
with £0.5m of restructuring costs being
offset by £0.5m of other benefits.

Operating profit was £12.1m (2011: £10.6m).

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Key cash flow components and movement in Group net debt

Cash flow from operations (before lease surrender costs)
Lease surrender costs

Cash flow from operations
Net interest paid
Taxation

Net cash generated from operating activities
Issue of share capital
Capital expenditure
Dividends
Proceeds from sale of shares in investments
Other items including other disposal proceeds, foreign exchange,
rolled up interest and amortised financing costs

Movement in net debt
Opening net debt

Closing net debt

2012
£m

13.8
(7.8)

6.0
(1.6)
(0.6)

3.8
0.2
(6.7)
(2.2)
—

(2.3)

(7.2)
(10.6)

(17.8)

2011
£m

10.8
—

10.8
(1.0)
(0.6)

9.2
—
(6.3)
(0.7)
4.4

(1.3)

5.3
(15.9)

(10.6)

Finance costs
Finance costs decreased to £3.1m from
£3.4m in 2011 reflecting better interest rates
achieved following the Group’s refinancing
in September 2011. In addition a charge of
£1.2m for exceptional finance costs has been
made relating to the immediate write-off of
finance costs from the previous financing
which were due to be fully amortised by
October 2012.

Dividends
As previously announced it is the Board’s
intention to implement a progressive dividend
policy subject to the Group’s earnings, cash
flow and balance sheet position. As such
the Board is recommending a final dividend
of 0.28p per share, which, together with
the interim dividend of 0.14p, makes a total
dividend of 0.42p in respect of the year
ended 31 March 2012.

Braintree. This lease exit will save the Group
annualised cash costs of £3.3m. Excluding
this one off item the Group’s cash generation
of £13.8m is a significant improvement on
last year reflecting the Group’s increased
profitability and control over working capital.
Net cash generated from operating activities
was £3.8m (2011: £9.2m). The table above
sets out the key cash flow components
and the movement in Group net debt.

Other finance income of £1.6m (2011: £0.1m)
relate to our UK defined benefit pension
scheme. The large credit reflects the year on
year movements in expected rates of return
and pension scheme assets, liabilities and
discount rates.

Pension schemes
The Group contributed £2.2m into its UK
defined benefit pension scheme during
the year (2011: £2.1m). This included £1.0m
additional contribution as part of the 2009
deficit recovery plan.

The Group’s net interest payments have
increased as no interest has been received
on loans to associates which have
previously been fully impaired.

The Group’s working capital increased
by only £0.4m in the year (2011: increase
of £1.0m). This reflects management’s
continuing actions to tightly control
working capital in the current
economic conditions.

Profit before tax
Underlying profit before tax was £10.7m
(2011: £10.2m) reflecting the increased
underlying operating profit and reduced
finance costs noted above.

The Group reported profit before tax
of £9.4m (2011: £7.5m).

Taxation
A taxation charge of £nil has arisen for 2012
(2011: £0.8m). This is principally driven by the
recognition in the year of certain UK deferred
tax assets which has offset the charge for UK
corporation tax.

Earnings per share
Underlying earnings per share amounted to
1.9p (2011: 1.6p). Basic earnings per share
was 1.6p (2011: 1.2p).

The total charge in respect of defined benefit
schemes to operating expenses (excluding
exceptional credits) in the Consolidated
Income Statement was £1.5m (2011: £1.3m).

The gross defined benefit pension scheme
valuation on the UK scheme showed a deficit
of £18.7m compared to a deficit of £7.0m
last year. The higher deficit mostly reflects
the increase in liabilities due to a reduced
discount rate of 4.95% from 5.5% last year.

Capital expenditure of £6.7m includes
the final payments for the investment in
a new kiln and inkjet machine in Johnson
Tiles, buffer stock equipment and store
refurbishments in South Africa and new
product development at Triton Showers.

The Group’s contributions to its defined
contribution pension schemes were £1.1m
(2011: £1.0m).

In the previous year the Group received
£4.4m from the sale of R.J. Beaumont &
Co Pty Ltd.

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Cash flow and financial position
Although cash flow from operations reduced
to £6.0m from £10.8m in the previous year
this included £7.8m of lease surrender costs
to exit the onerous lease at Springwood Drive,

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Norcros plc

Annual report and accounts 2012

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Financial review
Continued

The Board considers that its key performance indicators
are the measures most relevant in monitoring its progress
to creating shareholder value.

Bank funding
Following a re-financing in September
2011 the Group has available a revolving
credit facility of £51.0m of which £30.0m
is available as cash drawings. This facility
expires in October 2015 and is currently
subject to a margin of 1.5% above LIBOR.

Key performance indicators
Management uses a full suite of measures
to manage and monitor the performance of
its individual businesses. The Board considers
that its key performance indicators are the
measures most relevant in monitoring its
progress to creating shareholder value.
The relevant statistics for 2012 and 2011
are shown in the table opposite.

Foreign currency translation
Pre-tax profits from our overseas operations
are translated at the average exchange rate
for the year and balance sheets of these
operations translated at the closing rate
of exchange. The table opposite sets out
the relevant exchange rates used.

The movement in average exchange rates
compared to 2011 had the effect of reducing
2011 reported Group revenue by £2.9m but
had no effect on Group trading profit.

Key performance indicators

Revenue*
Underlying operating profit
Underlying profit before tax
Underlying earnings per share – pence
Cash generated from operations
(before lease surrender costs)
Net debt (before prepaid finance costs)

* Restated on a 52 week basis.

South African Rand
Australian Dollar
Euro
US Dollar

2012
£m

200.3
12.1
10.7
1.9p

2011
£m

192.4*
11.7
10.2
1.6p

Change
%

+4.1%
+3.5%
+5.3%
+18.8%

13.8
(18.5)

10.8
(12.4)

+27.8%
+49.2%

Average rate vs £

2012

11.53
1.51
1.16

1.60

2011

10.99
1.60
1.17

1.56

Closing rate vs £

2012

12.26
1.54
1.20

1.60

2011

10.79
1.55
1.13

1.60

N. P. Kelsall
Group Chief Executive

M. K. Payne
Group Finance Director

Norcros plc

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Norcros plc

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Operational risk management

There are a number of potential risks and uncertainties which could
have a material impact on the Group’s performance. Norcros has a
system of risk management which identifies these items and seeks
ways of mitigating such risks as far as possible. The key risks which
the Group believes it is exposed to are noted as follows:

Risk

Potential effects

Mitigating actions

Change
from
prior year

Key commercial relationships
Whilst the Group has a diverse
range of customers there
are nevertheless certain key
customers who account for
high levels of revenue.

Many of the contractual arrangements with
customers are short term in nature (as is common
in our markets) and there exists some 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.

The importance of relationships with key customers
is recognised and managed by senior personnel
within the Group.

—

Rebate schemes and incentive programmes help
maintain these key relationships in a competitive
market situation.

Competition
The Group operates within a
highly competitive environment
in all its markets.

The Group accepts there is a risk to its results
and financial condition caused by the actions of
its competitors, including competitors’ marketing
strategies and product development.

Reliance on
production facilities
The Group has a small
number of fully automated
manufacturing facilities for
the manufacture of tiles
and adhesives.

If any of these facilities (including technology
used to operate them) were to fail, the effect
on the Group could be significant.

Staff retention and recruitment
The Group employs over 1,600
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. Future growth plans may
be restricted or delayed by difficulties experienced
in recruiting and retaining appropriate staff.

—

The Group stresses key selling points such as
continuity of supply, financial strength of the
Group and level of customer service to help
maintain relationships.

The existence of a flexible cost base helps
alleviate this potential risk in certain of the
Group’s businesses.

To help identify such risks the competitive
environment, specific marketplace and the
actions of particular competitors are 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.

The Group has a well established ongoing
preventative maintenance programme as well as
a comprehensive “annual shutdown” programme
throughout its manufacturing operations.

Furthermore the Group has developed an
experienced globally co-ordinated product
sourcing function which could mitigate the
risk of failure.

Finished inventory holdings across the
operations act as a limited buffer in the event
of operational failure.

A business interruption insurance policy is
maintained to mitigate losses caused by a serious
event affecting manufacturing capability.

Group policy is to remunerate its personnel in line
with market rates and practice. In addition there
are bonus schemes and access to a final salary
pension scheme which are valuable benefits.

Executives and key management are now
incentivised via an Approved Performance Share
Plan which was approved at the 2011 AGM. This
plan was implemented in the UK during the year
with implementation planned in South Africa
during 2012.

Succession planning is an agenda item at Group
Board level.

Foreign currency exchange risk
A significant amount of the
Group’s business is conducted
in currencies other than Sterling
(primarily South African Rand,
US Dollar, Australian Dollar
and Euro).

The Group’s financial performance is subject to the
effects of fluctuations in foreign exchange rates.

The Group seeks to hedge its foreign exchange
transactional flows for up to twelve months forward.

—

The Group may, where it is considered
appropriate, denominate some of its borrowings
in other currencies to hedge translational profit
and asset risk although this is not considered
necessary at present given the level of earnings
made by its overseas businesses at present
compared to the Group as a whole.

Norcros plc

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Risk

Potential effects

Mitigating actions

Change
from
prior year

Interest rate risk
The Group pays interest
and other facility fees based
on current base rates and
LIBOR rates.

Pension scheme management
The UK companies in the Group
participate in a defined benefit
pension scheme.

Energy price risk
Energy costs are a significant
proportion of the Group’s
manufacturing costs, especially
in its tile manufacturing
businesses.

Additional capital requirements
to fund ongoing operations

A significant increase in interest rates would
affect the Group’s profitability and cash flow.

The Group’s financial results show an aggregate
deficit in this scheme, as at 31 March 2012 of
£18.7m (2011: £7.0m) assessed in accordance
with IAS 19. There are various risks that could
adversely affect the funding of the defined
benefits under the scheme and consequently
the Group’s funding obligations.

Given the current low levels of bank debt and low
interest rates negotiated as part of the refinancing
of bank debts this year, it is not considered
advantageous to enter into hedging arrangements
for the time being. The Group’s interest rate risk is
reviewed regularly by Executive Management and at
least annually as part of the Group budget process.

Executive Management regularly monitors the
funding position of the scheme and is represented
on both the Trustee’s board and its investment
sub-committee to monitor and assess investment
performance and other risks to the Group.

The Group considers each actuarial valuation
(annual IAS 19 valuation and each triennial
valuation) to re-assess its position with regard
to its pension commitments in conjunction
with external actuarial advice.

Sustained increases in energy costs could
significantly affect the Group’s profitability.

Prices are monitored on a regular basis and,
where believed to be appropriate, a proportion
of energy costs are hedged.

—

The Group must ensure it has adequate funding
to meet capital demands within its current
available facilities.

The Group’s current and forecast performance
against its banking facilities is monitored regularly by
the Executive Directors. This has historically shown
there are ample facilities available to meet the
current and future needs of the existing Group.

The Group refinanced its facilities during the year
with a new financing agreement to October 2015.
This new agreement has not materially changed
the Group’s available facility.

Performance against
banking covenants
The Group is subject to key
banking covenants including
interest cover and debt cover.

Many of the products the Group
sells are subject to changing
consumer preferences

Failure to meet these covenants could result in
the Group being in default of its banking facilities.

Performance against banking covenants
is regularly and closely monitored.

The recent debt refinancing reduced both the
number and frequency of the Group’s covenant
tests and provided the Group with a comfortable
level of headroom.

The Group’s revenues and profits can be sensitive to
these changing preferences. Failure to anticipate,
identify or react swiftly to changes in consumer
preferences could result in lower sales, higher
mark-downs to reduce excess inventories and lower
profits. Conversely, failure to anticipate increased
consumer demand for its products may lead to
inventory shortages, negatively impacting customer
goodwill, brand image and profitability.

The Group invests significantly in sales
and marketing including design, new product
development and market research. All these
are discussed at each operating divisional
Board meeting and are regular agenda items.
Each divisional Board has appropriate sales
and marketing representation. This ensures the
Group is aware of changes in the marketplace
and can adapt resources accordingly.

South African operations
Approximately a third of
the Group’s activities are
conducted in South Africa.

The Group may be exposed to risks outside of its
control including political, social and economic
instability, unexpected changes in the regulatory
environment, exposure to different legal standards
or employment relations and potentially adverse
tax consequences.

The Group Executives and Head Office finance
staff are in regular contact with their South African
counterparts via electronic communication.
In addition Group Executives make regular visits
to the Group’s South African operations as do
other Head Office staff on internal control visits.

—

In addition, the geographical spread of the Group’s
operations means management co-ordination
of effort and communications with employees
are subject to certain challenges.

In a number of cases the rent paid by the Group
exceeds the rents received from sub-letting
these properties.

Management of
property estate
The Group has several
leasehold interests in
properties which are no
longer used by the Group.

The Group maintains a leasehold provision
specifically to cover these rental shortfalls,
this is reviewed regularly and updated
whenever significant assumptions change.

The property portfolio is managed on a day
to day basis by a property consultant who
is engaged by the Group.

The Group seeks to enter long-term leases with
tenants to give it as much security over future
revenues as possible and minimise rent free
periods and voids.

During 2011/12 the Group paid £7.8m as a
surrender premium to exit its lease at Springwood
Drive. This removed annual costs of £3.3m from
the Group and significantly reduced the risks
associated with the Group’s property portfolio.

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Norcros plc

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Corporate social responsibility

The Board takes regular account of
the significance of environmental, ethical
and social matters affecting the Group
and recognises that management of these
matters is key to ensuring the long-term
sustainability of its businesses.

The environment
The Board recognises the Group’s activities
do have an impact on the environment.
Norcros is committed to minimising this
impact by continually improving its
efficiency in terms of energy, water
and material consumption.

For example, up to 36% of the body of
a tile manufactured by Johnson Tiles UK
is recycled ceramic waste from both its
own manufacturing process and also from
other ceramic manufacturers in the local area.
This not only saves the company money, but
avoids waste landfill and reduces the need for
excavation of new materials. This and their
successful energy efficiency programme has
seen the business awarded the EEF National
Energy Efficiency Award in January 2012 as
well as being named in The Sunday Times
Top 60 Best Green Companies every year
since 2008. Johnson Tiles’ environmental
policy and brochure can be viewed on their
website at www.johnson-tiles.com.

Triton Showers also have a specific
environmental policy which targets the
use of recyclable materials and minimising
the production of waste. In addition, Triton
aim to develop advanced technological
solutions that make their products even more
environmentally friendly. This has resulted in
a number of “Eco” products being included
in their range. Triton’s environmental
commitment can be viewed on their
website at www.tritonshowers.co.uk.

Norcros innovation

Each year Johnson Tiles in the UK recycles
20,000 tonnes of ceramic waste from our own
production process and those of several other
local ceramic manufacturers who deliver waste
to our Stoke-on-Trent factory. The ceramic
waste is ground to a suitable size and added to
our standard material and can constitute up to
36% of our tile body. It is estimated that 20,000
tonnes of ceramic material is equivalent to the
annual household waste of 39,000 people or
24,000 cubic metres of landfill. In addition we
estimate that 235,000 HGV journeys (equivalent
to 360 tonnes of CO2) are saved on raw material
transport due to our recycling system.

Norcros plc

Annual report and accounts 2012

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units run training programmes and local
projects to help support our employees
and their local communities.

The Group is fully committed to keeping
its employees informed about their
work unit and the wider business.

The Group recognises its responsibilities
towards disabled persons and therefore
all applications from such persons are fully
and fairly considered bearing in mind the
respective aptitudes and abilities of the
applicant. In the event of existing employees
becoming disabled, every effort is made to
ensure that their employment with the Group
continues and that appropriate training is
arranged. It is the policy of the Group that the
training, career development and promotion
of disabled persons should, as far as possible,
be identical to that of an able-bodied person.

Ethics
The Group aims to act with integrity
towards all stakeholders in its businesses
and respects the laws, regulations and
customs in all the countries within which
it operates. The Group makes every effort
to ensure its employees are aware of,
and comply with, the relevant business’
ethical code.

The Group has implemented an
anti-bribery policy to comply with the
Bribery Act 2010. Appropriate procedures
are in place at each location to mitigate
the risk of any employee committing
an offence under this Act.

Employees
The necessity for, and importance
of, good relations with all employees is
well recognised and accepted throughout
the Group. However, because the Group’s
activities are organised on a de-centralised
basis, with each operating business having
autonomy over its operations, there is no
uniform set of arrangements for employee
involvement imposed throughout the
Group. Nevertheless, all Group companies
are strongly encouraged to devise and
adopt whatever means of employee
consultation best suit their circumstances.

Norcros also recognises the need to train
their staff in order to give them the necessary
skills to perform their duties to the high
standards required. The Group’s businesses
invest in a range of development activities,
for example Tile Africa is committed to invest
at least 1% of its annual payroll in training
and development initiatives, ranging from
management development to adult literacy
programmes. In addition all our business

Norcros plc

Annual report and accounts 2012

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Directors and officers

John Brown (Age 68)
Chairman
Appointed to the Board on admission of
Norcros plc to the London Stock Exchange
on 16 July 2007. He was formerly the chief
executive of Speedy Hire plc which he
founded in 1977. He is chairman of Henry
Boot plc and a non-executive director of
Lookers plc, both London Stock Exchange
listed companies. He also holds a number
of other directorships.

Nick Kelsall (Age 55)
Group Chief Executive
Nick Kelsall joined Norcros as Finance
Director of H&R Johnson Tiles Limited in
1993. Formerly, Nick had held a number of
senior financial management positions with
Touche Ross, Manchester and, immediately
prior to joining Norcros, with Waterford
Wedgwood Group plc. Nick was appointed
as Group Chief Executive on 1 April 2011
having previously served as Group Finance
Director since October 1996. He is a
member of the Institute of Chartered
Accountants in England and Wales.

Martin Payne (Age 46)
Group Finance Director
Appointed Group Finance Director
in March 2011. He has most recently
held senior financial positions at JCB
and IMI plc. Earlier in his career he
spent six years as Finance Director
of H & R Johnson Tiles Limited. He
is a fellow of the Chartered Institute
of Management Accountants.

Les Tench (Age 67)
Non-executive Director
Appointed to the Board on admission
of Norcros plc to the London Stock
Exchange on 16 July 2007. He joined
CRH plc in 1992 and from 1998 until
his retirement in December 2002 was
managing director of CRH Europe –
Building Products. He is currently a
non-executive director of Lupus Capital plc
and was formerly a non-executive director
of Shepherd Building Group Limited and
non-executive chairman of SIG plc.

Martin Towers (Age 59)
Non-executive Director
Appointed in July 2011. He is presently a
non-executive director of RPC Group plc,
KCOM Group plc and Lupus Capital plc.
He was formerly chief executive officer
of Spice plc, group finance director of
Kelda Group plc, group finance director
of Spring Ram Corporation plc and
finance director of McCarthy and
Stone plc. He is a Fellow of the
Institute of Chartered Accountants
in England and Wales.

Norcros plc

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Advisers and company information

Company website
www.norcros.com

Listing details
Market
Reference
Index

Sector

– UK Listed
– NXR
– FTSE All Share
FTSE SmallCap
Construction
and materials

–

Registered office
Ladyfield House
Station Road
Wilmslow
Cheshire SK9 1BU
Tel: 01625 549010
Fax: 01625 549011

Registered number
3691883
Registered in England

Principal bankers
Lloyds TSB Bank plc
8th Floor
40 Spring Gardens
Manchester M2 1EN

Barclays Bank plc
3 Hardman Street
Spinningfields
Manchester M3 3HF

Svenska Handelsbanken AB (pupl)
1st Floor, Unit 8
Acorn Business Park
Heaton Lane
Stockport SK9 1AS

Financial calendar

Solicitors
Addleshaw Goddard LLP
100 Barbirolli Square
Lower Mosley Street
Manchester M2 3AB

Clifford Chance LLP
10 Upper Bank Street
London E14 5JJ

Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU

Stockbrokers
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT

Financial PR
Hudson Sandler
29 Cloth Fair
London EC1A 7NN

Independent auditors
PricewaterhouseCoopers LLP
101 Barbirolli Square
Lower Mosley Street
Manchester M2 3PW

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Annual General Meeting

26 July 2012

Final dividend

Payable 31 July 2012

Interim results

Announcement November 2012

Interim Report

Available to shareholders November 2012

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David Hamilton (Age 69)
Director and Company Secretary
Appointed to the Board in April 1996 having
previously been appointed Company
Secretary in 1989. He joined Norcros plc
as Group Legal Adviser in 1973 following
positions as legal adviser and legal assistant
respectively with Automotive Products
Associated Limited and Pfizer Limited.

Vijay Aggarwal (Age 43)
Non-executive Director
Appointed to the Board on 8 October
2009. A former merchant banker, he is
currently managing director of Prism
Cement Limited (formerly H & R Johnson
(India) Limited). He is a graduate of the
Indian Institute of Technology in Delhi
and of the Indian Institute of Management
in Ahmedabad, where he completed his
MBA. Mr Girija Patnaik was appointed
as an alternate Non-executive Director
to Mr Aggarwal on 4 March 2010.

Norcros plc

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Directors’ report

The Directors present their annual report and the audited consolidated financial statements for the year ended 31 March 2012.

Principal activities
The Company acts as a holding company for the Norcros Group. The Company’s registered number is 3691883 and the Company is registered
and domiciled in England.

The Group’s principal activities are the development, manufacture and marketing of home consumer products in the UK, South Africa
and the Rest of the World.

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 Chairman’s Statement and the Business Review on pages 4 to 14.
Key performance indicators are shown on page 14.

The Directors recommend a final dividend for the year ended 31 March 2012 of 0.28p (2011: 0.24p). This follows the decision to pay
an interim dividend earlier in the year of 0.14p (2011: 0.12p).

Directors
Biographical details of the present Directors are set out on pages 20 and 21. The Directors who served during the year are set out below:

John Brown
Les Tench
Martin Towers
Vijay Aggarwal
Girija Patnaik
Nick Kelsall
Martin Payne
David Hamilton
Joe Matthews
Jamie Stevenson

– Chairman
– Non-executive Director
– Non-executive Director (appointed 28 July 2011)
– Non-executive Director
– Alternate Non-executive Director to Vijay Aggarwal
– Group Chief Executive
– Group Finance Director
– Director and Company Secretary
– Director (resigned 28 July 2011)
– Non-executive Director (resigned 28 July 2011)

The interest of the Directors in the shares of the Company at 31 March 2012 and 31 March 2011 are shown in the Remuneration Report.

Directors’ and officers’ liability insurance and indemnities
The Company purchases liability insurance cover for Directors and officers of the Company 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 to have 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 purchased no ordinary shares during the year (2011: nil). At the Company’s 2011
Annual General Meeting, the shareholders authorised the Company to make market purchases of up to 57,732,611 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 in the Notice of meeting.

Substantial shareholding
As at 31 May 2012 the Company had received notification that the following were interested in 3% or more of the Company’s issued
share capital:

Lifestyle Investments PVT Limited
Aviva Funds
Artemis Fund Managers
SVM Asset Management
Legal & General Investment Management
Hargreave Hale
Henderson Global Investors
Jupiter Asset Management

Percentage
of issued
share capital

29.79
11.50
9.73
4.85
3.85
3.34
3.14
3.05

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Employees
The necessity for, and importance of, good relations with all employees is well recognised and accepted throughout the Group. However,
because the Group’s activities are organised on a de-centralised basis, with each operating business having autonomy over its operations,
there is no uniform set of arrangements for employee involvement imposed throughout the Group. Nevertheless, all Group companies are
strongly encouraged to devise and adopt whatever means of employee consultation best suit their circumstances.

The Group is fully committed to keeping its employees informed about their work unit and the wider business.

The Group recognises its responsibilities towards disabled persons and therefore all applications from such persons are fully and fairly
considered bearing in mind the respective aptitudes and abilities of the applicant. In the event of existing employees becoming disabled,
every effort is made to ensure that their employment with the Group continues and that appropriate training is arranged. It is the policy
of the Group that the training, career development and promotion of disabled persons should, as far as possible, be identical to that
of an able-bodied person.

Charitable donations
The Group made donations for charitable purposes of £10,000 during the year (2011: £19,000). There were no political donations (2011: £nil).

Creditor payment policy
Group policy requires all operating units to apply appropriate controls to working capital management, whilst developing relationships
with suppliers. In view of the international nature of the Group’s activities, no universal code or standard on payment policy is followed but
subsidiary companies are expected to establish payment terms consistent with the above policy, local procedures, customs and practice.
Group trade payables amounting to £30.9m (2011: £27.1m) reported in note 17 to the accounts represent 77 days (2011: 69 days) of average
daily purchases. The Parent Company has no trade creditors (2011: nil).

Research and development
The Group’s expenditure on research and development is disclosed in note 3 to the accounts and is focused on the development
of new products.

Corporate governance
Details of the Group’s corporate governance is contained on pages 25 to 28. This Corporate Governance Report forms part of the
Directors’ Report and is incorporated into it by cross reference.

Financial risk management
The Group’s operations expose it to a variety of financial risks that include the effect of changes in interest rate risk, credit risk, liquidity risk,
exchange rate risk and energy price risk. The Group actively seeks to limit the adverse effects of these risks on the financial performance
of the Group.

Interest rate risk
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 LIBOR rates, the Group has decided 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. 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 the current operations and the Group’s further
development plans.

Exchange rate risk
Through its centralised treasury function the Group seeks to hedge its UK-based transactional foreign exchange risk on a rolling annual
basis through the use of forward exchange contracts and similar hedging instruments. The Group’s principal UK-based foreign currency
exposures are hedged until at least February 2013 based on current forecasts. In the overseas businesses the policy is to hedge the local
transactional risk to the extent this is permitted and not cost prohibitive.

The Group has certain investments in foreign operations whose net assets are exposed to foreign currency translational risk. The Group
seeks to mitigate this exposure through borrowings denominated in the relevant foreign currencies to the extent that this is considered
to be commercially beneficial.

Energy price risk
The Group seeks to secure a proportion of its key energy requirements using forward purchase contracts where it is believed to be necessary.

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Directors’ report
Continued

Takeover directive
Following the repurchase of the Company’s deferred shares in July 2011 (see page 38), the Company now has only one class of shares,
being ordinary shares, which have equal voting rights. The holdings of individual Directors are disclosed on page 29.

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 22 September 2011 in respect of the £51.0m term facilities 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 auditors
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 auditors are unaware; and

(b)

he has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information
and to establish that the Company’s auditors are aware of that information.

Independent auditors
Following a rigorous tender process undertaken by the Audit Committee (see page 26), a resolution to re-appoint PricewaterhouseCoopers
LLP as auditors to the Company will be proposed at the Annual General Meeting.

Annual General Meeting
The Annual General Meeting of the Company will take place at 11.00 am on 26 July 2012 at Ladyfield House, Station Road, Wilmslow,
Cheshire SK9 1BU. The notice convening that meeting, together with the resolutions to be proposed, appears on pages 66 to 69 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.

D. W. Hamilton
Director and Company Secretary
21 June 2012

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Corporate governance

The Board is committed to ensuring that high standards of corporate governance are maintained by Norcros plc. Its policy is to manage the
affairs of the Company in accordance with the principles of corporate governance contained in the FRC Combined Code on Corporate
Governance 2008 (Combined Code) for which the Board is accountable to the shareholders.

For the year ended 31 March 2012, the Company has complied with the Combined Code in all respects save for those mentioned within
this report.

Board balance and independence
The Board currently comprises a Non-executive Chairman, three Non-executive Directors and three Executive Directors, who are equally
responsible for the proper stewardship and leadership of the Company. The Directors holding office at the date of this report and their
biographical details are given on pages 20 to 21.

Taking into account the provisions of the Combined Code, the Chairman and two Non-executive Directors (being Les Tench and
Martin Towers) are considered by the Board to be independent of the Company’s Executive Management and free from any business
or other relationship that could materially interfere with the exercise of their independent judgement. The terms and conditions of
appointment of the Chairman and the Non-executive Directors are available for inspection at the registered office of the Company.
The letters of appointment set out the expected time commitment. Other significant commitments of the Chairman and Non-executive
Directors are disclosed to the Board.

Les Tench is the Senior Independent Non-executive Director. He will be available to shareholders if they have reasons for concern
for which contact through the normal channels of Chairman, Group Chief Executive or Group Finance Director have failed to resolve.

All Directors are supplied, in a timely manner, with all relevant documentation and financial information to assist them in the discharge
of their duties. 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 Chairman, 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 Chairman who will then circulate it to the other members of the Board and the Secretary.

Chairman and Group Chief Executive
The positions of Chairman and Group Chief Executive are held by separate individuals and the Board has clearly defined their responsibilities.
The Chairman 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 Group Chief Executive has responsibility for running the Group’s businesses and
for the implementation of the Board’s strategy, policies and decisions.

Appraisals and evaluation
The performance of the Board is appraised by the Chairman. The Non-executive Directors are appraised individually by the Chairman.
The Board, led by the Senior Independent Non-executive Director, appraises the Chairman. The Non-executive Directors appraise the
performance of each of the Executive Directors. Appraisals are conducted regularly.

Attendance by individual Directors at meetings of the Board and its committees
The attendance of Directors at the Board and principal Board Committee meetings during the year is detailed in the table below:

J. E. Brown, Chairman
L. Tench
M. Towers (appointed 28 July 2011)
V. Aggarwal
G. Patnaik (as alternate to V. Aggarwal)
J. R. Stevenson (resigned 28 July 2011)
N. P. Kelsall
M. K. Payne
D. W. Hamilton
J. Matthews (resigned 28 July 2011)

Main
Board
10 meetings

Audit
Committee
3 meetings

Remuneration
Committee
1 meeting

Nominations
Committee
1 meeting

10/10
10/10
7/7
4/10
5/10
3/4
10/10
10/10
9/10
4/4

3/3
3/3
2/2
1/3
2/3
1/1
—
—
—
—

1/1
1/1
—
1/1
—
1/1
—
—
—
—

1/1
1/1
—
1/1
—
—
—
—
—
—

Advice for Directors
Procedures have been adopted for the Directors to obtain access through the 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 Secretary who is responsible to the Board for ensuring that Board policies
and procedures are complied with. Both the appointment and removal of the Secretary is a matter reserved for decision by the Board.

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Corporate governance
Continued

Board procedures
The Board has a formal schedule of matters specifically reserved to it for decision which it reviews periodically. This ensures the Board
takes 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 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, including
the Audit Committee, Remuneration Committee and Nominations Committee (see below).

The Board will also appoint committees to approve specific processes as deemed necessary.

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 and none has taken on any non-executive directorship. However, in appropriate circumstances,
Executive Directors will be encouraged to take on one non-executive directorship in another non-competing company or organisation.

The terms and conditions of appointment of the Non-executive Directors are available upon written request from the Company. All the
Non-executive Directors undertake that they have sufficient time to meet the requirements of their role. They also undertake to disclose
to the Company their other commitments and to give an indication of the time involved in each such commitment. The performance
evaluation process will assess whether the Non-executive Director is spending enough time to fulfil his duties. If a Non-executive Director
is offered an appointment elsewhere, the Chairman is informed before any such offer is accepted and the Chairman will subsequently
inform the Board.

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 Chairman will offer to major shareholders the opportunity to meet
a new Non-executive Director.

Retirement by rotation
Each of the Directors is subject to election by shareholders at the first Annual General Meeting after their appointment. Thereafter
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. John Brown and Nick Kelsall will retire by rotation at the next
Annual General Meeting. Biographical details of John Brown and Nick Kelsall are set out on page 20.

Nominations Committee
The Nominations Committee and the Board seek to maintain an appropriate balance between the Executive and Non-executive Directors.
The Nominations Committee is chaired by the Chairman and consists of all the Non-executive Directors. The Chairman will not chair the
Committee when it deals with the appointment of a successor to the Chairmanship.

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 Nominations Committee evaluates the balance of skills, knowledge and experience of the Board. In light of this evaluation and,
if deemed necessary, it determines the scope of the role of a new Director, the skills and time commitment required and makes
recommendations to the Board about filling Board vacancies and appointing additional Directors.

Audit Committee
The Audit Committee consists of all the Non-executive Directors including the Chairman. The Board is satisfied that Martin Towers,
who chairs the Committee, has recent and relevant financial experience.

The main role and responsibilities of the Audit Committee are set out in written terms of reference. These terms of reference are available
upon written request to the Company and on the Company’s website at www.norcros.com.

The Committee has primary responsibility for making recommendations to the Board on the appointment, re-appointment and removal
of external auditors. The Committee keeps under review the scope and results of the audit and its cost effectiveness and the independence
and objectivity of the auditors. The Committee keeps the nature and extent of non-audit services under review by regularly reviewing the
balance of audit to non-audit fees. The Committee is aware of the need to safeguard the auditors’ objectivity and independence and the
issue is discussed by the Committee and periodically with senior staff from PricewaterhouseCoopers LLP.

During the year the Committee decided to invite other potential auditors (along with the incumbent auditors) to submit tenders for the
Group’s audit. This was a rigorous process involving the submission of tender documents and presentations to a panel of Audit Committee
members and the Group’s senior finance personnel. After carefully evaluating each tender the panel decided to re-appoint PricewaterhouseCoopers
LLP as the Group’s auditors.

The Committee reviews the policy by which employees of the Group may, in confidence, raise matters of concern, including possible improprieties
in matters of financial reporting or other matters. The Group has a formal whistleblowing procedure which is regularly monitored.

The Committee monitors the integrity of the Group’s financial statements and any formal announcements relating to financial performance
and reviews the significant financial reporting judgements contained in them.

The Audit Committee undertakes a review, at least annually, of the effectiveness of the Group’s system of internal controls and the Board
will take into account the Audit Committee’s report, conclusions and recommendations in this regard.

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Remuneration Committee
The Remuneration Committee operates under written terms of reference, which are consistent with current best practice. These terms
of reference are available upon written request to the Company and on the Company’s website at www.norcros.com. The Committee
comprises only Non-executive Directors. Vijay Aggarwal sits on the Remuneration Committee. As he represents a significant shareholder
he is not regarded as being independent under the Combined Code but the Board is of the opinion that he is able to carry out his role
on the Remuneration Committee effectively as that significant shareholder is not represented by any other Director on the Board and
he does not participate in the consideration or decision-making regarding his own remuneration. The Committee’s report is set out
on pages 29 to 32.

Financial reporting
When releasing the annual and interim financial statements the Directors aim to present a balanced and understandable assessment
of the Group’s results and prospects.

Relations with shareholders
The Company recognises the importance of maintaining good communications with shareholders. The Directors have regular meetings
with the Company’s major shareholders and have regular feedback on the view of those shareholders through the Company’s brokers.
Reports of these meetings, and any shareholder communications during the year, are reported to the Board. In addition, the Company
publishes any significant events affecting the Group and updates on current trading. The Chairman 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.

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 Chairman seeks to arrange for the Chairmen of the Audit, Remuneration and Nominations Committees (or deputies if any of them
are unavoidably absent) to be available at the Annual General Meeting to answer those questions relating to the work of these Committees.

Accountability and audit
The respective responsibilities of the Directors and auditors in connection with the financial statements are explained in the Statement
of Directors’ Responsibilities and the auditors’ report. The Directors ensure the independence of the auditors 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 senior finance staff independent of that business unit. The results of these reviews are
communicated to the Audit Committee.

The Board has identified and evaluated what it considers to be the significant risks faced by the Group and has also assessed the adequacy
of the actions taken to manage these risks. This has been disclosed on pages 16 to 17.

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.

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Corporate governance
Continued

Operational structure, review and compliance
In addition to the Group Finance Director, the Group has Senior Financial Managers at its Head Office. The Board has considered whether
the Company should have an internal audit department and has deemed that given both its risk management and internal control programme
noted on page 27, together with the size and complexity of the Group, it is not necessary to employ such a department at the present
time. The Board will however continue to keep this matter under review.

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, prior
year and the forecast for the year is revised where necessary. Any significant changes and adverse variances are questioned by the Board
and remedial action is taken where appropriate. There is weekly cash and treasury reporting to the Group Finance Director and periodic
reporting to the Board on the Group’s tax and treasury position.

The system of internal control is designed to manage rather than eliminate the risk of failing to achieve business objectives and can only
provide reasonable and not absolute assurance against material misstatement or loss.

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.

The Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Group
and that this has been in place for the period under review and up to the date of approval of the Annual Report and Accounts.

Takeover directive
Share capital structures are included in the Directors’ Report on page 24.

Going concern
The Directors consider, after making appropriate enquiries at the time of approving the financial statements, that the Company and
the Group have adequate resources to continue in operational existence for the foreseeable future and accordingly, that it is appropriate
to adopt the going concern basis in the preparation of the financial statements.

Norcros plc

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Remuneration report

Remuneration policy
The Company’s policy on remuneration of Directors is to attract, retain and motivate the best people, recognising that they are key
to the ongoing success of the business but to avoid paying more than is necessary.

Consistent with this policy, Norcros plc benefit packages awarded to Directors are intended to be competitive and comprise a mix of
challenging performance related and non-performance related remuneration designed to incentivise Directors and align their interests
with those of shareholders but not to detract from the goals of corporate governance.

Nick Kelsall and Martin Payne participated in the Company’s annual bonus scheme during the year although no bonuses have accrued
in respect of the year to 31 March 2012. The scheme allows for maximum annual bonus opportunities of up to 100% of base salary,
determined wholly in terms of Group underlying operating profit. 50% of bonuses are paid in cash and 50% are deliverable in the form
of nil cost share options, the release of which will be deferred for three years.

It is the Board’s intention to continue to award nil cost share options to Nick Kelsall and Martin Payne under the 2011 Approved Performance
Share Plan (APSP). The options awarded will vest with the Directors after a period of three years and will be dependent on the cumulative
Group EPS over the three year period to reward the Directors for their contribution towards the long-term profitability of the Group. In the
event that a Director resigns, the awards will lapse. The Committee considers that long-term growth in earnings is essential and considers
that a three year objective is an appropriate period to reward the Directors for continuing long-term earnings growth. In any year the value
of the shares notionally awarded to a Director under this scheme will not exceed 150% of the Director’s basic salary.

If the EPS target is met, thereby allowing 100% of his options under the scheme to vest, the percentage composition of each Director’s
remuneration (based on his 2011/12 remuneration) will be as follows:

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Non-performance
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Performance
related

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N. P. Kelsall
M. K. Payne
D. W. Hamilton

87%
87%
100%

13%
13%
—

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As there is no bonus proposed for the year the performance related figures above relate only to the APSP.

Directors’ service contracts
The details of the service contracts of the present Directors are:

N. P. Kelsall
M. K. Payne
D. W. Hamilton
J. E. Brown
L. Tench
M. G. Towers
V. Aggarwal

Contract date

Notice period

1 April 2011
18 March 2011
1 April 2011
16 July 2007
16 July 2007
28 July 2011
8 October 2009

12 months
12 months
12 months
1 month
1 month
1 month
1 month

Nick Kelsall, David Hamilton and Martin Payne have signed rolling contracts. These contracts are terminable on notice by either the Company
or Director. The contracts are expressed to expire on each Director’s applicable retirement date.

John Brown, Les Tench, Martin Towers and Vijay Aggarwal are on contracts 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.

John Brown and Nick Kelsall will retire by rotation and seek re-election at the Annual General Meeting. Biographical details of the Directors
standing for re-election are on page 20.

Interest in shares
The interests of the Directors in the shares of the Company and other Group members were:

N. P. Kelsall
D. W. Hamilton
J. E. Brown
L. Tench
M. G. Towers

31 March
2012
Ordinary
shares

7,865,143
12,247,960
778,387
686,283
500,000

31 March
2011
Ordinary
shares

7,762,123
12,144,940
778,387
686,283
—

All Directors’ interests are beneficially held. There has been no change in the interests set out above between 31 March 2012
and 21 June 2012.

Norcros plc

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Remuneration report
Continued

Members of the Remuneration Committee
The members of the Remuneration Committee during the year were:

Les Tench (Chairman)
John Brown
Martin Towers (appointed 28 July 2011)
Vijay Aggarwal
Jamie Stevenson (resigned 28 July 2011)

The Remuneration Committee is responsible for setting all aspects of Executive Directors’ remuneration. The remuneration
of Non-executive Directors is determined by the Board within the limits set by the Company’s Articles of Association.

Performance graph
The following graph demonstrates how £100 invested in Norcros plc on 16 July 2007 (the date of admission) has changed compared
with the same investment in a fund mirroring the make up of the construction and materials index of listed companies:

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In the opinion of the Directors, the construction and materials index is the most appropriate index against which the total shareholder
return of Norcros plc should be measured because it is an index of similar sized companies to Norcros plc.

Audited information
The remainder of the Remuneration Report is audited information.

Directors’ emoluments

Salary
and fees
£000

Bonuses
£000

Benefits
in kind
£000

260
180
100
95
80
40
27
13
15

810

—
—
—
—
—
—
—
—
—

—

1
1
6
1
—
—
—
—
—

Executive

N. P. Kelsall
M. K. Payne
D. W. Hamilton
J. Matthews**
J. E. Brown
L. Tench
M. G. Towers*
J. R. Stevenson**
V. Aggarwal

* From date of appointment.
** To date of resignation.

Expense
allowances
(including car
allowance)
£000

29
20
20
10
—
—
—
—
—

FURBS
£000

23
7
—
21
—
—
—
—
—

2012
Total
£000

313
208
126
127
80
40
27
13
15

949

2011
Total
£000

410
9*
125
611
80
40
—
40
15

1,330

Both Joe Matthews and Jamie Stevenson resigned from the Board on 28 July 2011. Martin Towers was appointed Non-executive Director
on the same date.

In April 2012 annual salary increases for the three Executive Directors (N. P. Kelsall, M. K. Payne and D. W. Hamilton) of 2.5% were agreed
by the Remuneration Committee. These increases took effect from 1 April 2012. There are no annual increases to remuneration levels
for Non-executive Directors.

Benefits in kind consist of medical insurance for every Executive Director. An amount of £21,000 paid to Joe Matthews, £23,000 paid
to Nick Kelsall and £7,000 paid to Martin Payne under a Funded Unapproved Retirement Benefit Scheme (FURBS).

Norcros plc

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Audited information continued
Share schemes
Savings Related Share Option Scheme (SAYE)
The Executive Directors are eligible to participate in the Company’s Savings Related Share Option Scheme which commenced in December 2007.
The scheme is open to all UK employees. Participants save a fixed amount of up to £250 per month for three years and are then able to use these
savings to buy shares in the Company at a fixed price. These options are not subject to any performance conditions.

Date of
grant

Earliest
exercise
date

Expiry
date

Exercise
price

N. P. Kelsall

D. W. Hamilton

23 December 2008
23 December 2011
23 December 2008
23 December 2011

1 March 2012
1 March 2015
1 March 2012
1 March 2015

31 August 2012
31 August 2015
31 August 2012
31 August 2015

9.3p
10.1p
9.3p
10.1p

* On the day these shares were exercised the price of the Company’s shares was 10.0p.

Number at
1 April
2011

103,020
89,108
103,020
89,108

Granted
in year

Exercised
in year

— (103,020)*

89,108

—

— (103,020)*

89,108

—

Number at
31 March
2012

—
89,108
—
89,108

Approved Performance Share Plan (APSP)
In September 2011 the Executive Directors and selected senior management were made awards of shares under the APSP. Vesting of these
shares was subject to achieving aggregate diluted benchmark earnings per share (Aggregate EPS) targets for the following three financial
years. 100% of the shares would vest if the Group achieved Aggregate EPS of over 5.75p. 25% of the shares vest if the Group achieved
Aggregate EPS of 5.08p and shares would vest on a straight line basis for a performance in between these targets. No shares would vest
if the Aggregate EPS performance was below 5.08p.

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Directors’ interests in the APSP

N. P. Kelsall
M. K. Payne

The market price on 1 September 2011 was 12.25p.

Award
date

1 September 2011
1 September 2011

Number at
1 April
2011

—
—

Granted in year

2,122,449
1,469,388

Number at
31 March
2012

2,122,449
1,469,388

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No other Directors have been granted share options in the shares in the Company or other Group entities. Once awarded there have been
no subsequent variations to the terms and conditions of the share options. All options were granted in respect of qualifying services.

The options were granted at nil cost to the Directors. The performance criteria for all the above share options were consistent with the
remuneration policy.

The market price of the Company’s shares at the end of the financial year was 10.00p and the range of market prices during the year was
between 16.12p and 9.51p.

Directors’ pension entitlement
The following Directors had retirement benefits accruing under the Group’s UK defined benefit scheme:

N. P. Kelsall
M. K. Payne

Transfer
value of
accrued pension
increase
in the year
£

23,973
7,093

Accrued
entitlement
£

14,370
10,448

Transfer
value at
31 March
2012
£

236,008
142,505

Transfer
value at
31 March
2011
£

166,431
103,971

Increase
in accrued
pension for
the year less
CPI inflation
£

1,008
—

Increase
in transfer
value less
Directors’
contributions
£

69,577
38,534

Increase
in accrued
pension for
the year
£

1,460
520

Norcros plc

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Remuneration report
Continued

Audited information continued
Directors’ pension entitlement continued
Neither Nick Kelsall nor Martin Payne are active members of the UK defined benefit scheme. Martin Payne’s entitlement relates to his
former employment at H&R Johnson Tiles Limited between 1993 and 2001.

The accrued pension entitlement is the amount that the Director would receive if he retired at the end of the year.

All transfer values have been calculated on the basis of actuarial advice in accordance with Actuarial Guidance Note GN11. The transfer values
of the accrued entitlement represent the value of assets that the pension scheme would need to transfer to another pension provided on
transferring the scheme’s liability in respect of the Directors’ pension benefits. They do not represent sums payable to individual Directors
and, therefore, cannot be added meaningfully to annual remuneration.

Nick Kelsall also participated in the Group’s UK defined contribution scheme. During the year the Group contributed £52,000 (2011: £63,930)
to this scheme. Contributions ceased after January 2012 after which Mr Kelsall was paid additional remuneration as a FURB.

The Group makes contributions on behalf of Martin Payne into his personal pension scheme. During the year the Group contributed
£37,500 (2011: £nil) to this scheme.

On behalf of the Board

L. Tench
Chairman of the Remuneration Committee
21 June 2012

Norcros plc

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Statement of directors’ responsibilities
In respect of the annual report, the 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 regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the
Group financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, and
the Parent 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 the Company and of the profit or loss of the Group for
that period. In preparing these financial statements, the Directors are required to:

— select suitable accounting policies and then apply them consistently;

— make judgements and accounting estimates that are reasonable and prudent;

— state whether IFRS as adopted by the European Union and applicable UK Accounting Standards have been followed, subject to any

material departures disclosed and explained in the Group and Parent Company financial statements respectively; and

— prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue

in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions
and disclose with reasonable accuracy at any time the financial position of the Company and the Group 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 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and
hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the Directors, whose names and functions are listed in the Directors’ Report confirm that, to the best of their knowledge:

— the Group financial statements, which have been prepared in accordance with IFRS as adopted by the European Union, give a true and

fair view of the assets, liabilities, financial position and profit of the Group; and

— the Business Review includes a fair review of the development and performance of the business and the position of the Group, together

with a description of the principal risks and uncertainties that it faces.

N. P. Kelsall
Group Chief Executive

M. K. Payne
Group Finance Director

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Independent auditors’ report
To the members of Norcros plc

We have audited the Group financial statements of Norcros plc for the year ended 31 March 2012 which comprise the Consolidated
Income Statement, the Consolidated Statement of Comprehensive Income and Expense, the Consolidated Balance Sheet, the
Consolidated Cash Flow Statement, the Consolidated Statement of Changes in Equity and the related notes. The financial reporting
framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRS) as adopted
by the European Union.

Respective responsibilities of Directors and auditors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 33, the Directors are responsible for the preparation
of the Group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an
opinion on the Group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3
of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for
any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.

Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the Group financial statements sufficient to give reasonable
assurance that the Group financial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied and
adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the
Group financial statements. In addition, we read all the financial and non-financial information in the Chairman’s Statement, Business Review,
Corporate Governance Statement and the Remuneration Report to identify material inconsistencies with the audited financial statements.
If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements
In our opinion the Group financial statements:

— give a true and fair view of the state of the Group’s affairs as at 31 March 2012 and of its profit and cash flows for the year then ended;

— have been properly prepared in accordance with IFRS as adopted by the European Union; and

— have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the lAS Regulation.

Opinion on other matter prescribed by the Companies Act 2006
In our opinion:

— the information given in the Directors’ Report for the financial year for which the Group financial statements are prepared is consistent

with the Group financial statements; and

— the information given in the Corporate Governance Statement set out on pages 25 to 28 with respect to internal control and risk

management systems and about share capital structures is consistent with the Group financial statements.

Matters on which we are required to report by exception
We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you if, in our opinion:

— 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; or

— a corporate governance statement has not been prepared by the Parent Company.

Under the Listing Rules we are required to review:

— the Directors’ statement, set out on page 28, in relation to going concern;

— the part of the Corporate Governance Statement relating to the Company’s compliance with the nine provisions of the UK Corporate

Governance Code specified for our review; and

— certain elements of the report to shareholders by the Board on Directors’ remuneration.

Other matter
We have reported separately on the Parent Company financial statements of Norcros plc for the year ended 31 March 2012 and on the
information in the Directors’ Remuneration Report that is described as having been audited.

Martin Heath (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Manchester
21 June 2012

Norcros plc

Annual report and accounts 2012

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Consolidated income statement
Year ended 31 March 2012

Continuing operations

Revenue

Operating profit

Underlying* operating profit

Exceptional operating items

Operating profit

Finance costs

Exceptional finance costs

Total finance costs

Finance income

IAS 19 finance income

Profit before taxation

Taxation

Profit for the year

Earnings per share attributable to equity holders of the Company

From continuing operations:

Basic earnings per share

Diluted earnings per share

Weighted average number of shares for basic earnings per share (millions)

Non-GAAP measures:

Underlying* profit before taxation (£m)

Underlying* earnings (£m)

Basic underlying* earnings per share

Diluted underlying* earnings per share

Notes

2012
£m

200.3

12.1

—

12.1

(3.1)

(1.2)

(4.3)

—

1.6

9.4

—

9.4

1.6p

577.2

10.7

11.1

1.9p

2011
£m

196.1

10.6

11.7

(1.1)

10.6

(3.4)

—

(3.4)

0.2

0.1

7.5

(0.8)

6.7

1.2p

577.0

10.2

9.4

1.6p

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* Underlying is defined as before exceptional items and, where relevant, amortisation of costs of raising finance, movement on fair value of derivative financial instruments, discounting

of property lease provisions and finance costs relating to pension schemes, less attributable taxation.

Consolidated statement of comprehensive income and expense
Year ended 31 March 2012

Profit for the year

Other comprehensive income:

Actuarial (losses)/gains on retirement benefit obligations

Foreign currency translation adjustments

Other comprehensive (expense)/income for the year

Total comprehensive (expense)/income for the year

Items in the statement are disclosed net of tax.

Norcros plc

Annual report and accounts 2012

Notes

2012
£m

9.4

(10.6)

(5.3)

(15.9)

(6.5)

2011
£m

6.7

0.7

1.4

2.1

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Consolidated balance sheet
At 31 March 2012

Non-current assets

Goodwill

Property, plant and equipment

Investment properties

Deferred tax assets

Current assets

Inventories

Trade and other receivables

Derivative financial instruments

Pension scheme asset

Cash and cash equivalents

Current liabilities

Trade and other payables

Derivative financial instruments

Current tax liabilities

Financial liabilities – borrowings

Net current assets

Total assets less current liabilities

Non-current liabilities

Financial liabilities – borrowings

Pension scheme liability

Other non-current liabilities

Provisions

Net assets

Financed by:

Share capital

Share premium

Retained earnings/(deficit) and other reserves

Total equity

Notes

2012
£m

23.4

44.8

5.4

6.4

80.0

45.5

40.7

—

0.6

2.9

89.7

(50.6)

(0.4)

(1.1)

(0.4)

(52.5)

37.2

117.2

(20.3)

(18.7)

(1.7)

(5.4)

(46.1)

71.1

5.8

0.2

65.1

71.1

2011
£m

23.9

49.1

5.5

2.2

80.7

42.3

42.6

0.4

1.4

7.7

94.4

(50.6)

(1.8)

(0.9)

(3.1)

(56.4)

38.0

118.7

(15.2)

(7.0)

(1.8)

(15.3)

(39.3)

79.4

19.2

86.8

(26.6)

79.4

The financial statements on pages 35 to 60 were approved on 21 June 2012 and signed on behalf of the Board by:

N. P. Kelsall
Group Chief Executive Group Finance Director

M. K. Payne

Norcros plc

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Consolidated cash flow statement
Year ended 31 March 2012

Cash generated from operations

Income taxes paid

Interest received

Interest paid

Net cash generated from operating activities

Cash flows from investing activities

Proceeds from disposal of investments

Purchase of property, plant and equipment

Net cash used in investing activities

Cash flows from financing activities

Net proceeds from issue of ordinary share capital

Repayment of borrowings

Capitalised finance costs

Drawdown of borrowings

Dividends paid to Company’s shareholders

Net cash generated from/(used in) financing activities

Net (decrease)/increase in cash at bank and in hand and bank overdrafts

Cash at bank and in hand and bank overdrafts at beginning of the year

Exchange movements on cash and bank overdrafts

Cash at bank and in hand and bank overdrafts at end of the year

Notes

2012
£m

6.0

(0.6)

—

(1.6)

3.8

—

(6.7)

0.2

(17.0)

(0.8)

21.0

(2.2)

1.2

(1.7)

4.6

(0.4)

2.5

2011
£m

10.8

(0.6)

0.7

(1.7)

9.2

4.4

(6.3)

(1.9)

—

(3.0)

—

(0.7)

(3.7)

3.6

1.1

(0.1)

4.6

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Consolidated statement of changes in equity
Year ended 31 March 2012

At 1 April 2010

Comprehensive income:

Profit for the year

Other comprehensive income:

Actuarial gain on retirement
benefit obligations

Foreign currency translation adjustments

Total other comprehensive income

Transactions with owners:

Dividends paid

Share option schemes and warrants

Ordinary
share
capital
£m

19.2

—

At 31 March 2011

19.2

Comprehensive income:

Profit for the year

Other comprehensive income:

Actuarial loss on retirement
benefit obligations

Foreign currency translation adjustments

Total other comprehensive income

Transactions with owners:

Purchase of own shares

Capital re-organisation

Shares issued

Dividends paid

Share option schemes and warrants

At 31 March 2012

—

(13.4)

—

5.8

Capital
redemption
reserve
£m

—

13.4

(13.4)

—

Share
premium
£m

86.8

—

86.8

—

(86.8)

0.2

—

0.2

Translation
reserve
£m

9.7

—

1.4

—

11.1

—

(5.3)

—

5.8

Retained
earnings/
(losses)
£m

(44.5)

6.7

0.7

—

0.7

(0.7)

0.1

(37.7)

Total
£m

71.2

6.7

0.7

1.4

2.1

(0.7)

0.1

79.4

9.4

(10.6)

—

(10.6)

—

100.2

—

(2.2)

0.2

59.3

(10.6)

(5.3)

(15.9)

—

0.2

(2.2)

0.2

71.1

Following the July 2011 AGM the Company repurchased its 148,754,684 9p deferred shares for a nominal value. The value of these shares,
being £13.4m, was placed in a capital redemption reserve. Immediately following this transaction the Company cancelled its share
premium account and capital redemption reserve.

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Notes to the group accounts
Year ended 31 March 2012

1. Group accounting policies
General information
Norcros plc (the “Company”), which is the ultimate Parent Company of the Norcros Group, is incorporated in England as a public company
limited by shares. The shares of the Company are listed on the London Stock Exchange market of listed securities. The consolidated financial
statements of the Group were approved by the Board on 21 June 2012.

Basis of preparation
The principal accounting policies applied in the preparation of this financial report are set out below. These policies have been consistently
applied to the information presented, unless otherwise stated.

The financial statements have been prepared under the historical cost convention, except for derivative financial instruments, the defined
benefit pension scheme and share-based payments which are stated at their fair value. The consolidated financial statements have been
prepared in accordance with IFRS as endorsed by the European Union issued by the International Accounting Standards Board (IASB), with
the interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are effective as of the
balance sheet date and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The preparation of 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 explained below.

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Standards, amendments and interpretations effective in 2012
The Group has adopted the following new IFRS standards and interpretations as of 1 April 2011:

— IAS 24 (revised), ‘Related party disclosures’ – This revised standard removes the requirement for Government related entities to disclose details
of all transactions with the Government and other Government related entities and it clarifies and simplifies the definition of a related party.

— Amendment to IFRS 1, ‘First time adoption’, on financial instrument disclosures – This amendment provides first-time adopters with
the same transition provisions as included in the amendment to IFRS 7, ‘Financial instruments: Disclosures’, regarding comparative
information for the new three-level classification disclosures.

— Annual improvements to IFRS 2010 – This set of amendments includes changes to six standards and one IFRIC:

— IFRS 1, ‘First time adoption’.

— IFRS 3, ‘Business combinations’.

— IFRS 7, ‘Financial instruments; Disclosure’.

— IAS 1,‘Presentation of financial statements’.

— IAS 27, ‘Separate financial statements’.

— IAS 34, ‘Interim financial reporting’.

— IFRIC 13, ‘Customer loyalty programmes’.

— IFRIC 19, ‘Extinguishing financial liabilities with equity investments’ – This interpretation clarifies the accounting when an entity renegotiates
the terms of its debt with the result that the liability is extinguished through the debtor issuing its own equity instruments to the creditor.
A gain or loss is recognised in the profit and loss account based on the fair value of the equity instruments compared to the carrying
amount of the debt.

— Amendment to IFRIC 14, ‘Prepayments of a minimum funding requirement’ – This amendment will have a limited impact, as it applies
only to entities that are required to make minimum funding contributions to a defined benefit pension plan. It removes an unintended
consequence of IFRIC 14, ‘IAS 19 – The limit on a defined benefit asset, minimum funding requirements and their interaction’, relating
to voluntary pension pre-payments when there is a minimum funding requirement.

The adoption of these standards, amendments and interpretations did not have a material impact on the financial statements.

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Notes to the group accounts
Year ended 31 March 2012
Continued

1. Group accounting policies continued
Standards, amendments and interpretations early adopted by the Group
No standards have been early adopted by the Group.

Standards, amendments and interpretations that are not yet effective and have not been early adopted by the Group
— Amendments to IFRS 7, ‘Financial instruments: Disclosures’, on transfers of assets.

— Amendment to IFRS 1, ‘First time adoption’, on fixed dates and hyperinflation.

— Amendment to IAS 12, ‘Income taxes’, on deferred tax.

— Amendment to IAS 1, ‘Financial statement presentation’ regarding other comprehensive income.

— IFRS 9, ‘Financial instruments’ − classification and measurement’.

— IFRS 10, ‘Consolidated financial statements’.

— IFRS 11, ‘Joint arrangements’.

— IFRS 12, ‘Disclosures of interests in other entities’.

— IFRS 13, ‘Fair value measurement’.

— IAS 27 (revised 2011) ‘Separate financial statements’.

— IAS 28 (revised 2011) ‘Associates and joint ventures’.

— Amendment to IFRS 7, ‘Financial instruments: Disclosures’, on offsetting financial assets and financial liabilities.

— Amendment to IAS 32, ‘Financial instruments: Presentation’, on offsetting financial assets and financial liabilities.

— Amendment to IFRS 1, ’First time adoption’, on Government loans.

The adoption of these standards, amendments and interpretations is not expected to have a material impact on the Group’s profits, net
assets or equity. The adoptions may affect the disclosures in the Group’s financial statements.

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.

Basis of consolidation
Subsidiaries
The consolidated historical financial statements incorporate the financial statements of Norcros plc and entities controlled by Norcros plc
(its subsidiaries) made up to the reporting date each year. Control is achieved where Norcros plc has the power to govern the financial and
operating policies of an investee entity so as to obtain benefits from its activities.

On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair value at the date of acquisition.
Any excess of the cost of the acquisition 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. All acquisition costs are expensed as incurred. The results of subsidiaries acquired or disposed of
during the year are included in the Income Statement from the effective date of acquisition or disposal, as appropriate. Where necessary,
adjustments are made to the financial statements of subsidiaries to bring the accounting policies into line with those used by the Group.

All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

Critical estimates
The Group’s accounting policies have been set by management and approved by the Audit Committee. The application of these accounting
policies to specific scenarios requires estimates and assumptions to be made concerning the future. These 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. The resulting accounting estimates will, by definition, seldom equal the related actual results.

Under IFRS, estimates or judgements are considered critical where they involve a significant risk or 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.

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1. Group accounting policies continued
Basis of consolidation continued
Critical estimates continued
Critical judgements have been made in the following areas:

— estimated impairment of goodwill, long life assets and property, plant and equipment – the Group tests annually whether these assets

have suffered any impairment, in accordance with its accounting policy. The recoverable amounts of cash-generating units (CGUs) have
been determined based on value-in-use calculations. These calculations require the use of estimates, both in arriving at the expected
future cash flows and the application of a suitable discount rate in order to calculate the present value of these flows. These calculations
have been carried out using the assumptions in note 11;

— retirement benefit obligations – the present value of pension obligations depends on a number of factors that are determined on an

actuarial basis using a number of assumptions. The assumptions used in determining the net expense for pensions include the discount
rate. Any changes in these assumptions can impact the carrying amount of retirement benefit obligations (see note 22);

— property provisions – where a property leased by the Group is vacated but an ongoing lease commitment remains, provision is made for

the onerous element of the lease. Key assumptions are the extent to which properties are let and rentals are achieved. Any changes
in these assumptions can affect the quantum of the provisions; and

— deferred tax – deferred tax assets are recognised on losses and capital allowances carried forward only to the extent that it is

probable they will be available for use against future profits and that there will be sufficient future taxable profit available against which
the temporary difference can be utilised. In arriving at a judgement in relation to the recognition of deferred tax assets, management
considers the regulations applicable to taxation and whether there are sufficient future taxable profits. Future taxable profits may be
higher or lower than estimates made when determining whether it is necessary to record a tax asset and the amount to be recorded.
Furthermore changes to the legislative framework or application of tax law may result in a management reassessment of the level of
recognition of deferred tax assets.

Revenue recognition
Revenue comprises the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s
activities. It is shown net of value added and other sales-based taxes.

Revenue is recognised when significant risks and rewards of ownership of the goods are transferred to the buyer, which is usually
on despatch or upon sale to a customer in the case of the Group’s retail operations.

Segmental reporting
The Group operates in three main geographical areas: UK, South Africa and the Rest of the World. 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 as each segment has similar economic characteristics, complementary products, distribution channels and regulatory environments.

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 on 1 April 2004 less accumulated impairment losses.
Any impairment is recognised in the period in which it is identified.

Impairment of long life assets
Property, plant and equipment and other non-current 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 Consolidated 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 of acquisition
by the Group.

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Notes to the group accounts
Year ended 31 March 2012
Continued

1. Group accounting policies continued
Property, plant and equipment continued
The estimated useful lives of Group assets are as follows:

Buildings

25 – 50 years

Plant, machinery and equipment

3 – 15 years

Motor vehicles

4 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. 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.

Deferred tax is the tax expected to be payable or recoverable on the difference between the carrying amounts of assets and liabilities
in the 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.

Operating leases
Annual rentals are charged/credited directly against profits on a straight line basis over the lease term.

Provisions
Warranty provisions – provision is made for the estimated liability on products under warranty. Revenue received in respect of extended
warranties is recognised over the period of the warranty. Liability is recognised upon the sale of a product and is estimated using historical data.

Re-organisation costs – provision is made for costs of re-organising 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, an onerous lease provision
is recorded. This is calculated as the cost that management expects to incur over the period of the lease.

Provisions are measured at the best estimate of the amount to be spent and discounted where material.

Retirement benefit obligations
The Group operates a defined benefit scheme in the UK and a number of defined contribution pension schemes.

A full actuarial valuation of the Group’s defined benefit scheme is carried out every three years with interim reviews in the intervening years;
these valuations are updated to 31 March each year by qualified independent actuaries. The operating and financing costs of the scheme
are recognised separately in the Income Statement; service costs are spread systematically over the lives of employees; and financing
costs are recognised in the periods in which they arise. Actuarial gains and losses, including differences between the expected and actual
return on scheme assets, are recognised, net of the related deferred tax, in the Statement of Comprehensive Income.

The asset or liability in respect of defined benefit pension scheme is the present value of the defined benefit obligation at the balance sheet
date less the market value of scheme assets. The defined benefit obligation is calculated annually by independent actuaries using the projected
unit cost method. The present value of the defined benefit obligation is determined by the estimated future cash outflows using interest
rates of Government securities, which have terms to maturity approximating the terms of the related liability.

Pension scheme surpluses (to the extent that they are considered recoverable) or deficits are recognised in full on the face of the Balance Sheet.

Curtailment gains are recognised in the Income Statement.

The costs of the Group’s defined contribution pension schemes are charged to the Income Statement in the period in which they fall due.
The assets of these schemes are held in independently administered funds.

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1. Group accounting policies continued
Exceptional items
Exceptional items are transactions which occur outside the course of the Group’s normal operations. They include profits and losses
on disposal of non-current assets, restructuring costs and large or significant one off items.

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.

Treasury derivatives – where deemed necessary, the Group uses interest rate swaps to manage exposure to interest rate fluctuations.
The Group’s exposure to foreign exchange rate fluctuations is managed through the use of forward exchange contracts and cross
currency swaps.

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair
value. Changes in the fair value of these derivative instruments are recognised immediately in the Income Statement. Amounts payable/
receivable under interest rate swaps are accounted for as adjustments to finance cost/income for the period.

Cash and cash equivalents – cash and cash equivalents include cash in hand and deposits held at call with banks and bank overdrafts.
Cash and cash equivalents are offset when there is a legally enforceable right to do so.

Trade receivables – trade receivables are recognised initially at fair value less provision for impairment. A provision for impairment of trade
receivables is established where there is objective evidence that the Group will not be able to collect all amounts due according to the original
terms of receivables. Evidence including significant financial difficulties of a debtor, probability that the debtor will enter bankruptcy or financial
re-organisation and default or delinquency in payment are considered indicators that the trade receivables are impaired. The amount of
provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the
effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of loss is
recognised in the Income Statement within administration costs. When a trade receivable is uncollectable, it is written off against the allowance
account for trade receivables. Subsequent recoveries of amounts previously written off are credited against administration costs in the
Income Statement.

Trade payables – trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method.

Fair value estimation
The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the balance sheet date. The Group
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. The Directors do not believe development costs can
be measured accurately enough to warrant capitalisation.

Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which
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 currency of the parent entity.

Transactions and balances
Assets and liabilities expressed in currencies other than functional currency are translated at rates applicable at the year end and trading
results at average rates for the year. Exchange gains and losses of a trading nature are dealt with in arriving at the 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.

Norcros plc

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Notes to the group accounts
Year ended 31 March 2012
Continued

1. Group accounting policies continued
Share capital
Issued share capital is recorded in the Balance Sheet at nominal value with any premium at that date of issue being credited to the share
premium account.

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.

2. Segmental reporting
The Group operates in three main geographical areas: UK, South Africa and the Rest of the World. 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 as each segment has similar economic characteristics, complementary products, distribution channels and regulatory environments.

Continuing operations — year ended 31 March 2012

Revenue

Underlying operating profit/(loss)
Exceptional operating items

Operating profit/(loss)

Finance costs
Exceptional finance costs
IAS 19 finance income

Profit before taxation
Taxation

Profit from continuing operations

Net debt

Segmental assets
Segmental liabilities
Additions to property, plant and equipment
Depreciation

UK
£m

116.8

12.5
—

12.5

South
Africa
£m

74.0

(0.5)
(0.5)

(1.0)

Rest of
the World
£m

9.5

0.1
0.5

0.6

104.4
(82.2)
2.7
3.9

57.1
(15.0)
2.7
2.3

8.2
(1.4)
—
0.1

Group
£m

200.3

12.1
—

12.1

(3.1)
(1.2)
1.6

9.4
—

9.4

(17.8)

169.7
(98.6)
5.4
6.3

Revenues of £32.9m (2011: £29.6m) are derived from a single customer. These revenues are attributable to the UK segment.

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2. Segmental reporting continued
Continuing operations — year ended 31 March 2011

Revenue

Underlying operating profit/(loss)
Exceptional operating items

Operating profit

Finance costs
Finance income
IAS 19 finance income

Profit before taxation
Taxation

Profit from continuing operations

Net debt

Segmental assets
Segmental liabilities
Additions to property, plant and equipment
Depreciation

3. Operating profit
The following items have been included in arriving at operating profit:

Staff costs (see note 4)
Depreciation of property, plant and equipment (all owned assets)
Depreciation of investment properties
Other operating lease rentals payable:
– plant and machinery
– other
Research and development expenditure
(Profit)/loss on disposal of property, plant and equipment

Auditors’ remuneration
Services provided by the Group’s auditors and network firms:

Fees payable to the Company’s auditors for the audit of the
Parent Company and consolidated financial statements
Audit of subsidiaries pursuant to legislation
Tax services

UK
£m

114.0

11.6
(3.8)

7.8

South
Africa
£m

72.4

0.2
—

0.2

Rest of
the World
£m

9.7

(0.1)
2.7

2.6

107.6
(75.6)
6.3
3.9

60.7
(15.6)
1.6
2.6

6.8
(4.5)
—
0.1

2012
£m

41.2
6.2
0.1

1.6
3.1
2.2
(0.4)

2012
£m

0.1
0.1
0.1

0.3

Group
£m

196.1

11.7
(1.1)

10.6

(3.4)
0.2
0.1

7.5
(0.8)

6.7

(10.6)

175.1
(95.7)
7.9
6.6

2011
£m

40.1
6.6
—

1.5
3.4
2.3
0.1

2011
£m

0.1
0.1
—

0.2

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2011
£m

36.0
2.2

1.3
1.0
(0.4)

40.1

2011
Number

847
819

1,666

2011
£m

1.3
0.1

1.4

2011
£m

0.6
—

0.6

2011
£m

1.5
0.1

1.6

2012
Number

827
803

1,630

2012
£m

0.9
0.1

1.0

2012
£m

0.3
0.1

0.4

2012
£m

1.6
0.1

1.7

Notes to the group accounts
Year ended 31 March 2012
Continued

4. Employees

Staff costs:
– wages and salaries
– social security costs
– pension costs
– defined benefit
– defined contributions
– exceptional pension credit (see note 5)

2012
£m

36.3
2.3

1.5
1.1
—

41.2

Included in wages and salaries are £0.3m (2011: £nil) of redundancy costs classed as exceptional items in the Income Statement.

Average monthly numbers employed:
– UK
– overseas

Directors’ emoluments

Salaries and short-term employee benefits
Post employment benefits

Further information about the Directors’ remuneration may be found in the Remuneration Report on pages 29 to 32.

Highest paid Director

Salaries and short-term employee benefits
Post employment benefits

Key management compensation

Salaries and short-term employee benefits
Post employment benefits

Key management is defined as the Directors of Norcros plc together with selected other senior managers. In 2012 two further senior
managers were considered to be key management. The inclusion of their costs increased key management compensation by £0.4m
compared to the previous year.

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5. Exceptional items

Exceptional operating items

Impairment of associate’s carrying value and related costs1
Past service pension credit2
Restructuring costs3
Property provisions4
Profit on disposal of investments5

Exceptional finance costs
Write-off of capitalised costs of raising debt finance6

2012
£m

0.5
—
(0.5)
—
—

—

(1.2)

2011
£m

—
0.4
—
(4.2)
2.7

(1.1)

—

1 In 2009 the carrying value of the Group’s Greek associate was fully impaired together with associated costs including the mark to market value of the related cross currency swap.

This swap has now matured and other associated costs paid. The cost of settling the cross currency swap was £0.5m lower than initially estimated.

2 The pension credit related to the impact of changes in pensioners’ benefits in the UK defined benefit pension scheme.

3 Restructuring costs related to redundancies, asset write-downs and consultancy costs following the implementation of a programme of restructuring initiatives throughout the Group’s

business units.

4 The provision to cover the Group’s onerous property leases was increased by £4.2m last year, of which £2.0m related to the Springwood Drive property and £2.2m to the remaining

three UK onerous property leases.

5 Profit on disposal of the Group’s 25% investment in R.J. Beaumont & Co Pty Ltd.

6 Following the refinancing of the Group’s banking facilities in September 2011, £1.2m of costs relating to the previous banking arrangement have been written off.

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6. Finance income and costs

Finance costs
Interest payable on bank borrowings
Amortisation of costs of raising debt finance
Movement on fair value of derivatives
Discount on property lease provisions

Total finance costs

Finance income
Movement on fair value of derivative financial instruments

Total finance income

Net finance costs

2012
£m

1.4
0.7
0.7
0.3

3.1

—

3.1

s
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m
e
n
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s

2011
£m

1.5
1.2
—
0.7

3.4

(0.2)

3.2

Norcros plc

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Notes to the group accounts
Year ended 31 March 2012
Continued

7. Taxation
Taxation comprises:

Current
UK taxation
Deferred
Origination and reversal of temporary differences

Taxation

2012
£m

0.8

(0.8)

—

The tax for the period under review is different from the standard rate of corporation tax in the UK (26% throughout the period).
The differences are explained below:

Profit before tax
Profit on ordinary activities multiplied by rate of corporation tax in the UK of 26% (2011: 28%)
Effects of:
– over provision in prior years
– income/expenses not chargeable/deductible for tax purposes
– losses not recognised
– recognition of UK losses and capital allowances
– origination and timing differences

Total tax charge

There is no tax impact relating to components of other comprehensive income.

8. Non-GAAP measures

Profit before taxation
Adjusted for:
– exceptional operating items
– amortisation of costs of raising finance
– net movement on fair value of derivative financial instruments
– discount on property lease provisions
– IAS 19 finance income

Underlying profit before taxation

Taxation attributable to underlying profit before taxation

Underlying earnings

2012
£m

9.4
(2.4)

0.3
1.0
(0.9)
1.7
0.3

—

2012
£m

9.4

—
1.9
0.7
0.3
(1.6)

10.7

0.4

11.1

2011
£m

0.8

—

0.8

2011
£m

7.5
(2.1)

—
(0.3)
(0.6)
—
2.2

(0.8)

2011
£m

7.5

1.1
1.2
(0.2)
0.7
(0.1)

10.2

(0.8)

9.4

Underlying profit before taxation is defined as profit before taxation, exceptional items, amortisation of costs of raising finance, movement
on fair value of derivative financial instruments, discounting of property lease provisions and finance costs relating to pension schemes.
The Directors believe that underlying profit before taxation and underlying earnings provide shareholders with additional useful information on
the underlying performance of the Group.

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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 2012 the potential dilutive ordinary shares amounted to 2,383,527 (2011: 116,155) as calculated in accordance with IAS 33.

The calculation of EPS is based on the followings profits and numbers of shares:

Basic and diluted:
– earnings for the year
– underlying earnings for the year (see note 8)

Weighted average number of shares for basic earnings per share
Share options and warrants

Weighted average number of shares for diluted earnings per share

2012
£m

9.4
11.1

2011
£m

6.7
9.4

2012
Number

2011
Number

577,231,925
2,383,527

577,025,912
116,155

579,615,452

577,142,067

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Basic earnings per share
Diluted earnings per share
Basic underlying earnings per share
Diluted underlying earnings per share

10. Share-based payments

Approved Performance Share Plan (APSP)
Save As You Earn Scheme (1) (SAYE)
Save As You Earn Scheme (2) (SAYE)
Save As You Earn Scheme (3) (SAYE)
Save As You Earn Scheme (4) (SAYE)

2012

1.6p
1.6p
1.9p
1.9p

Price
per share

1 April
2011

Granted

Exercised

Lapsed

31 March
2012

Date from
which
exercisable

0.0p
56.5p

67,975
9.3p 4,102,243
9.4p 1,864,246
10.1p

—
— 7,045,037
—
—
— (2,506,492)
—
— 3,001,492

(67,975)
(112,271) 1,483,480
— (338,879) 1,525,367
— (106,929) 2,894,563

— 7,045,037

30.06.14
— 01.03.11
01.03.12
01.03.14
01.03.15

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a

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n
t
s

2011

1.2p
1.2p
1.6p
1.6p

Expiry
date

N/A
31.08.11
31.08.12
31.08.14
31.08.15

Details of the terms of the APSP and SAYE scheme are disclosed in the Remuneration Report.

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 on the Group’s estimate of shares that will eventually vest. A charge of £0.2m was recognised
in respect of share options in the period (2011: £0.1m). 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:

Date of grant
Initial exercise price
Revised exercise price after capital raising adjustment
Number of shares granted initially
Revised number of shares after capital raising adjustment
Expected volatility
Expected option life
Risk free rate
Expected dividend yield

SAYE (2)

SAYE (3)

SAYE (4)

APSP

22.12.08
10.0p
9.3p
4,325,760
4,642,065
69.95%
3 years
4.6%
3%

20.12.10
9.4p
N/A
1,864,296
1,864,296
67.39%
3 years
2.1%
3%

20.12.11
10.1p
N/A
3,001,492
3,001,492
59.53%
3 years
2.0%
3%

01.09.11
0.0p
N/A
7,045,037
7,045,037
65.67%
3 years
2.0%
3%

The share price at 31 March 2012 was 10.0p. The average price during the year was 12.26p. Expected volatility is based on historical volatility
over either the last three years of the construction and materials sector, or the previous three years’ data for the Company where available.

Norcros plc

Annual report and accounts 2012

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Notes to the group accounts
Year ended 31 March 2012
Continued

11. Goodwill

At beginning of the year
Exchange differences

Goodwill is allocated to the Group’s CGUs. A summary of the goodwill allocation is presented below:

Triton Showers
Tile Africa Group

2012
£m

23.9
(0.5)

23.4

2012
£m

19.1
4.3

23.4

2011
£m

23.8
0.1

23.9

2011
£m

19.1
4.8

23.9

The recoverable amount of a CGU is determined by a value-in-use calculation. These calculations use cash flow projections based on financial
forecasts approved by management covering a two-year period with a growth rate of 3% applied in future periods. The key assumption for
the value-in-use calculations are those regarding discount rates, growth rates, future gross margin improvements and cash flows. Discount
rates of 9.0% in the UK and 11.7% in South Africa have been applied depending on the region in which the CGU operates. The discount rate
is 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.

The following sensitivity analysis has been performed:

— increase each CGU discount rate by 1%; and

— reduce future growth rate by 30%.

In each of these scenarios the estimated recoverable value comfortably exceeds the carrying value for the CGU and accordingly
no impairment was identified.

Having assessed the future anticipated cash flows, management believes that any reasonably possible changes in key assumptions would
not result in an impairment of goodwill.

12. Property, plant and equipment

Land and
buildings
£m

Plant and
equipment
£m

Cost
At 1 April 2010
Exchange differences
Additions
Disposals

At 31 March 2011
Exchange differences
Additions
Disposals

At 31 March 2012

Accumulated depreciation
At 1 April 2010
Exchange differences
Charge for the year
Disposals

At 31 March 2011
Exchange differences
Charge for the year
Disposals

At 31 March 2012

Net book amount at 31 March 2011

Net book amount at 31 March 2012

Plant and equipment includes motor vehicles, computer equipment and plant and machinery.

35.3
0.5
0.2
(0.2)

35.8
(1.7)
0.5
(0.9)

33.7

9.3
—
1.0
(0.1)

10.2
(0.2)
1.0
(0.1)

10.9

25.6

22.8

73.9
0.8
7.7
(4.9)

77.5
(3.1)
4.9
(0.5)

78.8

52.9
0.3
5.6
(4.8)

54.0
(2.0)
5.2
(0.4)

56.8

23.5

22.0

Total
£m

109.2
1.3
7.9
(5.1)

113.3
(4.8)
5.4
(1.4)

112.5

62.2
0.3
6.6
(4.9)

64.2
(2.2)
6.2
(0.5)

67.7

49.1

44.8

Norcros plc

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13. Investment properties

Cost
At 31 March 2010, 31 March 2011 and 31 March 2012

Accumulated depreciation
At 1 April 2010
Charge for the year

At 31 March 2011
Charge for the year

At 31 March 2012

Net book amount at 31 March 2011

Net book amount at 31 March 2012

Investment
property
£m

6.3

0.8
—

0.8
0.1

0.9

5.5

5.4

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Investment properties are held at cost and depreciated over 50 years with the exception of land which is not depreciated. The Directors
are of the opinion that the fair value of the investment properties is not significantly different to their carrying value.

14. Inventories

Raw materials
Work in progress
Finished goods

2012
£m

9.9
0.7
34.9

45.5

Provisions held against inventories totalled £2.9m (2011: £3.0m).

The cost of inventories recognised as an expense within cost of sales in the Income Statement amounted to £110.9m (2011: £109.9m).

During the year the Group charged £0.3m (2011: £0.2m) of inventory write-downs to the Income Statement within cost of sales.

15. Trade and other receivables

Trade receivables
Less: provision for impairment of trade receivables

Trade receivables – net
Other receivables
Prepayments and accrued income

2012
£m

33.8
(0.3)

33.5
4.3
2.9

40.7

2011
£m

9.2
0.8
32.3

42.3

2011
£m

36.8
(0.4)

36.4
3.1
3.1

42.6

The fair value of trade receivables does not differ from the book value.

Taking into account the Group’s credit insurance, management believes that no further material provision is required in excess of the normal
provision for impairment of receivables. Trade receivable credit exposure is controlled by credit limits that are set and reviewed by operational
management on a regular basis.

The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:

Sterling
South African Rand
Australian Dollar

Movements on the provision for impairment of trade receivables are as follows:

At beginning of year
Provision for receivables impairment
Receivables written off during the year as uncollectible

At end of year

As at 31 March 2012, trade receivables of £29.6m (2011: £32.1m) were fully performing.

Norcros plc

Annual report and accounts 2012

2012
£m

30.1
9.3
1.3

40.7

2012
£m

0.4
0.2
(0.3)

0.3

2011
£m

34.1
7.4
1.1

42.6

2011
£m

0.7
0.2
(0.5)

0.4

_3_NXR_ar12_Back_[RB_KW].indd 51

27/06/2012 09:19:45

Notes to the group accounts
Year ended 31 March 2012
Continued

15. Trade and other receivables continued
The creation and release of the provision for impaired receivables has been included in administration costs in the Consolidated Income Statement.

Amounts charged to this provision are generally written off when there is no expectation of recovering additional cash.

As of 31 March 2012, trade receivables of £0.3m (2011: £0.4m) were impaired and provided for. The individually impaired receivables were
impaired at 100% of their gross value (2011: 100%). The ageing of these receivables is as follows:

Less than three months
Greater than three months

2012
£m

0.1
0.2

0.3

At 31 March 2012 trade receivables of £3.9m (2011: £4.3m) were past due but not impaired. These relate to a number of independent
customers for whom there is no recent history of default. The ageing analysis of these receivables is as follows:

Up to one month
One to two months
Two to three months
Greater than three months

2012
£m

2.7
0.5
0.1
0.6

3.9

2011
£m

0.1
0.3

0.4

2011
£m

3.3
0.5
0.2
0.3

4.3

The Group maintains a credit insurance policy which significantly limits its exposure to credit risk. The Group does not hold any collateral
as security.

The other categories within trade and other receivables do not contain impaired assets.

16. Cash and cash equivalents

Cash at bank and in hand

Cash at bank and in hand includes the following for the purposes of the Consolidated Cash Flow Statement:

Cash and cash equivalents as above
Less: bank overdrafts (note 18)

2012
£m

2.9

2012
£m

2.9
(0.4)

2.5

2011
£m

7.7

2011
£m

7.7
(3.1)

4.6

Credit risk on cash and cash equivalents is limited as the counterparties are banks with strong credit ratings assigned by international credit
rating agencies.

17. Trade and other payables

Trade payables
Other tax and social security payables
Amounts owed to associates
Other payables
Accruals and deferred income

The fair value of trade payables does not differ from the book value.

2012
£m

30.9
2.1
—
3.5
14.1

50.6

2011
£m

27.1
2.1
0.1
3.6
17.7

50.6

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18. Borrowings

Non-current
Bank borrowings (secured):
– bank loans
– less: costs of raising finance

Total non-current

Current
Bank borrowings (secured):
– bank overdrafts (note 16)

Total borrowings

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:

Not later than one year
After more than one year:
– between one and two years
– between two and five years
– costs of raising finance

Total borrowings

2012
£m

21.0
(0.7)

20.3

0.4

20.7

2012
£m

0.4

—
21.0
(0.7)

20.3

20.7

2011
£m

17.0
(1.8)

15.2

3.1

18.3

2011
£m

3.1

17.0
—
(1.8)

15.2

18.3

Capital risk management
The Group has available a £51.0m committed banking facility which expires in October 2015. This provides the Group with a sound financial
structure for the medium term with £30.0m being available for cash draw down. Under this facility bank borrowings are secured by the
Group’s UK assets.

Interest rate profile
The effective interest rates at the balance sheet dates were as follows:

Bank loans
Overdraft

2012
%

2.2
2.0

2011
%

3.6
3.5

At 31 March 2012 the bank loans carried interest based on LIBOR plus a margin of 1.5% (2011: 3.0%). Overdrafts carry interest at base rate
plus a margin of 1.5% (2011: 3.0%).

Currency profile of net debt
The carrying value of the Group’s net debt is denominated in the following currencies:

Sterling
Euro
South African Rand
Australian Dollar
US Dollar

2012
£m

19.9
0.3
(1.3)
(1.1)
—

17.8

2011
£m

10.3
0.1
(2.7)
3.1
(0.2)

10.6

Norcros plc

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Notes to the group accounts
Year ended 31 March 2012
Continued

19. Derivative financial instruments
During the year the Group held financial instruments for two purposes:

— financial instruments relating to the operations, financing and risks of the Group’s operations; and

— financial instruments relating to the financing and risks of the Group’s bank debt.

The Group’s financial instruments comprise borrowings, cash, trade receivables and payables, cross currency swaps and forward
exchange contracts.

Derivative financial instruments carried at fair value through the Income Statement
2012
£m
Assets

Cross currency swap
Forward foreign exchange contracts

—
—

—

2012
£m
Liabilities

—
(0.4)

(0.4)

2011
£m
Assets

—
0.4

0.4

2011
£m
Liabilities

(1.7)
(0.1)

(1.8)

Forward foreign exchange contracts
The notional principal amounts of outstanding forward foreign exchange contracts at 31 March 2012 were €16.6m and US$24.7m (2011: €12.6m
and US$17.6m).

The hedged forecast transactions denominated in foreign currency are expected to occur at various dates during the next twelve months.
Gains and losses recognised on forward exchange contracts to date have been taken to the Income Statement.

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, hypothetical 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 net debt of £18.5m (excluding amortised finance costs) the effect of a 1% change in market interest rates would be
approximately £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.
A 5% strengthening of Sterling across all currencies would lead to a £2.3m devaluation in net assets. Likewise a 5% weakening in Sterling
would lead to a £2.5m increase in net assets.

The Group’s profits and losses are exposed to both translational and transactional risk of fluctuations in foreign currency risk. The Group
seeks to hedge the majority of its transactional risk using forward foreign exchange contracts. After taking these hedges into account the
effect of a 5% strengthening in both Sterling and South African Rand against all other currencies would be an increase in profits of £0.5m.
Likewise a 5% weakening in both these currencies would lead to a £0.5m reduction in profits.

20. 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.

The main rate of corporation tax was reduced from 28% to 26% from 1 April 2011. A further reduction to 25% from 1 April 2012 was
substantively enacted on 5 July 2011.

A further announcement was made in the 2012 Budget on 21 March 2012 that the rate would reduce to 24% with effect from 1 April 2012. This
rate reduction was substantively enacted on 26 March 2012 and the deferred tax asset at 31 March 2012 has been re-measured accordingly.

This announcement also included provisions to reduce the main rate of corporation tax by further 1% reductions per annum to 22% by 1 April 2014.
The changes had not been substantively enacted at the balance sheet date and therefore are not recognised in these financial statements.

The overall effect of the further reductions from 24% to 22%, if these applied to the deferred tax balances at 31 March 2012, would
be to reduce the deferred tax asset by £0.5m (being £0.3m expected to be recognised in 2013 and £0.2m in 2014).

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20. Deferred tax continued
Deferred tax is calculated in full on temporary differences under the liability method. The movement on the deferred tax account
is as shown below:

Deferred tax asset at the beginning of the year
Credited to the Income Statement
Credited/(debited) to Statement of Comprehensive Income

Deferred tax asset at the end of the year

Accelerated capital allowances
Tax losses
Other timing differences
Deferred tax asset relating to pension deficit

The full potential asset/(liability) for deferred tax is as follows:

Accelerated capital allowances
Other timing differences
Net deferred tax asset relating to pension assets/deficits
Tax losses
Advanced corporation tax asset

2012
£m

2.2
0.8
3.4

6.4

2012
£m

0.6
1.1
0.2
4.5

6.4

2012
£m

1.6
1.4
4.3
18.1
5.0

30.4

21. Provisions

At 1 April 2010
Charged/(credited) to the Income Statement
Amortisation of discount
Utilisation

At 31 March 2011
Charged to the Income Statement
Amortisation of discount
Utilisation

At 31 March 2012

Warranty
provision
£m

Restructuring
provision
£m

UK property
provision
£m

South Africa
property
provision
£m

1.1
1.1
—
(1.1)

1.1
1.3
—
(1.1)

1.3

0.4
0.8
—
(0.5)

0.7
0.8
—
(1.2)

0.3

12.6
4.2
0.7
(4.4)

13.1
—
0.3
(9.7)

3.7

1.9
(0.5)
—
(1.0)

0.4
—
—
(0.3)

0.1

2011
£m

2.6
—
(0.4)

2.2

2011
£m

—
—
0.4
1.8

2.2

2011
£m

(1.4)
2.2
1.4
20.8
5.0

28.0

Total
£m

16.0
5.6
0.7
(7.0)

15.3
2.1
0.3
(12.3)

5.4

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 has been recognised for expected liabilities arising from re-organisations and company disposals. This is expected
to be utilised within twelve months of the balance sheet date.

The UK and South African property provisions have been recognised for expected liabilities arising from lease shortfalls on surplus Group
properties and so future expenditure is expected to be spread over several years.

22. Retirement benefit obligations
(a) Pension costs
Norcros Security Plan
The Norcros Security Plan, the principal UK pension scheme of Norcros plc subsidiaries, is funded by a separate trust fund. It is predominantly
a defined benefit scheme, with a modest element of defined contribution benefits. Norcros plc itself has no employees and so has no liabilities
in respect of these pension schemes.

South Africa defined benefit schemes
The Group previously operated two separate defined benefit schemes for the benefit of the Group’s South African employees. These were
the TAL Pension Fund and the Johnson Tiles Pension Fund. Both schemes were closed during the financial year 2007/08 and replaced by
defined contribution schemes.

Defined contribution pension schemes
Contributions made to these schemes amounted to £1.1m (2011: £1.0m).

Norcros plc

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Notes to the group accounts
Year ended 31 March 2012
Continued

22. Retirement benefit obligations continued
(b) IAS 19, ‘Retirement benefit obligations’
Norcros Security Plan
The valuation used for IAS 19 disclosures has been based on the most recent actuarial valuation at 31 March 2010 and updated by Mercer
Human Resource Consulting, a firm of qualified actuaries, to take account of the requirements of IAS 19 in order to assess the liabilities of
the scheme at 31 March 2012. Scheme assets are stated at their market value at 31 March 2012.

South Africa defined benefit schemes
The actuarial valuations of the Group’s South African defined benefit pension schemes, carried out in March 2005, have been updated
by Alexander Forbes Financial Services to take account of the requirements of IAS 19. The schemes were closed during the financial
year 2007/08 and replaced with defined contribution schemes. Following the agreement of the allocation of surplus assets, the surplus
was partially recovered in 2012 with the remaining £0.6m surplus due to be recovered in the forthcoming years.

(i) The principal assumptions used to calculate the scheme liabilities of the Norcros Security Plan under IAS 19 are:

Discount rate
Inflation rate (RPI)
Inflation rate (CPI)
Increase to deferred benefits during deferment (non-GMP liabilities)
Increases to pensions in payment (other than pre-1988 GMP liabilities)
Salary increases

2012
Projected
unit

4.95%
3.20%
2.20%
3.20%
3.20%
3.45%

2011
Projected
unit

5.50%
3.40%
2.70%
3.40%
3.40%
3.65%

The mortality assumptions are based on standard mortality tables which allow for future mortality improvements. The assumptions are that
a member who retires in 2012 at age 65 will on average live for a further 20.4 years (2011: 20.3 years) after retirement if they are male and
23.2 years (2011: 23.1 years) if they are female.

(ii) The amounts recognised in the Income Statement are as follows:

Included in operating profit:
Current service cost
Past service credits

Included in IAS 19 finance income:
Interest cost
Expected return on plan assets

Total amounts recognised in the Income Statement

(iii) The amounts recognised in the balance sheet are determined as follows:

Equities
– Norcros Security Plan
Absolute return funds – Norcros Security Plan
– Norcros Security Plan
Bonds
– Norcros Security Plan
Cash and gilts
– other

Total market value of scheme assets
Present value of scheme liabilities

Pension deficit

Comprising:
– Norcros Security Plan
– other

Deficit in schemes

Long-term
rate of return
expected at
31 March
2012
%

7.25%
7.25%
4.95%
3.10%
—

Value at
31 March
2012
£m

77.1
142.0
99.0
49.5
0.6

368.2
(386.3)

(18.1)

(18.7)
0.6

(18.1)

2012
£m

1.5
—

1.5

19.8
(21.4)

(1.6)

(0.1)

Long-term
rate of return
expected at
31 March
2011
%

7.69%
7.69%
5.50%
4.19%
—

2011
£m

1.3
(0.4)

0.9

20.1
(20.2)

(0.1)

0.8

Value at
31 March
2011
£m

81.4
135.1
73.1
72.3
1.4

363.3
(368.9)

(5.6)

(7.0)
1.4

(5.6)

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22. Retirement benefit obligations continued
(b) IAS 19, ‘Retirement benefit obligations’ continued
(iv) The movement on scheme deficit in the year is as follows:

Deficit at the beginning of the year
Employer contributions – normal contributions

– deficit recovery plan

Pension holiday taken on South African defined contribution scheme
Past service credits
Currency translation adjustments
Current service cost
Interest cost
Expected return on scheme assets
Actuarial (loss)/gain

Deficit at the end of the year

(v) The reconciliation of scheme assets is as follows:

Opening fair value of scheme assets
Employer contributions – normal contributions

– deficit recovery plan

Employee contributions
Pension holiday taken on South African defined contribution scheme
Expected return on scheme assets
Benefits paid
Actuarial gain on scheme assets
Plan settlements
Currency translation

Closing fair value of scheme assets

(vi) The reconciliation of scheme liabilities is as follows:

Opening scheme liabilities
Current service cost
Employee contributions
Interest cost
Actuarial loss
Benefits paid
Past service curtailment/credits

Closing fair value of scheme liabilities

(vii) Amounts for the current period and previous four periods are as follows:

Fair value of scheme assets
Present value of defined benefit obligations

(Deficit)/surplus in the scheme
Experience adjustment on scheme assets
Experience loss on scheme liabilities

2012
£m

368.2
(386.3)

(18.1)
3.1
—

2011
£m

363.3
(368.9)

(5.6)
5.0
—

2010
£m

354.8
(362.9)

(8.1)
57.1
(5.9)

(viii) Amounts recognised in the Statement of Comprehensive Income are as follows:

Actuarial (loss)/gain
Deferred tax

Norcros plc

Annual report and accounts 2012

2012
£m

(5.6)
1.2
1.0
(0.6)
—
(0.2)
(1.5)
(19.8)
21.4
(14.0)

(18.1)

2012
£m

363.3
1.2
1.0
0.8
(0.6)
21.4
(21.8)
3.1
—
(0.2)

368.2

2012
£m

(368.9)
(1.5)
(0.8)
(19.8)
(17.1)
21.8
—

(386.3)

2009
£m

300.2
(298.4)

1.8
(79.6)
—

2012
£m

(14.0)
3.4

(10.6)

2011
£m

(8.1)
1.1
1.0
—
0.4
0.1
(1.3)
(20.1)
20.2
1.1

(5.6)

2011
£m

354.8
1.1
1.0
0.7
—
20.2
(19.0)
5.0
(0.6)
0.1

363.3

2011
£m

(362.9)
(1.3)
(0.7)
(20.1)
(3.9)
19.0
1.0

(368.9)

2008
£m

375.8
(365.4)

10.4
(19.1)
—

2011
£m

1.1
(0.4)

0.7

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Notes to the group accounts
Year ended 31 March 2012
Continued

23. Called up share capital

Issued and fully paid
579,832,604 (2011: 577,326,112) ordinary shares of 1p each
Nil (2011: 148,754,684) deferred shares of 9p each

2012
£000

5,798
—

5,798

2011
£000

5,773
13,388

19,161

The Company issued 2,506,492 1p ordinary shares to members of an SAYE scheme whose options became exercisable during the year
(see note 10). Following the July 2011 AGM the Company repurchased its 148,754,684 9p deferred shares for a nominal value.

Warrant instruments
In 2010 the Company executed a warrant instrument in favour of its principal banks over 5% of its fully diluted ordinary share capital
excluding any shares issued as part of a capital raising. Following a capital raising in the same year these warrants now represent 8,642,612
ordinary shares (1.49% of the issued ordinary share capital) at 31 March 2012. The warrants are exercisable at 8.97p per share at any time up
to July 2017. Under IAS 33, warrants only dilute earnings per share to the extent that their fair value exceeds their cost. As at 31 March 2011
the fair value of these warrants was below their cost and they were therefore not included in the diluted earnings per share calculation;
however, at 31 March 2012 these warrants had the effect of increasing the quantity of shares used to calculate diluted earnings per share
by 681,297 (see note 9).

24. Consolidated cash flow statements
(a) Cash generated from operations

Profit before taxation
Adjustments for:
– exceptional items included in the Income Statement
– cash flows from exceptional costs
– depreciation
– difference between pension charge and contributions
– (profit)/loss on disposal of property, plant and equipment
– finance costs
– finance income
– other finance income
– share-based payments

Operating cash flows before movement in working capital
Changes in working capital:
– increase in inventories
– decrease/(increase) in trade and other receivables
– increase in trade and other payables

Cash generated from operations

2012
£m

9.4

—
(11.1)
6.3
(0.7)
(0.4)
4.3
—
(1.6)
0.2

6.4

(5.9)
2.1
3.4

6.0

2011
£m

7.5

1.1
(5.9)
6.6
(0.8)
0.1
3.4
(0.2)
(0.1)
0.1

11.8

(4.2)
(4.2)
7.4

10.8

(b) Outflow related to exceptional items
This includes expenditure charged to exceptional provisions relating to onerous lease costs and business rationalisation and restructuring
including severance and other employee costs.

At 1 April 2010
Cash flow
Other non-cash movements
Exchange movement

At 31 March 2011
Cash flow
Other non-cash movements
Exchange movement

At 31 March 2012

Net
cash
£m

1.1
3.6
—
(0.1)

4.6
(1.7)
—
(0.4)

2.5

Net
debt
£m

(17.0)
3.0
(1.2)
—

(15.2)
(4.0)
(1.1)
—

(20.3)

Total
£m

(15.9)
6.6
(1.2)
(0.1)

(10.6)
(5.7)
(1.1)
(0.4)

(17.8)

Other non-cash movements relate to an increase in transaction costs of £0.8m (2011: £nil) following the refinancing of bank debt in September
2011 less amortisation charged for the year of £1.9m (2011: £1.2m).

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25. Dividends
A final dividend in respect of the year ended 31 March 2011 of £1.4m (0.24p per share) was paid in August 2011 and an interim dividend of
£0.8m (0.14p per share) was paid in January 2012. A final dividend in respect of the year ended 31 March 2012 of £1.6m (0.28p per share)
is to be proposed at the Annual General Meeting on 26 July 2012. These financial statements do not reflect this final dividend.

26. Capital and other financial commitments
(a) Capital commitments

Contracts placed for future capital expenditure not provided in the financial statements

(b) Operating lease commitments

Total commitments under operating leases:
– not later than one year
– later than one year and not later than five years
– later than five years

Total future sub-lease payments receivable relating to the above operating leases amounted to £1.6m (2011: £3.1m).

The above operating lease commitments are analysed as:

Equipment:
– not later than one year
– later than one year and not later than five years
– later than five years
Land and buildings:
– not later than one year
– later than one year and not later than five years
– later than five years

2012
£m

1.4

2012
£m

6.5
17.6
20.9

45.0

2012
£m

1.3
2.5
0.2

5.2
15.1
20.7

45.0

2011
£m

0.3

2011
£m

8.6
26.9
26.0

61.5

2011
£m

1.0
1.7
0.1

7.6
25.2
25.9

61.5

(c) Operating leases receivable
The Group leases certain of its investment properties to third parties. The total future minimum lease payments receivable are analysed below:

Total commitments under operating leases:
– not later than one year
– later than one year and not later than five years
– later than five years

2012
£m

0.7
3.0
1.4

5.1

2011
£m

0.9
2.9
2.1

5.9

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Notes to the group accounts
Year ended 31 March 2012
Continued

27. Related party transactions
The following transactions were carried out with related parties:

(a) Purchases of goods and services

Purchases of goods:
– associates
– Prism Cement Limited

2012
£m

—
1.5

1.5

Goods are purchased on normal commercial terms and conditions.

Dividends of £0.7m (2011: £0.2m) were paid to Lifestyle Investments PVT Limited which owns 29.79% of the Company’s issued share
capital. This company is owned by Prism Cement Limited, a company of which Vijay Aggarwal is a director.

Key management and Directors’ compensation is disclosed in note 4.

(b) Year end balances arising from sales/purchases of goods and services

Payables to related parties (note 17):
– associates
– Prism Cement Limited

2012
£m

—
(0.3)

2011
£m

2.1
0.4

2.5

2011
£m

(0.1)
—

28. Contingent liabilities
The Company’s material UK subsidiaries have entered into a guarantee and debenture which effectively means that all of their assets, property
or otherwise, and undertakings are charged in favour of the security agent acting on behalf of the lending banks to the Company.

29. Principal subsidiaries
The principal Group subsidiaries are disclosed below. Transactions between subsidiaries and between the Parent Company and its
subsidiaries are eliminated on consolidation.

UK
— Norcros Group (Holdings) Limited

Overseas
— Johnson Tiles (Pty) Limited* (incorporated in Australia)

— Norcros SA (Pty) Limited* trading as Johnson Tiles (Pty) Limited, TAL and TAF (incorporated in South Africa)

* The Group interest is owned by Group companies other than Norcros plc.

Notes

Unless otherwise stated, all companies are 100% owned and all UK companies are incorporated and operate in Great Britain and are
registered in England. Overseas companies operate in the countries in which they are incorporated.

Only those subsidiary undertakings whose results principally affect the financial statements of the Group are included above.

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Independent auditors’ report
To the members of Norcros plc

We have audited the Parent Company financial statements of Norcros plc for the year ended 31 March 2012 which comprise the Parent
Company Balance Sheet and the related notes. The financial reporting framework that has been applied in their preparation is applicable
law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

Respective responsibilities of Directors and auditors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 33, the Directors are responsible for the preparation
of the Parent Company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and
express an opinion on the Parent Company financial statements in accordance with applicable law and International Standards on Auditing
(UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the Parent Company financial statements sufficient to give
reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the Parent Company’s circumstances and have been consistently applied
and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of
the financial statements. In addition, we read all the financial and non-financial information in the Chairman’s Statement, Business Review,
Corporate Governance Statement and the Remuneration Report to identify material inconsistencies with the audited financial statements.
If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements
In our opinion the Parent Company financial statements:

— give a true and fair view of the state of the Parent Company’s affairs as at 31 March 2012;

— have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

— have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matters prescribed by the Companies Act 2006
In our opinion:

— the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and

— the information given in the Directors’ Report for the financial year for which the Parent Company financial statements are prepared

is consistent with the Parent Company financial statements.

Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to 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 in agreement 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.

Other matter
We have reported separately on the Group financial statements of Norcros plc for the year ended 31 March 2012.

Martin Heath (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Manchester
21 June 2012

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Parent company balance sheet
At 31 March 2012

Fixed assets

Investments

Creditors: amounts falling due within one year

Other

Net current liabilities

Total assets less current liabilities

Creditors: amounts falling due after more than one year

Borrowings – bank and other loans

Net assets

Financed by:

Share capital

Share premium account

Profit and loss account

Total shareholders’ funds

Notes

2012
£m

2011
£m

177.3

(6.5)

170.8

(20.3)

150.5

5.8

0.2

144.5

150.5

(7.2)

170.1

(15.2)

154.9

19.2

86.8

48.9

154.9

The financial statements on pages 62 to 65 were approved on 21 June 2012 and signed on behalf of the Board by:

N. P. Kelsall
Group Chief Executive

M. K. Payne
Group Finance Director

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Notes to the parent company accounts
Year ended 31 March 2012

1. Statement of accounting polices
Norcros plc prepares its financial statements on the going concern basis under the historical cost basis of accounting with the exception
of share-based payments which are measured at fair value at the date of grant and in accordance with both applicable Accounting Standards
in the UK and the Companies Act 2006. A summary of the more important accounting polices which have been applied consistently is set
out below.

Accounting reference date
The Company’s year end is stated as 31 March.

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. Dividends received 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. Exchange gains
and losses are dealt with in arriving at the 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
of economic benefits is more likely than not to occur.

Profit and loss account
A separate profit and loss account dealing with the results of the Company has not been presented as permitted by Section 408 of the
Companies Act 2006.

Cash flow statement
As the Group prepares consolidated financial statements, the Company is exempt from publishing a cash flow statement under FRS 1
(revised 1996).

Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the financial statements in the period in which the
dividends are approved by the Company’s shareholders or when paid if earlier.

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, if any, in the
Income Statement, with a corresponding adjustment to equity.

Related parties
Related party disclosures are made in the Group accounts under note 27.

2. Other information
Other than the Directors, who receive no emoluments from the Parent Company, the Company has no employees. Details of the
Directors’ emoluments can be found in note 4 of the Group accounts.

Auditors’ remuneration of £3,000 (2011: £4,000) is borne by the Company’s subsidiary.

3. Investments

At 1 April 2011 and 31 March 2012

Shares in
subsidiaries
£m

177.3

The Company owns 100% of the share capital of Norcros Group (Holdings) Limited, a company incorporated in England and Wales.
The principal activities of the subsidiary are to act as an intermediate holding company and a manufacturer and distributor of showers,
tiles and adhesives.

Details of the principal operating subsidiaries indirectly owned by the Company are shown in note 29 of the Group accounts.

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Notes to the parent company accounts
Year ended 31 March 2012
Continued

4. Borrowings

Loans and bank overdrafts – secured
Costs of raising finance

Repayable after more than one year:
– between one and two years
– between two and five years
– costs of raising finance

2012
£m

21.0
(0.7)

20.3

—
21.0
(0.7)

20.3

2011
£m

17.0
(1.8)

15.2

17.0
—
(1.8)

15.2

Loans and bank overdrafts are secured on the Group’s UK assets and principally carry interest based on LIBOR. Bank loans are repayable
on expiry of the current banking arrangements in October 2015.

5. Creditors – amounts falling due within one year

Amounts owed to Group undertakings
Other creditors

2012
£m

5.9
0.6

6.5

2011
£m

6.3
0.9

7.2

Amounts owed to Group undertakings are unsecured, interest free and repayable on demand.

6. Deferred tax
No deferred tax has been recognised in the financial statements as the Company does not believe that utilisation of these losses is probable
in the near future.

The full potential asset for deferred taxation is as follows:

Tax losses

7. Called up share capital

Issued and fully paid
579,832,604 (2011: 577,326,112) ordinary shares of 1p each
Nil (2011: 148,754,684) deferred shares of 9p each

2012
£m

6.3

2012
£m

5,798
—

5,798

2011
£m

6.9

2011
£m

5,773
13,388

19,161

The Company issued 2,506,492 1p ordinary shares to members of an SAYE scheme whose options became exercisable during the year
(see note 10 in the Group accounts). Following the July 2011 AGM the Company repurchased its 148,754,684 9p deferred shares for a
nominal value.

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8. Reconciliation of movement in shareholders’ funds

At beginning of year
Purchase of own shares
Capital re-organisation
Shares issued in the year
Loss for the year
Dividends paid

At end of year

Share
capital
£m

19.2
(13.4)
—
—
—
—

5.8

Capital
redemption
reserve
£m

—
13.4
(13.4)
—
—
—

—

Share
premium
account
£m

86.8
—
(86.8)
0.2
—
—

0.2

Profit
and loss
account
£m

48.9
—
100.2
—
(2.4)
(2.2)

144.5

Total
£m

154.9
—
—
0.2
(2.4)
(2.2)

150.5

9. Dividends
A final dividend in respect of the year ended 31 March 2011 of £1.4m (0.24p per share) was paid in August 2011 and an interim dividend
of £0.8m (0.14p per share) was paid in January 2012. A final dividend in respect of the year ended 31 March 2012 of £1.6m (0.28p per share)
is to be proposed at the Annual General Meeting on 26 July 2012. These financial statements do not reflect this final dividend.

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10. Contingent liabilities
The Company has entered into a guarantee and debenture which effectively means that all of its assets, property or otherwise, and
undertakings are charged in favour of the security agent acting on behalf of the lending banks to the Company.

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11. Financial risk management objectives and policies
A description of the Group’s financial risk management policies are provided in the Directors’ Report on page 23. These objectives and
policies also apply to the Company.

12. Share-based payments
The grants and related accounting treatment adopted by Norcros plc under FRS 20, ‘Share-based payments’ are identical to those adopted
by the Group under IFRS 2, ‘Share-based payments’. For details refer to note 10 in the Group accounts.

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Notice of annual general meeting

Notice is given that the 2012 Annual General Meeting of the Company will be held at 11.00 am on 26 July 2012 at Ladyfield House, Station
Road, Wilmslow, Cheshire SK9 1BU for the purpose of considering and, if thought fit, passing the resolutions set out below. Resolutions 1
to 9 (inclusive) below will be proposed as ordinary resolutions and resolutions 10 to 12 (inclusive) below will be proposed as special resolutions.

To receive the audited accounts and the auditors’ and Directors’ Reports for the year ended 31 March 2012.

2. To approve the Board’s Remuneration Report for the financial year ended 31 March 2012.

3. To declare a final dividend of 0.28p per ordinary share.

4. To elect Martin Towers as a Director.

5. To re-elect John Brown as a Director.

6. To re-elect Nick Kelsall as a Director.

To re-appoint PricewaterhouseCoopers LLP as auditors.

8. To authorise the Directors to determine the auditors’ remuneration.

That the Directors be and they are hereby generally and unconditionally authorised pursuant to Section 551 of the Companies Act 2006
to exercise all 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 this authority are shares
with an aggregate nominal value of £3,826,895 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 Services 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)

(c)

(d)

this authority shall expire 18 months after the passing of this resolution or, if earlier, on the conclusion of the Company’s
next Annual General Meeting;

the Company may make any offer or agreement before such expiry which would or might require shares to be allotted
or Allotment Rights to be granted after such expiry; and

all authorities vested in the Directors on the date of the notice of this Meeting to allot shares or to grant Allotment Rights
that remain unexercised at the commencement of this meeting are revoked.

10.

That the Directors are empowered pursuant to Section 570 of the Companies Act 2006 to allot equity securities, as defined in Section 560
of that Act, pursuant to the authority conferred on them by resolution 9 in the notice of this Meeting or by way of a sale of treasury
shares as if Section 561 of that Act did not apply to any such allotment, provided that this power is limited to:

(a)

the allotment of equity securities in connection with any rights issue or open offer (each as referred to in the Financial Services
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 on the register on any fixed record date in proportion to their holdings of ordinary shares (and,
if applicable, to the holders of any other class of equity security 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 or practical problems in relation to any territory
or the requirements of any regulatory body or any stock exchange; and

(b)

the allotment of equity securities (other than pursuant to paragraph (a) above) with an aggregate nominal value of £289,916,

and shall expire when the authority conferred on the Directors by resolution 9 in the notice of this Meeting expires, save that,
before the expiry of this power, the Company may make any offer or agreement which would or might require equity securities
to be allotted after such expiry.

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11.

That the Company is generally and unconditionally authorised pursuant to Section 701 of the Companies Act 2006 to make market
purchases (as defined in Section 693 of that Act) of ordinary shares of 1p each in its capital, provided that:

(a)

the maximum aggregate number of such shares that may be acquired under this authority is 57,983,260;

(b)

the minimum price (exclusive of expenses) that may be paid for such a share is its nominal value;

(c)

(d)

(e)

the maximum price (exclusive of expenses) that may be paid for such a share is the maximum price permitted under the Financial
Services Authority’s listing rules or, in the case of a tender offer (as referred to in those rules), 5% above the average of the middle
market quotations for an ordinary share (as derived from the London Stock Exchange’s Daily Official List) for the five business
days immediately preceding the date on which the terms of the tender offer are announced;

this authority shall expire 18 months after the passing of this resolution or, if earlier, on the conclusion of the Company’s next
Annual General Meeting; and

before such expiry, the Company may enter into a contract to purchase shares that would or might require a purchase
to be completed after such expiry.

12.

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.

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By order of the Board

D. W. Hamilton
Director and Company Secretary
21 June 2012

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Registered office:
Ladyfield House
Station Road
Wilmslow
Cheshire SK9 1BU

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Notice of annual general meeting
Continued

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.

The right of a member of the Company to 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 of 1p each (“ordinary shares”) by 6.00 pm on
24 July 2012 in order to be entitled to attend and vote at the meeting as a member in respect of those shares.

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, as amended. 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. 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. Forms for the appointment of a proxy that can be used for this purpose
have been provided to members with this Notice of Annual General Meeting. To be valid, a proxy appointment form must be completed
in accordance with the instructions that accompany it and then be delivered (together with any power of attorney or other authority
under which it is signed, or a certified copy of such item) to Capita Registrars, Proxy Department at The Registry, 34 Beckenham Road,
Beckenham, Kent BR3 4TU so as to be received by 11.00 am on 24 July 2012. Alternatively, a member may appoint a proxy online by
following the instructions for the electronic appointment of a proxy at www.capitashareportal.com. If you have not previously registered
to use this facility you will require your investor code which can be located on the enclosed proxy form. In order to be a valid proxy
appointment, the member’s electronic message confirming the details of the appointment completed in accordance with those
instructions must be transmitted so as to be received by the same time. Members who hold their shares in uncertificated form may
also use the CREST voting service to appoint a proxy electronically, as explained below. Appointing a proxy will not prevent a member
from attending and voting in person at the meeting should he so wish.

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, as amended, (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.

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 placed on the
Company’s website: www.norcros.com.

As at 19 June 2012 (being the latest practicable date prior to the printing of this document), (i) the Company’s issued share capital
consisted of 579,832,604 ordinary shares carrying one vote each and (ii) the total voting rights in the Company were 579,832,604.

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, as amended, 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, as amended,
to publish on a website in advance of the meeting may be viewed at www.norcros.com. A member may not use any electronic
address provided by the Company in this document or with any proxy appointment form or in any website for communicating with
the Company for any purpose in relation to the meeting other than as expressly stated in it.

It is possible that, pursuant to members’ requests made in accordance with Section 527 of the Companies Act 2006, as amended,
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 members concerned to pay its expenses in complying with those sections. The Company must forward
any such statement to its auditors 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.

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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 & Ireland 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 Capita Registrars
(ID RA10), as the Company’s “issuer’s agent”, by 11.00 am on 24 July 2012. 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) Capita Registrars 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, if the 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 providers 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.

10.

Please note that the Company takes all reasonable precautions to ensure that no viruses are present in any electronic communication
which it sends, but the Company does not accept responsibility for any loss or damage arising from the opening or use of any email
or attachment sent by the Company and the Company recommends that members subject all emails and attachments to virus checking
procedures prior to opening or use. Any electronic communication received by the Company or Capita Registrars (including the
lodgement of an electronic proxy form) which is found to contain any virus will not be accepted.

11.

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 Annual General Meeting for at least 15 minutes prior to and
during the meeting.

12.

Information regarding this meeting, including information required by Section 311A of the Companies Act 2006, is available
at www.norcros.com.

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Explanatory notes

The Annual General Meeting of the Company will take place at 11.00 am on 26 July 2012 at Ladyfield House, Station Road, Wilmslow,
Cheshire SK9 1BU. The Notice convening that meeting, together with the resolutions to be proposed, appears on pages 66 to 67 of this
document. 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, and consider 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:

Resolution 1
Report and accounts
For each financial year, the Directors are required to present the audited accounts, the auditors’ report and the Directors’ Report to
shareholders at a general meeting.

Resolution 2
Approval of the Remuneration Report
The Company is required by law to seek the approval of shareholders of its Annual Report on remuneration policy and practice. This does
not affect the Directors’ entitlement to remuneration and the result of this resolution is advisory only.

The Remuneration Report for the year ended 31 March 2012 is set out in full on pages 29 to 32 of this document. Any shareholder who
would like a copy of the Annual Report and Accounts 2012 can obtain one by contacting our registrar on 0871 664 0300. Alternatively,
the Annual Report and Accounts 2012 can be viewed on our website at www.norcros.com.

Your Directors are satisfied that the Company’s policy and practice in relation to Directors’ remuneration are reasonable and that they
deserve shareholder support.

Resolution 3
Dividend
The payment of the final dividend requires the approval of shareholders in general meeting. If the meeting approves resolution 3, the final
dividend of 0.28p per ordinary share will be paid on 31 July 2012 to ordinary shareholders who are on the register of members on 29 June 2012
in respect of each ordinary share.

Resolution 4
Election of Martin Towers
It is proposed that Martin Towers be elected as a Director.

Brief biographical details of Martin can be found on page 20. The other Directors unanimously recommend that Martin be elected as a Director.

Resolution 5
Re-election of John Brown
Under the Company’s Articles of Association, a Director must retire from office (and may offer himself for re-election) at the third Annual General
Meeting following his appointment or last appointment by members at a general meeting. John Brown (who was last re-appointed at the 2009
Annual General Meeting) will therefore retire at the 2012 Annual General Meeting and offers himself for re-appointment via resolution 5.

Brief biographical details of John can be found on page 20. The other Directors unanimously recommend that John be re-elected
as a Director of the Company and the Board confirms that, following performance evaluation, John’s performance continues
to be effective and he demonstrates commitment to the role.

Resolution 6
Re-election of Nick Kelsall
Under the Company’s Articles of Association, a Director must retire from office (and may offer himself for re-election) at the third Annual
General Meeting following his appointment or last appointment by members at a general meeting. Nick Kelsall (who was last re-appointed
at the 2009 Annual General Meeting) will therefore retire at the 2012 Annual General Meeting and offers himself for re-appointment via
resolution 6.

Brief biographical details of Nick can be found on page 20. The other Directors unanimously recommend that Nick be re-elected as a Director
of the Company and the Chairman confirms that, following performance evaluation, Nick’s performance continues to be effective and he
demonstrates commitment to the role.

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Resolution 7
Re-appointment of auditors
The Company is required to appoint auditors at each general meeting before which accounts are laid, to hold office until the end of the
next such meeting. PricewaterhouseCoopers LLP have indicated that they are willing to continue as the Company’s auditors for another
year. You are asked to re-appoint PricewaterhouseCoopers LLP and, following normal practice, to authorise the Directors to determine
their remuneration. The Directors recommend their re-appointment.

Resolution 8
Remuneration of auditors
The resolution follows best practice in giving authority to the Directors to determine the remuneration of the Company’s auditors.

Resolution 9
Power to allot shares
Most listed companies renew their directors’ authority to issue shares at each annual general meeting. Such an authority was granted
at last year’s Annual General Meeting and is due to expire on 27 October 2012 or, if earlier, at the conclusion of the next Annual General
Meeting of the Company. In accordance with best practice, this resolution seeks to renew the Directors’ authority to allot shares.

Resolution 9, if passed, will renew the Directors’ authority to allot shares in the capital of the Company up to a maximum aggregate nominal
value of £3,826,895 (representing 382,689,518 ordinary shares). This represents the Association of British Insurers’ (ABI) guideline limit of
approximately two thirds of the Company’s issued ordinary share capital as at 19 June 2012 (being the latest practicable date prior to the
publication of this document). Of this amount, ordinary shares to an aggregate nominal value of £1,913,448 (representing 191,344,759 ordinary
shares which is approximately one third of the Company’s issued ordinary share capital as at 19 June 2012 (being the latest practicable date
prior to the publication of this document)), can only be allotted pursuant to a rights issue.

As at 19 June 2012 (being the latest practicable date prior to the publication of this document), the Company did not hold any shares
in the Company in treasury. The renewed authority will remain in force until 18 months after the passing of this resolution or, if earlier,
at the conclusion of the next Annual General Meeting in 2013.

The Directors have no present intention of exercising this authority. The purpose of giving the Directors this authority is to maintain
the Company’s flexibility to take advantage of any appropriate opportunities that may arise.

Resolution 10
Disapplication of pre-emption rights
The Directors are currently authorised to issue securities of the Company for cash without first offering them to existing shareholders in
proportion to their existing shareholdings. That authority will expire on 27 October 2012 or, if earlier, at the conclusion of the next Annual
General Meeting of the Company and, in accordance with best practice, this resolution (which will be proposed as a special resolution)
seeks to renew the Directors’ authority to disapply pre-emption rights.

Other than in connection with a rights or other similar issue or scrip dividend (where difficulties arise in offering shares to certain overseas
shareholders and in relation to fractional entitlements), the authority contained in this resolution will be limited to an aggregate nominal
value of £289,916, which represents 28,991,630 ordinary shares and is approximately 5% of the Company’s issued ordinary share capital
as at 19 June 2012 (being the latest practicable date prior to the publication of this document)). The renewed authority will remain in
force until 18 months after the passing of this resolution or, if earlier, at the conclusion of the next Annual General Meeting in 2013.

In accordance with the Statement of Principles on disapplying pre-emption rights issued by the Pre-Emption Group (which is supported by
the Association of British Insurers, the National Association of Pension Funds Limited and the Investment Managers Association), the Board
confirms its intention that no more than 7.5% of the issued share capital will be issued for cash on a non pre-emptive basis during any
rolling three year period.

Resolution 11
Authority to purchase own shares
This resolution, which will be proposed as a special resolution, is a resolution which the Company proposes to seek on an annual basis,
in line with other listed companies in the UK, to give the Company authority 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 57,983,260
ordinary shares which have an aggregate nominal value of £579,833 (representing approximately 10% of the aggregate nominal value
of the issued ordinary share capital of the Company as at 19 June 2012 (being the latest practicable date prior to the publication of
this document)) and sets minimum and maximum prices. The renewed authority will remain in force until 18 months after the passing
of this resolution or, if earlier, at the conclusion of the next Annual General Meeting in 2013.

Norcros plc

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Resolution 11 continued
Authority to purchase own shares continued
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 for the benefit 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.

As at 19 June 2012 (being the latest practicable date prior to the publication of this document), there were warrants and options over
21,591,059 ordinary shares in the capital of the Company, which represent, in aggregate, approximately 3.7% of the Company’s issued
ordinary share capital. If the authority to purchase the Company’s ordinary shares was exercised in full, these options and warrants would
represent approximately 4.1% of the Company’s issued ordinary share capital. As at 19 June 2012 (being the latest practicable date prior
to the publication of this document), the Company did not hold any shares in treasury.

Resolution 12
Notice of general meeting
This special resolution is required in order to preserve the ability of the Company to convene general meetings (other than Annual General
Meetings) of the Company on not less than 14 clear days’ notice, rather than the 21 days’ notice which would otherwise be required under
the Companies (Shareholders’ Rights) Regulations 2009 (Regulations). In order to preserve this ability, the Company’s shareholders must
have approved the calling of such meetings on not less than 14 clear days’ notice. Resolution 12 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.
The Company will also need to meet the requirements for electronic proxy submission under the Regulations before it can call a general
meeting on such notice.

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Ladyfield House
Station Road
Wilmslow
Cheshire SK9 1BU

www.norcros.com

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27/06/2012 09:21:09