Norcros Plc Annual Report 2013

FY2013 Annual Report · Norcros Plc

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Annual report and accounts
2013

About Norcros
Focused on
showers, taps,
bathroom
accessories,
tiles and
adhesives

We have four complementary UK
businesses: Triton Showers, Vado,
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.

Our divisions

South Africa

Rest of the world

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 35
showrooms located mainly in South Africa
but also in Namibia and Botswana

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

Vado
Vado is a leading manufacturer and global
distributor of bathroom controls including
taps, mixer showers, bathroom accessories
and valves

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

Full review on pages 8 & 9

Full review on pages 10 & 11

Full review on pages 12 & 13

Highlights

Fourth consecutive year of revenue and underlying operating
proﬁt growth

Group revenue increased by 5.2% to £210.7m (2012: £200.3m)

Group underlying operating proﬁt of £13.0m (2012: £12.1m)
was 7.4% higher than the prior year

South Africa returned to proﬁt

Vado acquisition on 31 March 2013 – ﬁrst step in a faster
and focused growth strategy

The Board is recommending that the ﬁnal dividend for the
year be increased by 8.9% to 0.305p per share in addition
to the interim dividend of 0.155p per share making a 9.5%
increase on the previous year

Revenue
(£m)

6
9
6
1

2
4
5
1

Underlying operating proﬁt
(£m)

Dividends per share
(p)

1
.
6
9
1

3
0
0
2

7
0
1
2

£210.7m

0
3
1

£13.0m

.
1
1

1
.
2
1

+5.2%

0
7

3
7

+7.4%

2
4
0

6
3
0

6
4
0

0.46p

+9.5%

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Contents

Our objectives and strategy
Our long-term plan for growth
and how we measure it
pages 2 & 3

Our ﬁnancial performance
Read a full review of our
ﬁnancial year
pages 14–17

How we deal with risk
A comprehensive overview of our
risk management procedures
pages 18 & 19

Corporate responsibility
See how we achieve our goals
to be a responsible business
pages 20 & 21

Review of the year

IFC About Norcros

Highlights

Group accounts

Independent auditors’ report

38 Consolidated income statement

2 Our objectives and strategy

38 Consolidated statement of comprehensive

Chairman’s statement

Business review

14 Financial review

Corporate governance

Operational risk management

20 Corporate social responsibility

Directors and officers

Advisers and company information

Financial calendar

24 Directors’ report

Corporate governance

30 Directors’ remuneration report

Statement of directors’ responsibilities

income and expense

Consolidated balance sheet

40 Consolidated cash ﬂow statement

Consolidated statement of changes in equity

42 Notes to the group accounts

Parent company accounts

66 Independent auditors’ report

Parent company balance sheet

68 Notes to the parent company accounts

Notice of annual general meeting

Explanatory notes

Norcros plc Annual report and accounts 2013

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Overview
Our objectives
and strategy

Pursue a faster and
focused growth
strategy to scale
up the size of the
Group organically
and by acquisition.

Norcros enjoys market leading positions
and well established brands in showers,
taps, bathroom accessories, tiles and
adhesives. With its strong balance sheet
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

Pursue a faster and focused growth strategy to scale up
the size of the Group organically and by acquisition

Maintain investment in our strong brands and new
product development

Leverage revenue synergies within our portfolio
of complementary businesses

Target acquisitions in complementary markets
with attractive returns on capital

Continue to ensure high standards of corporate
governance and responsibility

Key strategic targets

Double Group revenue by 2018

Maintain approximately 50% of Group revenue derived
outside the UK

Achieve a sustainable underlying return on capital
employed of 12–15%

Key performance indicators

Revenue
(£m)

1
.
6
9
1

3
0
0
2

6
9
6
1

2
4
5
1

Group revenue outside the UK
(%)

7
0
1
2

£210.7m

4
8
4

8
8
4

6
9
4

0
9
4

0
8
4

48.0%

+5.2%

-1.0%

Norcros plc Annual report and accounts 2013

Acquisition of Vado

In March 2013 we completed the acquisition of 100% of
the share capital of Eurobath International Ltd trading
as Vado. Vado is a leading manufacturer and global
distributor of bathroom controls including taps, mixer
showers, bathroom accessories and valves, with strong
brands and a product offering positioned at the mid to
high end segment of its target markets. Whilst UK revenue
represents 55% of total revenue, one of the key strengths
of Vado is its global distribution network which contributes
the remaining 45% of total revenue. Vado exports to over
60 countries, most notably in the Middle East and Africa
where it has a particularly strong presence.

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The Vado geo tap was selected for the Presidential Suite of
the JW Marriott Marquis Hotel, Dubai, the world’s tallest hotel

Underlying operating proﬁt
(£m)

Underlying return on capital employed
(%)

Dividends per share
(p)

0
3
1

£13.0m

1
.
2
1

.
1
1

5
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1

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2
1

12.6%

0
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3
7

+7.4%

7
7

9
6

+0.3%

2
4
0

6
3
0

6
4
0

0.46p

+9.5%

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Norcros plc Annual report and accounts 2013

Overview
Chairman’s
statement

With our leading brands and market
positions, high quality and innovative
products, strong customer relationships,
talented people and successful self-help
initiatives, together with the acquisition of
Vado, the Board is conﬁdent that the Group
is well placed to make further progress.

Martin Towers Chairman

Summary

Fourth consecutive year of revenue and underlying operating
proﬁt growth

Group revenue increased by 5.2% to £210.7m (2012: £200.3m)

Group underlying operating proﬁt of £13.0m (2012: £12.1m)
was 7.4% higher than the prior year

South Africa returned to proﬁt

Vado acquisition on 31 March 2013 – ﬁrst step in a faster
and focused growth strategy

Norcros plc Annual report and accounts 2013

During the year the Board has reviewed the Group’s
strategy, and has concluded that a faster and focused
growth strategy to scale up the size of the Group
organically and by acquisition should be pursued.

In what has been a challenging year, I am
pleased to report another strong performance
by Norcros in the year to 31 March 2013.
The Group has achieved its fourth consecutive
year of growth in both revenue and underlying
operating proﬁt despite tough markets
and signiﬁcant energy cost increases, with
South Africa having returned to proﬁtability
this year.

During the year the Board has developed its
strategy for the Group, which is to continue
to grow through organic means but also
through targeted acquisitions that complement
the Group’s existing proﬁtable brands, product
portfolio, and markets. The acquisition
of Eurobath International Ltd. (“Vado”) in
March 2013 is the ﬁrst step in implementing
this vision, and the Board believes Vado is
an excellent ﬁt with the Group and its strategy.

With clear strategic vision and continued
progress, the Group is in a strong ﬁnancial
position as it enters a new and exciting
phase of its development.

Results and ﬁnancial position
Group revenue for the year increased by 5.2%
to £210.7m (2012: £200.3m) representing a
10.2% increase on a constant currency basis.

Underlying operating proﬁt of £13.0m
(2012: £12.1m) was 7.4% higher than prior
year, with operating margins also ahead
at 6.2% (2012: 6.0%).

Underlying proﬁt before taxation was 9.3%
higher at £11.7m (2012: £10.7m) driven by
higher underlying operating proﬁts and
lower ﬁnancing costs.

An exceptional operating charge of £4.4m
(2012: £nil) has been made in the year
principally reﬂecting a £3.0m provision
increase relating to our three remaining
legacy property leases and Vado acquisition
costs of £0.9m.

Proﬁt before tax was 6.4% higher at £10.0m
(2012: £9.4m), with higher underlying proﬁt
before tax and non-cash interest credits
offset by an increased exceptional charge.

Basic underlying earnings per share were
maintained at 1.9p (2012: 1.9p) with an
increase in underlying proﬁt before tax
offset by an increased effective tax rate
on underlying proﬁt as the shelter from
the Group’s tax losses reduced in the year.
Basic earnings per share as reported
were also maintained at 1.6p (2012: 1.6p).

Net cash generated from operations was
£6.6m (2012: £6.0m) and included a £7.7m
increase in working capital primarily to
support new business gained by Johnson
Tiles UK with B&Q, whilst prior year net cash
generated from operations was impacted
by the £7.8m buyout of the Group’s legacy
property lease obligation at Springwood
Drive in May 2011. Capital expenditure at
£6.7m (2012: £6.7m) included new sorting,
packaging and palletising equipment in
Johnson Tiles South Africa, continued
investment in tooling for new product in
Triton Showers, and the freehold purchase
of a new store at Klerksdorp together with
other store upgrades as part of the normal
store improvement programme in our
South African retailer, Tile Africa. This
ongoing store improvement programme
also gave rise to disposal proceeds of £2.5m

(2012: £nil) in the year following the sale
of certain freehold sites in Tile Africa.

Closing net debt at £30.7m (2012: £17.8m)
included the net cash outﬂow of £10.6m
associated with the acquisition of Vado and
increased working capital requirements in
Johnson Tiles UK referred to earlier. Leverage
as measured by net debt to EBITDA (including
a full year of Vado EBITDA on a pro-forma basis)
was 1.4 times, with all banking covenants
met with appropriate headroom.

Strategy
During the year the Board has reviewed the
Group’s strategy and has concluded that a
faster and focused growth strategy to scale
up the size of the Group organically and by
acquisition should be pursued. The Board
believes the implementation of this strategy
will enhance shareholder value as well as
rebalance the value of the Group as against
its pension scheme liability.

Organic growth will continue to be
driven by capitalising on our leading market
positions in the UK and South Africa. Our
strategic initiatives will ensure we maintain
the provision of innovative new product
programmes, excellent customer service
and investment in our brand portfolio. We
will also reinforce our “designed and built
in Britain” credentials as well as capture the
growth opportunities in South Africa and
sub-Saharan Africa, where medium term
growth rates are likely to be higher than the
more developed markets. We will continue
to drive faster revenue growth in our existing
export markets and develop new emerging
export opportunities.

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Norcros plc Annual report and accounts 2013

Overview
Chairman’s
statement
continued

Strategy continued
The strengths and characteristics of our
recently acquired Vado business perfectly
dovetail with all these initiatives and we
will seek to realise the exciting revenue
synergies that Vado will bring to the Group.

Acquisitions will be targeted at complementary
market and industry segments exhibiting
attractive returns on capital which are likely
to be bathroom and kitchen products with
exposure to commercial and speciﬁcation
segments. The recent acquisition of Vado
represents a ﬁrst step in this approach.

The Board has set itself three strategic
targets. These are to double Group revenue
by 2018, to maintain revenue derived outside
of the UK at approximately 50% of Group
revenue, and to sustain an underlying return
on capital employed of 12% to 15% over the
economic cycle.

Acquisition
On 31 March 2013 the Group completed
the acquisition of 100% of the share capital
of Vado, a private family owned business,
for an initial cash consideration of £11.0m
plus debt and debt-like items assumed as
part of the transaction of approximately
£0.9m, and further payments of up to
£4.1m in total depending upon the future
ﬁnancial performance of Vado. The Board
expects the acquisition to be earnings
enhancing immediately.

Vado is a leading UK-based manufacturer of
taps, mixer showers, bathroom accessories
and valves, with strong brands and a product
offering positioned both in the UK and
internationally at the mid to high end segment
of its target markets. The acquisition is an
important step in supporting and accelerating
the Group’s growth strategy and is an
excellent ﬁt with the Group’s existing
products and market positions.

For the year ended 31 December 2012,
Vado’s audited results showed revenue of
£25.6m, EBITDA of £2.5m and proﬁt before
tax of £2.1m.

The acquisition was funded by a £19m
increase to the Group’s existing banking
facility, taking the Group’s overall committed
credit facilities from £51m to £70m on
existing terms.

Pension
The Group’s UK deﬁned beneﬁt pension
scheme was closed to future accrual on
31 March 2013 and replaced with a new auto
enrolment compliant deﬁned contribution
scheme. Closure to future accrual is a key
step in de-risking the pension scheme,
preventing the build-up of future liabilities.

The UK deﬁned beneﬁt pension scheme
deﬁcit calculated under IAS19 increased
to £30.0m (2012: £18.7m). Although asset
values continued to increase, liabilities
increased further driven by a signiﬁcant
reduction in the discount rate.

Surplus property
The Group is pleased to report that planning
consent for the proposed development at
Highgate Park, Tunstall has been obtained.
The approved plans for the site include a food
store and petrol station which as previously
announced is subject to a conditional sale
contract with Optimisation Developments Ltd.,
a subsidiary of WM Morrison Supermarkets plc,
(“Morrisons”) for gross proceeds of £8.25m
and net proceeds of £2.6m. It is now expected
that the sale contract with Morrisons will
become unconditional by the end of
August 2013. A further update will be
provided at the appropriate time.

Norcros plc Annual report and accounts 2013

Progress in our South African businesses has been
encouraging, with both strong revenue growth and a
return to overall proﬁtability achieved in the year.

In addition to the food store and petrol
station, the approved planning consent also
includes a number of non-food retail and
restaurant/leisure units, which the Group
will now actively market to prospective
tenants to generate incremental returns,
although it is too early to comment on
the likely proceeds and timing.

Dividend
The Board is recommending that the ﬁnal
dividend for the year be increased by 8.9%
to 0.305p per share. When added to the
interim dividend of 0.155p per share which
was paid on 8 January 2013 this will make
the total dividend for the year 0.46p per share,
a 9.5% increase on the previous year. This ﬁnal
dividend, if approved at the Annual General
Meeting, will be payable on 30 July 2013 to
shareholders on the register on 28 June 2013.
The shares will be quoted ex-dividend on
26 June 2013.

Board changes
As announced separately, John Brown,
Senior Independent Director and Chairman
of the Audit Committee, has notiﬁed the
Board of his intention to retire at the AGM
on 24 July 2013. David McKeith will join the
Board as Senior Non-Executive Director and
Chairman of the Audit Committee at the AGM.

David Hamilton, Executive Director and
Company Secretary, has also notiﬁed the
Board of his intention to retire from the Board
at the same AGM. Richard Collins has been
appointed Company Secretary as of 3 June
2013 although in line with best practice he
will not be appointed to the Board as an
Executive Director.

On behalf of the Board I wish both John
and David well for the future, and I look
forward to working with David and Richard
in their new roles.

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

Summary and outlook
Whilst our South African and Australian
businesses have traded in line with
expectations in the ﬁrst two months of
the current year, demand in our UK markets
has been weaker than expected reﬂecting the
unseasonally cold weather and destocking by
key customers. Early action has been taken
to mitigate the impact of this and of higher
energy costs and weaker exchange rates,
including a cost reduction programme at
Johnson Tiles UK which could involve up to
75 redundancies. It is expected that this will
result in an exceptional charge in the region
of £1.5m in the current year, with the resultant
savings being more heavily weighted to the
second half of the ﬁnancial year.

The integration of the Vado business is
progressing well. Although there is no
contribution from Vado in these results,
the business has maintained its strong
momentum post acquisition largely reﬂecting
outperformance in its export markets which
historically have accounted for 45% of
total revenue.

We have continued to invest in our businesses
through this protracted economic downturn
and succeeded in growing market share,
revenue and proﬁt. We will continue to
apply this successful formula alongside an
enhanced growth strategy including targeted
acquisitions that complement the Group’s
current main businesses and markets. With
our leading brands and market positions,
high quality and innovative products, strong
customer relationships, talented people and
successful self-help initiatives, together with
the acquisition of Vado which will provide
further synergy opportunities, the Board is
conﬁdent that the Group is well placed to
make further progress.

M. Towers
Chairman
13 June 2013

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Norcros plc Annual report and accounts 2013

Business review
United Kingdom

New product
innovation is a
continuing feature
of the Triton
business, and the
new stylish Touch
electric shower,
which was launched
to the trade in
March 2013, has
been very well
received.

Strong revenue growth in Johnson Tiles
was offset by lower revenue at the more
proﬁtable Triton Showers and, with continued
energy cost increases, resulted in a 4.8%
reduction in underlying operating proﬁt
to £11.9m (2012: £12.5m), a resilient
performance given the challenging
market conditions.

Nick Kelsall Group Chief Executive

Summary

Share of Group revenue

UK revenue (£m)

58%

103.7

94.6

9
4
4

2
7
4

6
2

8
4

6
.
1
5

114.0 116.8

122.8

4
5
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1
.

5
5

1
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4

1
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9
5

6
3
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4
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3
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1
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1
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£122.8m

+5.1%

Total
Norcros Adhesives
Johnson Tiles
Triton

Revenue increased in the year by 5.1% to
£122.8m (2012: £116.8m). Strong revenue
growth in Johnson Tiles was offset by lower
revenue at the more proﬁtable Triton Showers
and, with continued energy cost increases,
resulted in a 4.8% reduction in underlying
operating proﬁt to £11.9m (2012: £12.5m).
Although this represents a reduced margin
of 9.7% (2012: 10.7%), it nevertheless was a
resilient performance given the challenging
market conditions.

Triton Showers
Triton, the UK market leading domestic
shower business, continued to gain market
share in the UK market, but with a declining
UK market and continued tough conditions
in the Irish market, revenue for the year was
4.6% lower at £51.1m (2012: £53.6m).

In the UK, revenue for the year was 3.5%
lower than prior year but ahead of the market.
This represented a much stronger second
half performance with revenue only 0.7%
lower despite a subdued February and
March performance in the retail sector
driven by the poor weather conditions
impacting footfall in store. Both trade and
retail sector revenues declined by similar
amounts in the year, but market share
gains were made in both segments.

Export revenue, which represents
approximately 14% of overall revenue, was
10.9% lower compared to prior year but
again represents a much stronger second
half performance, being only 1.0% lower.
The primary export market for Triton is Ireland
and, although lower than last year, this is a
respectable result given the general economic
conditions in this market.

Performance of the Triton T80z Fast Fit
range since its launch in the fourth quarter
of the previous year has been pleasing
having been extremely well received by
installers and the trade sector. 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. New
product innovation is a continuing feature
of the Triton business, and the new stylish
Touch electric shower, which was launched
to the trade in March 2013, has been very
well received. As the name indicates the
product uses touch control technology,
a new feature for Triton electric showers.

With lower revenues in the year, underlying
operating proﬁts were also lower, although
further cost reduction initiatives and tight
overhead control helped maintain strong
proﬁtability and cash generation.

Norcros plc Annual report and accounts 2013

Johnson Tiles is just
the ticket for new-look
Blackfriars Station

Colour is crucial when it comes to identifying lines on
the London tube map – and so the £600m re-build of
Blackfriars Station had to reﬂect the vital colour connection
travellers make every day.

Thanks to a successful partnership between Johnson Tiles
and Craven Dunnill Jackﬁeld, passengers will now instantly
identify the District and Circle Line in the station through a
distinctive tile combination in the bespoke London Underground
colours of cream and blue – a speciﬁcation which will form
the theme for future upgrades of the line.

The Johnson Tiles and Craven Dunnill Jackﬁeld partnership
remains a powerful combination, taking the very best of
both companies and offering bespoke project solutions . We
are proud to be a major part of this important project which
will beneﬁt London commuters for generations to come.

Andrew Sadler
Trade Sales Manager, Johnson Tiles

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
13.8% to £67.3m (2012: £59.1m).

In the UK revenue grew by 16.8% with
strong growth in the retail sector more
than offsetting a decline in the trade sector.
Market share gain in the DIY multiples
sector was driven largely by B&Q which
has implemented a major tile range review
and introduced a new in-store tile shop.
Implementation of this new concept involved
us increasing our stockholding by £6.6m
and delivering over 12 million boxes of
tiles and 34,000 POS display boards in a
three-month period. Our success in this
project is testament to the excellent logistics
capabilities and strong customer and supplier
relationships the business has built. The UK
social housing market has declined further
in the year with Government spending cuts
constraining activity, although we continue to
hold our strong market share in this sector
with signiﬁcant projects completed in the
period including the MOD in Tidworth, the
Foreign Office, as well as Decent Homes
programmes in Leeds, Edinburgh and
South Wales.

Increased focus on growing our private
sector speciﬁcation business is continuing
to progress well. Architects and interior
designers recognise our strong product offer
backed up by Material Lab, our London-based
architects and designer centre, our highly
knowledgeable sales team, and quality service.
Notable successes in the year include further
work with Marks and Spencer, Premier Inn,
Costa Coffee, Radisson Edwardian Hotels
and John Lewis.

Export revenue, which represents
approximately 9% of overall revenue,
declined 9.3%. Growth was seen in most
regions during the year, but sales to the
Middle East fell as a result of large projects
in the prior year in Kuwait and Qatar not
being repeated in the current year.

Manufacturing performance was signiﬁcantly
improved in the year, with the problems
following installation of the new kiln in
March 2011 fully resolved. However, energy
prices rose a further 14% in the year and
continue to constrain ﬁnancial performance
and, despite increased revenue, underlying
operating proﬁts were marginally lower
than prior year.

Norcros Adhesives
Norcros Adhesives, our manufacturer
and supplier of tile and stone adhesives
and ancillary products, saw revenue grow
by 7.1% in the year to £4.4m (2012: £4.1m).
Growth in the second half was stronger,
helped in part by new business won following
the exit of a competitor from the UK market.

New product introductions during the year
include wet room wall boarding and ﬂoor
proﬁles, together with a high performance
two-part levelling screed. These latest
additions to the range now enable Norcros
Adhesives to offer the professional ﬁxer
one-stop sourcing of tile adhesives, screeds
and ancillary products.

Investment in new products and continued
investment in sales and marketing in order
to drive further growth have left underlying
operating proﬁt at a similar level to last year.

Norcros plc Annual report and accounts 2013

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Business review
South Africa

All three businesses within the South African
group recorded double-digit constant
currency revenue growth. An overall
underlying operating proﬁt for the year of
£1.0m (2012: £0.5m loss) marks the return
to proﬁt for our South African operations.

Summary

Share of Group revenue

South Africa revenue (£m)

37%

72.4

74.0

59.0

52.6

4
5
3

0
2
1

0
5

3
0
4

3
1

6
6

8
4

0
7
1

7
7
4

1
.

8
1

77.6

.
1
1

9
6
4

4
9
1

£77.6m

+4.8%

Total
Johnson Tiles
South Africa
Tile Africa
TAL Adhesives

TAL supplies adhesives
to Soweto Theatre

TAL is proud to be associated with the Soweto Theatre
in Jabulani for which it supplied various products to install
almost 7000m² of glazed stoneware tiles.

The company issued a materials and methods speciﬁcation
for the facade cladding, which entailed ﬁxing glazed
stoneware tiles in a mosaic format.

We required guarantees on the tile adhesive, which TAL was
able to provide as they supplied installation instructions and
conducted regular site inspections.

Tatenda Mavunga
Architect, Afritects

Norcros plc Annual report and accounts 2013

Another strong year of growth in our South
African business saw revenue 19.3% higher
on a constant currency basis and 4.8% higher
on a reported basis at £77.6m (2012: £74.0m).
The average exchange rate for Sterling to
Rand for the year was 14% weaker at SAR13.37
(2012: SAR11.77). All three businesses within
the South African group recorded double-
digit constant currency revenue growth,
and Johnson Tiles South Africa has made
signiﬁcant operational improvements in the
year, although a 26% rise in energy costs
has limited some of the ﬁnancial beneﬁts
of this improvement. Nonetheless, an overall
underlying operating proﬁt for the year of
£1.0m (2012: loss of £0.5m) marks the return
to proﬁt for our South African operations.

Johnson Tiles South Africa
Johnson Tiles South Africa continued to
beneﬁt from a number of key successes
in the retail sector with independent sector
revenue increasing 56.9% on a constant
currency basis and 37.7% on a reported
basis to £11.3m (2012: £8.2m).

Further gains in the DIY sector have been
achieved as we continue our successful
strategy of importing ceramic tile products
to complement our own manufactured
product to create a “one-stop shop” for larger
retailers, particularly Builders Warehouse.

The operational improvements in Johnson
Tiles South Africa noted last year have
continued and further progress made this
year with signiﬁcantly better quality, higher
throughput and reduced downtime leading
to a 16.0% increase in production volumes.
New sorting, packaging and palletising
equipment was successfully installed in
September 2012, and further improvements
to planned maintenance and operating
practices yielded further efficiencies.
Energy costs were, however, 26% higher
than prior year and held back the ﬁnancial

beneﬁt of this improved manufacturing
performance. Notwithstanding this, the
business recorded a signiﬁcantly reduced
loss in the year.

TAL Adhesives
TAL, our market leading adhesives business in
South Africa, saw independent sector revenue
grow 22.3% on a constant currency basis and
7.5% on a reported basis to £19.4m (2012:
£18.1m), driven by continued market share
growth both inside and outside of South Africa.
This growth has helped mitigate margin
pressure from competition which continues
to be challenging, and in conjunction with
continued cost control and formulation
improvements, has helped TAL produce
another proﬁtable and cash generative year.

Within South Africa, the ability to offer a full
tiling solution on a single truck to our major
retail customers by combining tile and adhesive
deliveries has helped drive improved sales
and cost efficiencies. To further build on
this “one-stop” strategy, Tilemate, a range of
tile tools has been successfully launched in
the period and further initiatives are underway
to add to this portfolio of products.

Exports have again shown good growth
off the back of new distribution agreements
signed in the year in both Southern and
Eastern Africa and have grown 39% in
constant currency terms in the period,
now representing nearly 10% of total
independent sector revenue.

In November 2012, we sold the business
and assets of Nortec, TAL’s small but loss
making industrial adhesives business, to
Permoseal Pty Ltd. Nortec revenue for the
year was £1.9m (2012: £3.9m) and an
exceptional charge of £0.4m reﬂects the
net loss on sale. Excluding Nortec, year on
year constant currency growth in TAL was
41% compared to the 22.3% noted above.

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Tile Africa
Tile Africa, our leading retailer of wall and
ﬂoor tiles, adhesive, showers, sanitaryware
and bathroom ﬁttings, saw revenue increase
11.7% on a constant currency basis but
reduce 1.8% on a reported basis to £46.9m
(2012: £47.7m). Continued enhancement
of the product offering and availability
has driven revenue higher despite
market conditions being challenging.

Tile Africa currently has 29 owned stores
and six franchises. Continual assessment
and focus on underperforming stores is a
normal ongoing part of running any retail
business successfully. Senior management
identiﬁes underperforming stores and then
works proactively to improve performance,
relocate, or close stores. In the past year we
successfully relocated the Paarden Eiland
store and are in the process of relocating
our Klerksdorp store. Our Germiston store
has now been completely refurbished in
the year, leaving 21 of our owned stores
fully refurbished, and this programme
continues to be rolled out across most of
the remaining store network. We have
also closed two underperforming stores at
Fourways and N1 City. These two closures
as well as the Klerksdorp relocation involved
the sale of freehold sites which generated a
proﬁt on disposal of £1.2m (2012: £0.4m).

We expect to secure two new sites in
the current year with the stores becoming
operational in the next ﬁnancial year. In
line with our Group strategy of growing our
geographical footprint, Tile Africa will look
to use its strongly performing contracts
division to spearhead this growth, with the
opening of a contracts office being planned
for East Africa in the year to March 2015.

Norcros plc Annual report and accounts 2013

Business review
Rest of the World

The Johnson Tiles Australia business
was proﬁtable in the year and remains in
a strong position to capitalise on further
opportunities in its markets.

Summary

Share of Group revenue

Rest of the World revenue
(£m)

7
9

5
9

3
0
1

£10.3m

9
7

0
7

+8.8%

Rising Angels

Norcros Adhesives manufactures a comprehensive range of
adhesives, grouts, surface preparation and aftercare products
for ﬁxing ceramic and porcelain tiles, mosaics, natural stone
and marble. The extended open time of Norcros One Part
Flexible White adhesive enabled the ﬁxers at Rowles & Co to
cope with the intricate design of the “Rising Angels” mosaic
at Phoenix Court on Bond Street, Bristol, with minimal
wastage. The high polymer content of both the adhesive
and Stop Mould Flexible Grout makes both products perfect
for external use and able to withstand the unpredictable
British weather.

We are able to provide a tiling solution to suit most situations.
Technical advice and site visits are available to all our
customers together with a bespoke NBS M40 speciﬁcation
writing service. This ensures that the correct products are used
on every installation, all covered by our lifetime guarantee.

Mandy Searle
Head of Technical Services, Norcros Adhesives

Norcros plc Annual report and accounts 2013

Australia
Johnson Tiles Australia saw revenue in the
year increase 8.8% to £10.3m (2012: £9.5m)
or 9.3% higher on a constant currency basis.
General conditions in the Australian economy
have improved in the year, driven by the
resources and mining sector, leading to a
12.8% increase in building approvals following
reductions in the two previous years. Revenue
also beneﬁted from upgrades and new stores
openings by Bunnings, a major Australian
retail customer. Furthermore, in October 2012
a new contract to supply Bunnings New
Zealand was won, with product being supplied
to 22 stores.

In March 2013 the business and assets of
One Stop Tiles Pty Ltd were acquired. One
Stop Tiles has two retail stores in Tasmania
and the acquisition of these assets should
provide good growth opportunities in a market
where we have been under-represented.

The Johnson Tiles Australia business was
proﬁtable in the year with underlying operating
proﬁt maintained at £0.1m (2012: £0.1m)
and remains in a strong position to capitalise
on further opportunities in its markets.

General conditions
in the Australian
economy have
improved in the
period, driven
by the resources
and mining sector,
leading to a 12.8%
increase in
building approvals

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Norcros plc Annual report and accounts 2013

Business review
Financial review

Group underlying return on capital
employed rose to 12.6% (2012: 12.3%) and
continues to exceed our cost of capital.

Martin Payne Group Finance Director

Summary

Group revenue increased by 5.2% to £210.7m (2012: £200.3m)

Group underlying operating proﬁt of £13.0m (2012: 12.1m)
was 7.4% ahead of the prior year

Group underlying return on capital employed was 12.6%
(2012: 12.3%)

Working capital outﬂow increased to £7.7m (2012: £0.4m)
to support new business gained with B&Q

Net debt was £30.7m (2012: £17.8m) including a £10.6m
outﬂow on 31 March 2013 to acquire Vado

Revolving credit facility increased from £51.0m to £70.0m
on the same commercial terms

Norcros plc Annual report and accounts 2013

The Group recorded increases in revenue in its UK
businesses of 5.1% and increases on a constant currency
basis in South Africa of 19.3% and in Australia of 9.3%.

Key cash ﬂow components and movement in Group net debt

Cash ﬂow from operations

Net interest paid

Taxation

Free cash ﬂow available for investment

Issue of share capital

Capital expenditure

Disposal proceeds

Acquisitions

Dividends

Other items including foreign exchange
and amortised ﬁnancing costs

Movement in net debt

Opening net debt

Closing net debt

2013
£m

6.6

(1.3)

(1.0)

4.3

0.3

(6.7)

2.5

(10.6)

(2.5)

(0.2)

(12.9)

(17.8)

2012
£m

6.0

(1.6)

(0.6)

3.8

0.2

(6.7)

—

(2.2)

(2.3)

(7.2)

(10.6)

(30.7)

(17.8)

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Revenue
Group revenue increased on a reported
basis by 5.2% or by £10.4m to £210.7m
(2012: £200.3m). The underlying increase on
a constant currency basis was 10.2% reﬂecting
the translation impact of the South African
Rand and Australian Dollar against Sterling.
The Group recorded increases in revenue in
its UK businesses of 5.1% and increases on
a constant currency basis in South Africa
of 19.3% and in Australia of 9.3%.

Underlying operating proﬁt
Underlying operating proﬁt increased by
7.4% to £13.0m (2012: £12.1m). Our UK
businesses delivered underlying operating
proﬁts of £11.9m against £12.5m with the
beneﬁt of revenue growth in Johnson Tiles
being offset by lower revenue at the more
proﬁtable Triton Showers and higher energy
costs. Our South African businesses
returned to proﬁtability with an underlying
operating proﬁt of £1.0m compared to a
underlying operating loss of £0.5m last year.
The beneﬁt of operational improvements
made over the last two years in Johnson
Tiles South Africa has contributed to this
result, although somewhat constrained
by higher energy costs, but continued
improvements in TAL and Tile Africa have
also had an impact. In Australia trading
proﬁt of £0.1m is consistent with the
performance in 2012. Group underlying
operating proﬁt margins improved to 6.2%
(2012: 6.0%).

Exceptional items and operating proﬁt
Exceptional items at £4.4m (2012: £nil)
include a £3.0m increase in provisions for
the Group’s legacy property leases. The
Group has three remaining legacy leasehold
properties which are not actively used by
Group operating businesses. The increased
provision has been necessary in light of the
Group’s view of the likely costs (net of any
future rental income) which will be incurred
over the remainder of the lease tenure.

Norcros plc Annual report and accounts 2013

Business review
Financial review
continued

Underlying
proﬁt before
tax was £11.7m
(2012: £10.7m)
reﬂecting the
increased underlying
operating proﬁt
and reduced
ﬁnance costs

Triton’s new Touch shower.

Exceptional items and operating proﬁt
continued
The remaining charge covers acquisition
related expenses of £0.9m in respect of Vado,
net costs of £0.3m resulting from the disposal
of the small non-core Nortec business
previously operated by the Group’s South
African adhesives business and £0.2m
of other restructuring costs.

Operating proﬁt for the year was £8.6m
(2012: £12.1m).

Net ﬁnance costs
Net ﬁnance costs decreased to £0.8m
(2012: £3.1m) driven by a £1.6m favourable
variance in respect of the movement on fair
value of derivatives and lower amortisation
of costs of raising debt ﬁnance following
the reﬁnancing in September 2011. Bank
interest payable of £1.3m (2012: £1.4m) was
lower than prior year and reﬂects a full year
of improved terms also following the
September 2011 reﬁnancing.

IAS19 ﬁnance income of £2.2m (2012: £1.6m)
relates to the Group’s UK deﬁned beneﬁt
pension scheme and reﬂects the net of
expected rates of return on pension scheme
assets and expected interest pension
scheme liabilities.

underlying operating proﬁt and reduced
ﬁnance costs noted above.

The Group reported proﬁt before tax
of £10.0m (2012: £9.4m).

Taxation
The taxation charge of £0.9m (2012: £nil)
represents an effective tax rate of 9% (2012: nil)
and is lower than the standard rate primarily
because of the recognition in the year of certain
South African deferred tax assets now that
our South African businesses are ﬁrmly in proﬁt.
Details of the tax charged in the year are
provided in note 7 to the ﬁnancial statements.

Earnings per share
Underlying earnings per share amounted
to 1.9p (2012: 1.9p). Basic earnings per share
was 1.6p (2012: 1.6p).

Dividends
As previously announced it is the Board’s
intention to continue 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 0.305p per share, which, together with
the interim dividend of 0.155p, makes a
total dividend of 0.46p in respect of
the year ended 31 March 2013.

A charge of £1.2m for exceptional ﬁnance
costs was made in 2012 relating to the
immediate write-off of unamortised ﬁnance
costs from the previous banking facility which
was superseded by the September 2011
facility agreement.

Pension schemes
The Group contributed £3.2m (2012: £2.2m)
into its UK deﬁned beneﬁt pension scheme
during the year. This included an additional
contribution of £2.0m (2012: £1.0m) as part
of the 2012 deﬁcit recovery plan.

Proﬁt before tax
Underlying proﬁt before tax was £11.7m
(2012: £10.7m) reﬂecting the increased

The total charge in respect of deﬁned
beneﬁt schemes to operating expenses
in the Consolidated Income Statement
was £1.3m (2012: £1.5m).

Norcros plc Annual report and accounts 2013

Key performance indicators

Foreign currency translation

Revenue

Underlying operating proﬁt*

Underlying proﬁt before tax

Underlying diluted earnings
per share – pence

2013
£m

210.7

13.0

11.7

2012
£m

Change
%

200.3

+5.2%

South African Rand

12.1

10.7

+7.4%

Australian Dollar

+9.3%

Euro

US Dollar

1.9p

—

Averare rate vs £
2013

2012

Closing rate vs £
2013

2012

13.37

1.54

1.23

1.58

11.77

1.53

1.16

1.60

13.93

12.26

1.46

1.18

1.52

1.54

1.20

1.60

Underlying return on capital employed**

12.6%

12.3%

+0.3%

Cash generated from operations

Net debt

6.6

(30.7)

6.0

+10.0%

(17.8)

+72.5%

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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 above sets out
the relevant exchange rates used.

The movement in average exchange rates
compared to 2012 had the effect of reducing
2012 reported Group revenue by £9.0m but
had no material effect on Group underlying
operating proﬁt.

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 2013 and 2012
are shown above.

N. P. Kelsall
Group Chief Executive

M. K. Payne
Group Finance Director

The gross deﬁned beneﬁt pension scheme
valuation on the UK scheme showed a deﬁcit
of £30.0m compared to a deﬁcit of £18.7m
last year. The higher deﬁcit reﬂects increased
liabilities due to a reduced discount rate
of 4.20% (2012: 4.95%), although offset
partially by higher assets driven by strong
investment returns.

The table on page 15 sets out the key cash
ﬂow components and the movement in
Group net debt.

The Group’s net interest payments have
decreased as a result of beneﬁtting from a full
year of lower interest rates in respect of the
ﬁnancing facility agreed in September 2011.

The UK deﬁned beneﬁt scheme’s March 2012
triennial actuarial valuation process has now
been largely completed and shows a deﬁcit
of £62.4m and represents an 85% funding
level on this more prudent actuarial basis.
The increased deﬁcit is driven predominantly
by the well documented historically low gilt
yields resulting partly from the Government’s
use of quantitative easing during the banking
crisis and subsequent stimulus packages. In
light of this, a new deﬁcit recovery payment
schedule has been agreed with the Scheme
Trustee, with a contribution of £2m per annum
starting in March 2013, and increasing with
CPI, payable over the next 15 years. This is
subject to ﬁnal regulatory clearance, and
we are not aware of any reasons why this
clearance will not be given.

The Group’s contributions to its deﬁned
contribution pension schemes were
£1.2m (2012: £1.1m).

Cash ﬂow and ﬁnancial position
Whilst cash ﬂow from operations increased
to £6.6m, the previous year included an
outﬂow of £7.8m related to lease surrender
costs to exit the legacy lease at Springwood
Drive, Braintree. Excluding this, cash ﬂow
from operations was £7.2m lower than 2012
which principally relates to the increase in
inventory at Johnson Tiles UK to support new
business with B&Q. Net cash generated after
tax and interest was £4.3m (2012: £3.8m).

The Group’s working capital outﬂow was
£7.7m (2012: outﬂow of £0.4m), chieﬂy
to support new business gained by
Johnson Tiles in the UK with B&Q.

Capital expenditure of £6.7m includes two
new sorting lines at Johnson Tiles South
Africa, the freehold purchase of a new store
at Klerksdorp and continued Tile Africa
store improvements and new product
development at Triton Showers, particularly
in respect of the new single control and
touch screen showers.

The Group acquired Eurobath International
Limited trading as Vado on 31 March 2013
for initial consideration of £10.6m, net of
cash acquired of £0.4m. Full details of the
acquisition are provided in note 27 to the
ﬁnancial statements.

Bank funding
Following a re-ﬁnancing in September 2011 the
Group agreed an amendment in March 2013
in order to ﬁnance the acquisition of Vado.
This increased the revolving credit facility from
£51.0m to £70.0m on the same commercial
terms. As a result of this amendment the
headroom on facilities was £28.6m at
31 March 2013. This facility expires in
October 2015 and is currently subject
to a margin of 1.75% above LIBOR.

** Underlying operating proﬁt 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.
** Underlying return on capital employed is deﬁned as underlying operating proﬁt divided
by the average of opening and closing underlying capital employed. Underlying capital
employed is deﬁned as Group net assets excluding net debt and the UK pension deﬁcit
(net of deferred tax), as adjusted for translational foreign exchange differences to enable
overseas net assets to be stated on a constant currency basis.

Norcros plc Annual report and accounts 2013

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

Potential effects
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.

Mitigating actions
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.

Change from prior year:

Performance against
banking covenants
The Group is subject to key banking
covenants including interest cover
and debt cover. Whilst leverage has
increased in view of the acquisition
of Vado, the Group is still well within
the required targets.

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

Mitigating actions
Performance against banking
covenants is regularly and closely
monitored and is a key element of
the forecasting and budgeting process.

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.

Potential effects
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.

Mitigating actions
The importance of relationships with
key customers is recognised and
managed by senior personnel within
the Group who have direct and
regular access to their counterparts
at the highest levels of management.

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

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. As well as an excellent
product offering the Group is also able
to take care of customers’ sourcing,
storage and logistics requirements.

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

Change from prior year:

Additional capital requirements
to fund ongoing operations

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

Mitigating actions
The Group’s current and forecast
performance against its banking
facilities in 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 in
2011 and successfully increased the
facility in the current year by a further
£19m on the same commercial terms
to ﬁnance the acquisition of Vado.
This facility remains in place until
October 2015.

Change from prior year:

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:

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

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

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

Energy costs tend to increase worldwide
at similar rates, therefore competitors
will generally face the same pressures
of any sustained increase.

Change from prior year:

Key:

Risk increased
Risk reduced
No change in risk

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

Potential effects
The Group’s ﬁnancial results show an
aggregate deﬁcit in this scheme, as at
31 March 2013 of £30.0m (2012: £18.7m)
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.

Mitigating actions
The scheme was closed to new
members and future accrual with
effect from 1 April 2013 and replaced
by an auto-enrolment compliant
deﬁned contribution scheme.
Risks from rising costs of providing
a ﬁnal salary pension scheme have
therefore been materially reduced.
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 tri-annual valuation) to re-assess
its position with regard to its pension
commitments in conjunction with
external actuarial advice.

Change from prior year:

Norcros plc Annual report and accounts 2013

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

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

Mitigating actions
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 acts 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.

Change from prior year:

Staff retention and recruitment
The Group employs over 1600
people worldwide.

Potential effects
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.

Mitigating actions
Group policy is to remunerate its
personnel in line with market rates and
practice. In addition to competitive
salaries there are annual bonus
schemes, share options and
other beneﬁts offered.

Executives and key management are
now incentivised via an Approved
Performance Share Plan (APSP)
which was approved at the 2011
AGM. A second grant of options
under the APSP took place in 2012.

Succession planning is an agenda
item at Group Board level.

The Group is able to offer capable
employees appropriate training and
opportunities for advancement and
has a demonstrable track record of
internal promotion.

Change from prior year:

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

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

Potential effects
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.

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.

Mitigating actions
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 SA operations and
speciﬁc internal audit visits are
made annually.

Change from prior year:

Potential effects
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.

Mitigating actions
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.

Change from prior year:

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

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

Mitigating actions
Given the current low interest rates
negotiated as part of the reﬁnancing
of bank debts in 2011, 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.

Change from prior year:

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). Sterling has
become weaker relative to the major
currencies on the back of poor UK
economic data.

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

Mitigating actions
The Group typically 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.

Change from prior year:

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

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

Mitigating actions
The Groups maintains a leasehold
provision speciﬁcally to cover these
rental shortfalls. This was reviewed
at the year end and a further £3.0m
provision was recognised.

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.

Change from prior year:

Vado acquisition risk
The Group acquired Vado at the end
of the year.

Potential effects
Business performance may not reach
expectations impacting Group
proﬁtability and cash ﬂows.

Mitigating actions
Key management have been
incentivised to remain with the business.
They will participate with Executive
Directors at regular divisional Board
meetings to monitor business
performance.

The Vado Managing Director reports
directly to the Group Chief Executive
and there is regular dialogue between
Vado management and Head
Office staff.

The terms of purchase provided
that a signiﬁcant proportion of the
consideration is deferred and contingent
upon future business performance
over the next three years.

Change from prior year: New in year

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Norcros plc Annual report and accounts 2013

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 if 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 its stunning “Tones” range of tiles, and
the top “Environmental and Social Impact”
award at the 2012 MIXOLOGY North Awards.

Johnson Tiles’ environmental policy and
brochure can be viewed on their website
at www.johnson-tiles.com.

For example, approximately a quarter 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. The business also won Silver
“Best Eco Product” prize at the awards of top
consumer interiors magazine House Beautiful,

Triton Showers also has a speciﬁc
environmental policy which targets the use
of recyclable materials and minimising the
production of waste. In addition, Triton aims
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 its website at
www.tritonshowers.co.uk.

The newly acquired Vado business has
recognised that saving water is increasingly
becoming a focus for its customers and
accordingly it has a range of products which

CSI Childline
Christmas party

Childline services began in KwaZulu-Natal in 1986 in
response to the very high levels of child sexual abuse
which characterise South Africa.

Norcros South Africa have aligned themselves with Childline
from 2009 as part of our Corporate Social Investment
initiative by the Corporate Citizenship Committee.

We annually sponsor and, when possible, send staff
volunteers to the Childline Christmas party that is quickly
becoming a company tradition. This was the third year
running that we not only provided funding for the party
but also had staff attending the party.

Norcros plc Annual report and accounts 2013

The necessity for, and importance of, good relations
with all employees is well recognised and accepted
throughout the Group.

speciﬁcally meet this objective. More details
on the H2ECO product range can be found
on its website www.vado-uk.com.

Ethics
The Group aims to act with integrity towards
all stakeholders in its businesses and respects
the laws, regulations and customs in all the
counties 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.

Social
Companies in the Group are encouraged
to become involved in and support local
initiatives where possible.

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 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.

Warwickshire Young Carers

Triton Showers sponsors the Warwickshire Young Carers’
Project which supports children and young adults from
the age of six upwards, in their caring role at home, and
encourages wider recognition of their contribution to
society. Financial support from Triton Showers will allow
the project staff to organise additional group activities,
workshops, days out and short breaks for the young carers.

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Norcros plc Annual report and accounts 2013

Directors and officers

Martin Towers
Chairman
Joined the Board in July 2011 and was
appointed Chairman in November 2012.
He is also a Non-Executive director of RPC
Group plc, KCOM Group plc and Tyman plc.
He was formerly chief executive officer of
Spice plc and prior to that group ﬁnance
director of Kelda Group plc, Spring Ram
Corporation plc and McCarthy and Stone plc.
He is a Fellow of the Institute of Chartered
Accountants in England and Wales.

Nick Kelsall
Group Chief Executive
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
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.

John Brown
Non-Executive Director
Appointed to the Board as Chairman on
admission of Norcros plc to the London
Stock Exchange on 16 July 2007, John
stood down from that role in November
2012 and is now Senior Non-Executive
Director and Chairman of the Audit
Committee. 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 unlisted directorships. John will
resign from the Board at the Annual
General Meeting on 24 July 2013.

Jo Hallas
Non-Executive Director
Appointed to the Board in September 2012,
Jo also serves as Chairman of the Remuneration
Committee. She is currently General Manager
of the Invensys Heating Controls business
and prior to that held a number of senior
management positions with Bosch and
Procter & Gamble both in the UK and
overseas. Jo is a Chartered Engineer.

Vijay Aggarwal
Non-Executive Director
Appointed to the Board in 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. Girija Patnaik
was appointed as an alternate Non-Executive
Director to Vijay on 4 March 2010.

Norcros plc Annual report and accounts 2013

David Hamilton
Director
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.
David will resign from the Board at the
Annual General Meeting on 24 July 2013.

Richard Collins
Company Secretary
Richard joined the Company in June 2013
as Company Secretary and Group Counsel.
He qualiﬁed as a solicitor in 1988 and was
previously company secretary and director
of risk and compliance at Vertex Financial
Services. Prior to that, Richard held a
number of company secretarial and legal
positions with Tribal Group plc, Blick plc
and Aggregate Industries plc.

Advisers and company information

Company website
www.norcros.com

Listing details
Market
Reference – NXR
Index

– UK Listed

– FTSE All Share
FTSE SmallCap
– Construction

Sector

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

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

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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Financial calendar

Annual General Meeting

24 July 2013

Final dividend

Payable 30 July 2013

Interim results

Announcement November 2013

Interim Report

Available to shareholders November 2013

Norcros plc Annual report and accounts 2013

Directors’ report

The Directors present their Annual Report and
the audited consolidated ﬁnancial statements
for the year ended 31 March 2013.

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 17. Key performance indicators
are shown on pages 2 and 3.

The Directors recommend a ﬁnal dividend
for the year ended 31 March 2013 of 0.305p
(2012: 0.28p). This follows the decision to
pay an interim dividend earlier in the year
of 0.155p (2012: 0.14p).

Directors
Biographical details of the present Directors
are set out on pages 22 and 23. The Directors
who served during the year and to the date of
this report are set out below:

Martin Towers

Chairman

John Brown

Non-Executive Director

Jo Hallas

Non-Executive
Director (appointed
27 September 2012)

Vijay Aggarwal

Non-Executive Director

Girija Patnaik

Alternate Non-Executive
Director to Vijay Aggarwal

Nick Kelsall

Group Chief Executive

Martin Payne

Group Finance Director

David Hamilton

Director

Les Tench

Non-Executive
Director (resigned
26 July 2012)

The interest of the Directors in the shares of the
Company at 31 March 2013 and 31 March 2012
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 (2012: nil).
At the Company’s 2012 Annual General
Meeting, the shareholders authorised the
Company to make market purchases of
up to 57,983,260 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 21 May 2013 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 Investors
Artemis Fund Managers
Crystal Amber Asset
Management (Guernsey)
SVM Asset Management
Standard Life Investments
Hargreave Hale
Legal & General
Investment Management

Percentage
of issued
share capital

24.97

11.37
10.05
8.16

4.88
3.56
3.44
3.14

Norcros plc Annual report and accounts 2013

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
largely hedged until at least March 2014
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.

Takeover directive
The Company has only one class of shares,
being ordinary shares, which have equal
voting rights. The holdings of individual
Directors are disclosed on page 32.

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 (as amended
on 28 March 2013) in respect of the £70.0m
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)

(b)

so far as the Director is aware, there is
no relevant audit information of which
the Company’s auditors are unaware; and

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

Independent auditors
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 11.00am on 24 July 2013
at Ladyﬁeld House, Station Road, Wilmslow,
Cheshire SK9 1BU. The Notice convening
that meeting, together with the resolutions
to be proposed, appears on pages 71 to 73
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.

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Employees continued
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 £16,000 during the year (2012:
£10,000). There were no political donations
(2012: £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 £31.5m (2012: £30.9m) reported in note 17
to the accounts represent 74 days (2012: 77 days)
of average daily purchases. The Parent
Company has no trade creditors (2012: £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 26 to 29. 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.

R. H. Collins
Company Secretary
13 June 2013

Norcros plc Annual report and accounts 2013

Corporate governance

The Board is committed to ensuring that
high standards of corporate governance are
maintained by Norcros plc and is accountable
to the Company’s shareholders for good
corporate governance. Its policy is to manage
the affairs of the Company in accordance
with the principles of the UK Corporate
Governance Code referred to in the Listing
Rules of the UK Listing Authority. For the year
under review, the Company has complied
with the UK Corporate Governance Code
issued in 2010 (“the Code”) in all respects save
for those mentioned within this statement.
The following sections of this statement
describe the Board’s approach to corporate
governance and how the principles of the
Code are applied.

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 22 and 23.

Taking into account the provisions
of the Code, the Chairman and two
Non-executive Directors (being John Brown
and Jo Hallas) 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 on a regular basis throughout the year.
The Board is satisﬁed that the Chairman’s other
signiﬁcant commitments do not prevent him
from devoting sufficient time to the Company.

John Brown is the Senior Independent
Non-Executive Director. He is 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 by the making of well-informed
decisions that are in the best interests of the
Company as a whole. The Board regularly
reviews the management and ﬁnancial
performance of the Company, as well as long-
term strategic planning and risk assessment.
Regular reports are given to the Board on
matters such as pensions, health and safety
and litigation.

Any concerns that a Director may have about
how the Group is being run or about a course
of action being proposed by the Board will,
if they cannot be resolved once those concerns
have been brought to the attention of the
other Directors and the 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
periodically and they are organised to ﬁt in with
Board priorities and succession planning
activity. Accordingly, there was no formal
evaluation in the year under review as the
scheduled programme of board changes was
underway. As this is now complete, a formal
and rigorous evaluation process will take place
in the current ﬁnancial year. The Chairman is
responsible for the review of each Director’s
development and ongoing training
requirements to ensure that the performance
of each Director continues to be effective.

Norcros plc Annual report and accounts 2013

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.

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.

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.

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 provides direction
to the management of the Company,
and it is ultimately accountable for the
performance of the Group.

The Board operates in such a way as to
ensure that all decisions are made by the
most appropriate people in a timely manner
that will not unnecessarily delay progress.
The Board has formally delegated speciﬁc
responsibilities to Board Committees, 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.

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 has suitable procedures in place
for ensuring that its powers to authorise
conﬂict situations are operated effectively.
Such powers are operated in accordance
with the Company’s Articles of Association
by means of each Director having a
responsibility to notify the Board of any
conﬂict situation and for the Board to
deal with that situation as appropriate.

The Board ensures that all new Directors
(including Non-Executive Directors) will
receive a full, formal and tailored induction
on joining the Company. As part of that
induction procedure, the Chairman will offer
to major shareholders the opportunity to meet
a new Non-Executive Director. The Chairman
also periodically assesses the training and
development needs of all Directors and
ensures that any suitable training and
updates are provided to Directors.

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:

Main
Board
9 meetings

Audit
Committee
3 meetings

Remuneration
Committee
3 meetings

Nominations
Committee
3 meetings

M. Towers, Chairman
L. Tench (resigned
26 July 2012)
J. E. Brown
V. Aggarwal
G. Patnaik (as alternate
to V. Aggarwal)
J. Hallas (appointed
27 September 2012)
N. P. Kelsall
M. K. Payne
D. W. Hamilton

9/9
3/3

9/9
4/9
5/9

6/6

9/9
9/9
9/9

3/3
1/1

3/3
2/3
1/3

2/2

—
—
—

3/3
2/2

3/3
1/3
2/3

1/1

—
—
—

3/3
1/1

3/3
2/3
1/3

3/3

—
—
—

Retirement by rotation
Each of the Directors is subject to election
by shareholders at the ﬁrst Annual General
Meeting after their appointment. Thereafter,
in accordance with the Company’s Articles
of Association, all of the Directors are subject
to retirement by rotation such that one third
of the Directors retire from the Board each
year and each Director must seek re-election
at intervals of no more than three years.
However, the Board has decided that every
Director should, where appropriate, offer
themselves for re-election at each Annual
General Meeting. Accordingly, each continuing
Director will seek re-election at the next
Annual General Meeting. Biographical details
of all of the Directors are set out on
pages 22 and 23.

John Brown and David Hamilton have both
informed the Board that they intend to retire
as Directors at the conclusion of the next
Annual General Meeting after 6 and 17 years
of service respectively as Directors, and
neither will be seeking re-election.

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, diversity
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.
The Committee utilises external search
and selection consultants as appropriate.

If a new Director is selected, the
Nominations Committee will use the
appropriate selection process. In the case
of the appointment of Martin Towers as
Chairman during the year under review,
he was selected as successor to the retiring
Chairman pursuant to the Board’s
succession plans for the role.

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Norcros plc Annual report and accounts 2013

Corporate governance
continued

Audit Committee
The Audit Committee consists of all the
Non-Executive Directors including the
Chairman. The Board is satisﬁed that John
Brown, 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 main work of
the Audit Committee in discharging its
functions is described in this section.

The Committee has primary responsibility
for making recommendations to the Board on
the appointment, re-appointment and removal
of the external auditor. The Committee keeps
under review the scope and results of the
audit and its cost effectiveness and the
independence and objectivity of the auditor.
The last review of the external auditor was
undertaken in 2011 and it led to the continued
appointment of PricewaterhouseCoopers LLP.
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 auditor’s objectivity and
independence and the issue is discussed
by the Committee and periodically with
the audit engagement leader from
PricewaterhouseCoopers LLP.

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.

Remuneration Committee
The Remuneration Committee is chaired by
Jo Hallas. It 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 Code but the Board
is of the opinion that he is able to carry
out his role on Committees of the Board
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
matters where this would be inappropriate.
The Committee’s report is set out on
pages 30 to 35.

The Remuneration Committee used
the services of Deloitte LLP as remuneration
consultants during the year under review.
Deloitte LLP has assisted the Company
with various remuneration-related matters
but otherwise has no connection with
the Company.

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. The Directors have a
collective responsibility for the preparation
of the Annual Report and Accounts which
is more fully explained in the Statement
of Directors’ Responsibilities on page 36.

Relations with shareholders
The Company recognises the importance
of maintaining good communications
with shareholders. The Company takes a
number of steps to ensure that the Board,
and in particular, the Non-Executive Directors,
develop an understanding of the views of
major shareholders about the Company.
The Directors have regular meetings with
the Company’s major shareholders and
have regular feedback on the views of those
shareholders through the Company’s brokers.
Reports of these meetings, and any shareholder
communications during the year, are given
to the Board. In addition, the Company
publishes any signiﬁcant events affecting
the Group and updates on current trading.
The 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.

Norcros plc Annual report and accounts 2013

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.

Approved by the Board of Directors on
13 June 2013 and signed on its behalf by:

M. G. Towers
Chairman

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Relations with shareholders continued
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 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.

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 previously, 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 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 on
page 36 and the Auditor’s Report on page 37.
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 18 and 19.

Norcros plc Annual report and accounts 2013

Directors’ remuneration report
Year ended
31 March 2013

Dear Shareholder

Following my appointment as Remuneration Committee Chairman and on behalf of the
Board, I am pleased to present the Remuneration Committee’s report for the year ended
31 March 2013. We will be seeking approval from shareholders for this report at our Annual
General Meeting.

The Remuneration Committee’s overall approach remains unchanged. We are focused on
ensuring the Group’s remuneration policy is aligned with shareholders’ interests while also
enabling us to attract, retain and motivate our executive leadership.

In making remuneration decisions, the Committee considers the Group’s overall performance
against its long-term goals. For the year to 31 March 2013, Norcros has delivered another
strong set of results as described in both the Chairman’s statement and Business Review.
Particular highlights include:

— Revenue growth up 5.2% (10.2% on constant currency basis) to £210.7m

— Underlying operating proﬁt up 7.4% to £13.0m

— The return to proﬁtability of the South African business

— The acquisition of Vado, supporting the strategic growth objectives of the Group

— Signiﬁcant progress in addressing legacy pension and property issues

During the year the Committee also undertook a benchmarking review of our executive
remuneration packages and concluded that these are in line with market norms in terms
of both structure and level, also meeting the preference for simplicity outlined in recent
institutional guidance. As a result, for the year ahead, the remuneration policy remains
largely unchanged but will be kept under review. The detail of the Directors’ remuneration
is contained in the report that follows, but in summary:

Base salary
Following a review of Directors’ base salary, the Remuneration Committee considered it
appropriate to award salary increases of 3% for the year to 31 March 2014 for the Group
Chief Executive and Group Finance Director. This increase is in line with the majority
of the Group’s UK employees and inﬂation.

Annual bonus
Performance against the underlying operating proﬁt targets for the annual bonus was
carefully assessed by the Remuneration Committee and annual bonuses of 50% of base
salary have been proposed for the year ended 31 March 2013, to be delivered half in cash
and half in the form of nil cost options under the 2011 Deferred Share Bonus Plan. For the
year to 31 March 2014, the maximum opportunity of the annual bonus will remain at 100%
of base salary and the Remuneration Committee has determined that underlying operating
proﬁt continues to provide the best measure of short-term performance.

Long term incentive
The Remuneration Committee considers that the current long-term incentive based on
achieving aggregate diluted underlying earnings per share targets over a three-year
performance period (Aggregate EPS) continues to provide an effective alignment between
the Directors and the long-term interests of all of our shareholders. Awards equal to 100%
of base salary were made in the year.

We have followed the widespread debate on executive reward and welcome the proposals
for improved remuneration reporting to ensure clear and transparent information for our
shareholders. During this year we will continue with our preparations to implement the
forthcoming regulations on Directors’ remuneration reporting for the year to 31 March 2014.

On behalf of the Board, I would like to thank shareholders for their continued support.

Jo Hallas
Chairman of the Remuneration Committee

Norcros plc Annual report and accounts 2013

Directors’ remuneration policy
The Company’s policy on remuneration of Directors is to provide packages sufficient 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, the remuneration of our Directors is intended to be competitive and comprises a mix of ﬁxed and performance
related remuneration designed to incentivise Directors and align their interests with those of shareholders whilst also reﬂecting good
corporate governance practice.

When setting Directors’ packages and reviewing potential increases to base salary, consideration is given to pay in the rest of the Company.

Base Salary
In April 2013 annual salary increases for Nick Kelsall and Martin Payne of 3% were agreed by the Remuneration Committee. The level
of increase is consistent with that awarded to the majority of the Group’s UK employees and is broadly in accord with the rate of inﬂation
in the UK during the period. These increases took effect from 1 April 2013.

Annual Bonus
Nick Kelsall and Martin Payne participated in the Company’s annual bonus scheme during the year. The scheme allows for maximum
annual bonus opportunities of up to 100% of base salary, determined wholly in terms of Group underlying operating proﬁt. The targets
are considered to be commercially sensitive and are not disclosed.

For the year to 31 March 2013, the Committee determined that total bonuses of £133,250 and £92,250 would be awarded to Nick Kelsall
and Martin Payne respectively, with 50% paid in cash as reﬂected in the Directors’ emoluments table below and 50% in the form of nil
cost options under the 2011 Deferred Share Bonus Plan (DSBP). The number of options granted is calculated by dividing the amount of
bonus to be deferred by the share price at the relevant time. The options become exercisable on the third anniversary of grant, but lapse
in the event of resignation from the Company, unless the Committee exercises its discretion otherwise.

The Committee feels that this approach provides an appropriate balance between annual performance measures and longer term
alignment with shareholder interests. The proportion of bonus deferred will be kept under review each year.

Details of bonuses earned are provided in the audited information below.

Long Term Incentive
Nick Kelsall and Martin Payne were awarded nil cost share options under the 2011 Approved Performance Share Plan (APSP) in 2011
and 2012. The options will be capable of exercise after three years subject to achieving aggregate diluted underlying earnings per share
targets over a three year performance period (Aggregate EPS) .

The Committee considers that Aggregate EPS is a transparent, objective and effective measure of performance which is in the long term
interests of all of our shareholders and that a three year period is appropriate over which to measure long-term earnings growth.

In the event that a Director resigns, the awards will lapse, unless the Committee exercises its discretion otherwise. In any year the value
of the shares notionally awarded to a Director under this scheme will not exceed 150% of base salary.

If the Aggregate 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 remuneration to 31 March 2013) will be as follows:

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

Non-performance
related

Performance
related

53%
53%
100%

47%
47%
—

Of the total performance related proportion, 23% is in respect of the APSP and the remaining 24% in respect of the annual bonus scheme.

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

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

Contract date

Notice period

1 April 2011
18 March 2011
1 April 2011
16 July 2007
27 September 2012
28 July 2011
8 October 2009

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

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

John Brown, Jo Hallas, 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.

Norcros plc Annual report and accounts 2013

Directors’ remuneration report
Year ended
31 March 2013
continued

Directors’ remuneration policy continued
Directors’ service contracts continued
The Company’s Articles of Association contain provisions for the retirement and re-election
of Directors by rotation. However, the Board has decided that every Director should, where
appropriate, offer themselves for re-election at each Annual General Meeting. Accordingly,
each continuing Director will seek re-election at the next Annual General Meeting.
Biographical details of all of the Directors are set out on pages 22 and 23.

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

N. P. Kelsall
M. K. Payne
D. W. Hamilton
J. E. Brown
M. G. Towers

31 March
2013
Ordinary
shares

7,865,143
300,000
12,247,960
778,387
713,635

31 March
2012
Ordinary
shares

7,865,143
—
12,247,960
778,387
500,000

All Directors’ interests are beneﬁcially held. There has been no change in the interests set
out above between 31 March 2013 and 13 June 2013.

Performance graph
The following graph demonstrates how £100 invested in Norcros plc has changed over a
ﬁve year period beginning on 1 April 2008 compared with the same investment in a fund
mirroring the make-up of the construction and materials index of listed companies:

Norcros Plc
Construction & Materials

120.00

100.00

)

(

t
n
e
m

t
s
e
v
n

80.00

60.00

40.00

20.00

0.00

01/04/08

31/03/09

31/03/10

31/03/11

31/03/12

31/03/13

In the opinion of the Directors, the construction and materials index is the most
appropriate index against which the performance of Norcros plc should be measured
because it is an index of companies in the same industrial sector as Norcros plc.

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

Jo Hallas (Chairman) (appointed 27 September 2012)
John Brown
Martin Towers
Vijay Aggarwal
Les Tench (former Chairman) (resigned 26 July 2012)

Compliance of the Remuneration Committee to Corporate Governance requirements
and best practice is discussed on page 28.

The Remuneration Committee is responsible for setting all aspects of Executive Directors’
remuneration, with its terms of reference being published on the Company’s website at
www.norcros.com. The fees for the Non-Executive Directors are determined by the Chairman
and Executive members of the Board.

The Committee met formally three times during the year. Details of attendance at the meetings
are shown in the attendance table on page 27. Girija Patnaik attended two of the meetings as
Alternate Non-Executive Director to Vijay Aggarwal. David Hamilton, Executive Director and
Company Secretary, attended meetings as Secretary to the Committee. In addition, Nick Kelsall,
the Chief Executive, was invited to attend some of the meetings, but was not present when
his own remuneration was discussed.

Norcros plc Annual report and accounts 2013

Remuneration Committee continued
The Committee took advice from Deloitte LLP. Deloitte LLP is a member of the Remuneration Consultants Group and is committed
to the Group’s voluntary code of practice for remuneration consultants in the UK. Deloitte LLP did not provide the Company with advice
in relation to any other matters during the year.

The key matters discussed by the Remuneration Committee during the year included:

— review of overall remuneration structure and levels for both Executive Directors and key members of the senior management team;

— salary increases for Executive Directors;

— performance conditions for 2012 APSP awards and the annual bonus plan for the year to 31 March 2013 for Executive Directors; and

— operation of the Deferred Share Bonus Plan.

Directors’ emoluments and interests in shares and share option plans
Audited information
The remainder of the Remuneration Report is audited information.

Director

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

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

Salary
and fees
£000

Cash
bonuses
£000

Beneﬁts
in kind
£000

Expense
allowances
(including
car
allowance)
£000

Pension
related
payments
£000

267
185
103
63
57
15
13
20
—
—

723

67
46
—
—
—
—
—
—
—
—

113

1
1
6
—
—
—
—
—
—
—

29
20
20
—
—
—
—
—
—
—

70
44
—
—
—
—
—
—
—
—

2013
Total
£000

434
296
129
63
57
15
13
20
—
—

2012
Total
(restated)
£000

365
246
126
80
27
15
40
—
127
13

114

1,027

1,039

Les Tench resigned from the Board on 26 July 2012. Jo Hallas was appointed Non-Executive Director on 27 September 2012.

In addition to the above cash bonuses, which represent 50% of the total bonuses in respect of the year to 31 March 2013, awards will be
made under the DSBP scheme to Nick Kelsall and Martin Payne of £66,625 (2012: £nil) and £46,125 (2012: £nil), respectively. For further
details please see the section entitled Deferred Share Bonus Plan (DSBP) in this report.

Beneﬁts in kind consist of medical insurance for every Executive Director.

As part of their remuneration arrangements Nick Kelsall and Martin Payne are entitled to receive pension contributions from the Company.
Under these arrangements, they can elect for those contributions to be paid in the form of taxable pension allowance, or direct payments
into a personal pension plan or the Group’s UK deﬁned contribution scheme. If a payment is made in the form of taxable pension allowance,
the amount payable is reduced to allow for employment taxes so that the total cost to the Company is the same as it would have been if
the contribution had been made directly into a pension plan. During the year Nick Kelsall elected to take taxable pension allowance of
£70,255 (2012: £23,000) with no amounts paid directly into a pension scheme (2012: £52,000 paid into the UK deﬁned contribution scheme).
Martin Payne elected to take taxable pension allowance of £13,510 (2012: £7,000) with £30,750 paid into a personal pension plan (2012: £37,500).
The total of these amounts has been included as pension related payments in the table above, and, in order to effect fair comparison,
the ﬁgures for 2012 have been restated to take into account the total value of pension related payments.

There were no annual increases to remuneration levels for Non-Executive Directors. Following John Brown’s resignation as Chairman
on 1 November 2012, his salary reduced from £80,000 to £40,000 per annum. Martin Towers, who replaced John Brown as Chairman
on the same date, received an increase from £40,000 to £80,000 per annum. Therefore in aggregate the remuneration of Non-Executive
Directors was the same as in 2012.

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

N. P. Kelsall
D. W. Hamilton

23 December 2011
23 December 2011

1 March 2015
1 March 2015

31 August 2015
31 August 2015

Exercise
price

10.1p
10.1p

Number at
1 April
2012

89,108
89,108

Granted
in year

Exercised
in year

—
—

Number at
31 March
2013

89,108
89,108

Norcros plc Annual report and accounts 2013

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Directors’
remuneration report
continued

Directors’ emoluments and interests in shares and share option plans continued
Approved Performance Share Plan (APSP)
In September 2011, Nick Kelsall, Martin Payne and selected senior management were made
awards of shares under the APSP. Vesting of these shares was subject to achieving aggregate
diluted underlying earnings per share targets over a three year performance period (Aggregate EPS).
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.

A further grant under the APSP was made in September 2012 to Nick Kelsall, Martin Payne
and selected senior management, again subject to achieving Aggregate EPS targets. 100%
of the shares would vest if the Group achieved Aggregate EPS of over 6.39p. 25% of the shares
vest if the Group achieved Aggregate EPS of 5.39p 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 5.39p.

Directors’ interests in the APSP

N. P. Kelsall

M. K. Payne

Award
date

1 September 2011
22 October 2012
1 September 2011
22 October 2012

Number at
1 April
2012

2,122,449
—
1,469,388
—

Granted in year

—
2,507,056
—
1,735,654

Number at
31 March
2013

2,122,449
2,507,056
1,469,388
1,735,654

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 16.50p
and the range of market prices during the year was between 9.25p and 16.75p.

Deferred Share Bonus Plan (DSBP)
The grant of options under the DSBP in respect of the year to 31 March 2013 has not yet
been made. As a result of this, the precise number of options to be granted in respect of
the year to 31 March 2013 cannot yet be calculated, though the proposed monetary value of
the bonus earned is known. Accordingly, Nick Kelsall and Martin Payne will receive a number
of nil cost options calculated by dividing the proposed value of £66,625 and £46,125 respectively
by the share price at the date of grant.

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

Transfer
value of
accrued pension
increase
in the year
£

N. P. Kelsall
M. K. Payne

28,514
3,488

Accrued
entitlement
£

15,970
10,696

Transfer
value at
31 March
2013
£

284,596
150,709

N. P. Kelsall
M. K. Payne

Transfer
value at
31 March
2012
£

236,008
142,505

Increase
in accrued
pension for
the year less
CPI inﬂation
£

1,198
—

Increase
in transfer
value less
Directors’
contributions
£

48,588
8,204

Increase
in accrued
pension for
the year
£

1,600
248

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.

Norcros plc Annual report and accounts 2013

Directors’ emoluments and interests in shares and share option plans continued
Directors’ pension entitlement continued
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
provider 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.

Information related to other pension payments made is disclosed in the section on
Directors’ emoluments on page 33.

This report was approved by the Board and signed on its behalf by:

J. C. Hallas
Chairman of the Remuneration Committee
13 June 2013

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Norcros plc Annual report and accounts 2013

Statement of directors’
responsibilities
In respect of
the Directors’
Remuneration
Report and the
ﬁnancial statements

The Directors are responsible for preparing the Annual Report, the Directors’ Remuneration
Report and the ﬁnancial statements in accordance with applicable law and 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 (IFRSs) 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 IFRSs 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 Directors’ Report conﬁrm
that, to the best of their knowledge:

— the Group ﬁnancial statements, which have been prepared in accordance with IFRSs

as adopted by the EU, 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

Norcros plc Annual report and accounts 2013

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 2013 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 (IFRSs) 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 36, 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 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 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 ﬁnancial
statements. In addition, we read all the ﬁnancial and non-ﬁnancial information in the Annual 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 2013 and of its proﬁt and cash ﬂows for the year then ended;

— have been properly prepared in accordance with IFRSs 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 page 29 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 29, 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 2013 and on the
information in the Directors’ Remuneration Report that is described as having been audited.

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Martin Heath (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Manchester
13 June 2013

Norcros plc Annual report and accounts 2013

Consolidated income statement
Year ended 31 March 2013

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

2013
£m

2012
£m

210.7

200.3

8.6

13.0

(4.4)

8.6

(1.7)

—

(1.7)

0.9

2.2

10.0

(0.9)

9.1

1.6p

580.0

11.7

11.0

1.9p

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

* 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 2013

Proﬁt for the year

Other comprehensive expense:

Items that may be subsequently be reclassiﬁed to the income statement

Actuarial losses on retirement beneﬁt obligations

Foreign currency translation adjustments

Other comprehensive expense for the year

Total comprehensive expense for the year

Items in the statement are disclosed net of tax.

Norcros plc Annual report and accounts 2013

Notes

2013
£m

9.1

(12.3)

(4.8)

(17.1)

(8.0)

2012
£m

9.4

(10.6)

(5.3)

(15.9)

(6.5)

Consolidated balance sheet
At 31 March 2013

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 and other reserves

Total equity

Notes

2013
£m

27.6

43.5

5.4

10.2

86.7

52.8

44.0

0.9

0.1

6.8

104.6

(51.7)

—

(1.8)

(0.5)

(54.0)

50.6

137.3

(37.0)

(30.0)

(2.2)

(6.5)

(75.7)

61.6

5.8

0.5

55.3

61.6

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

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The ﬁnancial statements on pages 38 to 65 were approved on 13 June 2013 and signed on behalf of the Board by:

N. P. Kelsall
Group Chief Executive Group Finance Director

M. K. Payne

Norcros plc Annual report and accounts 2013

Consolidated cash ﬂow statement
Year ended 31 March 2013

Cash generated from operations

Income taxes paid

Interest paid

Net cash generated from operating activities

Cash ﬂows from investing activities

Proceeds from sale of property, plant and equipment

Purchase of property, plant and equipment

Acquisition of subsidiary undertakings net of cash acquired

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 the Company’s shareholders

Net cash generated from ﬁnancing activities

Net increase/(decrease) 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

2013
£m

6.6

(1.0)

(1.3)

4.3

2.5

(6.7)

(10.6)

(14.8)

0.3

—

(0.1)

16.8

(2.5)

14.5

4.0

2.5

(0.1)

6.4

2012
£m

6.0

(0.6)

(1.6)

3.8

—

(6.7)

—

(6.7)

0.2

(17.0)

(0.8)

21.0

(2.2)

1.2

(1.7)

4.6

(0.4)

2.5

Norcros plc Annual report and accounts 2013

Consolidated statement of changes in equity
Year ended 31 March 2013

At 1 April 2011

Comprehensive income:

Proﬁt for the year

Other comprehensive expense:

Actuarial loss on retirement beneﬁt
obligations

Foreign currency translation adjustments

Total other comprehensive expense

Transactions with owners:

Purchase of own shares

Capital re-organisation

Shares issued

Dividends paid

Share option schemes and warrants

At 31 March 2012

Comprehensive income:

Proﬁt for the year

Other comprehensive expense:

Actuarial loss on retirement beneﬁt
obligations

Foreign currency translation adjustments

Total other comprehensive expense

Transactions with owners:

Shares issued

Dividends paid

Share option schemes and warrants

At 31 March 2013

Ordinary
share
capital
£m

19.2

—

(13.4)

—

5.8

—

5.8

Capital
redemption
reserve
£m

—

13.4

(13.4)

—

Share
premium
£m

86.8

—

(86.8)

0.2

—

0.2

—

0.3

—

0.5

Translation
reserve
£m

11.1

—

(5.3)

—

5.8

—

(4.8)

—

1.0

Retained
(losses)/
earnings
£m

(37.7)

9.4

(10.6)

—

(10.6)

—

100.2

—

(2.2)

0.2

59.3

9.1

(12.3)

—

(12.3)

—

(2.5)

0.7

54.3

Total
£m

79.4

9.4

(10.6)

(5.3)

(15.9)

—

0.2

(2.2)

0.2

71.1

9.1

(12.3)

(4.8)

(17.1)

0.3

(2.5)

0.7

61.6

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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Norcros plc Annual report and accounts 2013

Notes to the group accounts
Year ended 31 March 2013

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 13 June 2013.

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, contingent consideration 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.

Standards, amendments and interpretations effective in 2013
The Group has adopted the following new IFRS amendments as of 1 April 2012:

— Amendments to IFRS 7, ‘Financial instruments: Disclosures’ on transfers of assets’ – These amendments promote transparency in the

reporting of transfer transactions and improve users’ understanding of the risk exposures relating to transfers of ﬁnancial assets and the
effect of those risks on an entity’s ﬁnancial position, particularly those involving securitisation of ﬁnancial assets.

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

The adoption of the above amendments did not have a material impact on the ﬁnancial statements.

Standards, amendments and interpretations that are not effective and have not been early adopted by the Group:

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

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

— Amendment to IAS 19, ‘Employee beneﬁts’

— IFRS 10, ‘Consolidated ﬁnancial statements’

— IFRS 11, ‘Joint arrangements’

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

— Amendments to IFRS 10, 11 and 12 on transition guidance

— 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

— Amendments to IFRS 10, ‘Consolidated ﬁnancial statements’, IFRS 12 and IAS 27 for investment entities

— IFRS 9 ‘Financial instruments’ on classiﬁcation and measurement of ﬁnancial assets and liabilities

— Annual improvements 2011

The above amendments are not expected to have a material impact on the Group’s ﬁnancial statements with the exception of the
amendment to IAS19, ‘Employee beneﬁts’. Under IAS 19, ‘Employee beneﬁts’, the interest cost on the deﬁned beneﬁt obligation, and
the expected rate of return on plan assets, will be replaced with a net interest charge based on the net deﬁned beneﬁt liability using the
discount rate measured at the beginning of the year. Additionally, costs in relation to the administration of the pension scheme will need
to be reﬂected within the income statement rather that the statement of comprehensive income and expense. Adoption of this standard
likely to result in a higher charge in the income statement, the precise quantum of which is currently being reviewed.

Norcros plc Annual report and accounts 2013

1. Group accounting policies continued
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.

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;

— 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; and

— fair value measurement of contingent consideration – a proportion of the deferred consideration payable in respect of the Group’s

acquisition of Vado on 31 March 2013 is contingent upon the continued employment of certain vendors within a speciﬁed timeframe.
This element falls to be treated as remuneration in accordance with IFRS 3 (revised). This will be assessed at fair value and charged
to the income statement in the period over which the Group receives the beneﬁt of the employment services of these vendors.
The determination of this fair value will be based on an estimate of the future performance of Vado over a speciﬁed timeframe,
and is therefore subject to uncertainty.

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Norcros plc Annual report and accounts 2013

Notes to the group accounts
Year ended 31 March 2013
continued

1. Group accounting policies continued
Revenue recognition
Revenue comprises the consideration received or receivable for the sale of goods and services provided alongside the supply of goods
in the ordinary course of the Group’s activities, and is shown net of value added and other sales-based taxes, customer volume rebates,
discounts and promotional support.

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.

Revenue received in respect of extended warranties is recognised over the period of the warranty.

Segmental reporting
The Group operates in three main geographical areas: the 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.

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.

Norcros plc Annual report and accounts 2013

1. Group accounting policies continued
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. Liability is recognised upon the sale of a
product and is estimated using historical data.

Restructuring provisions – provision is made for costs of restructuring activities to carried out by the Group when the Group is
demonstrably committed to incurring the cost in a future period and the cost can be reliably measured.

Property provisions – where the Group has vacated a property but is committed to a leasing arrangement, an onerous lease provision is
recorded. This is calculated as the cost that management expects to incur over the period of the lease, which is net of any expected future
sub-lease income.

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

Retirement beneﬁt obligations
The Group operates a deﬁned beneﬁt scheme in the UK and South Africa 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.

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

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Norcros plc Annual report and accounts 2013

Notes to the group accounts
Year ended 31 March 2013
continued

1. Group accounting policies continued
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 re-measured 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 against overdrafts and borrowings when there is a legally enforceable right to do so.

Trade receivables – trade receivables are recognised initially at fair value and subsequently reviewed 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 meet the requirements for 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 and presentational 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 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 Annual report and accounts 2013

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: the 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 2013

Revenue

Underlying operating proﬁt
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
Proceeds from disposals of property, plant and equipment
Proﬁt on disposal of property, plant and equipment
Depreciation

UK
£m

122.8

11.9
(4.1)

7.8

128.1
(113.5)
2.5
—
—
3.8

South
Africa
£m

77.6

1.0
(0.3)

0.7

54.7
(14.8)
4.0
2.5
1.2
2.3

Rest of
the World
£m

10.3

0.1
—

0.1

8.5
(1.4)
0.2
—
—
0.1

Group
£m

210.7

13.0
(4.4)

8.6

(1.7)
0.9
2.2

10.0
(0.9)

9.1

(30.7)

191.3
(129.7)
6.7
2.5
1.2
6.2

Revenues of £49.6m (2012: £32.9m) are derived from a single customer. These revenues are attributable to the UK segment.

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Norcros plc Annual report and accounts 2013

Notes to the group accounts
Year ended 31 March 2013
continued

2. Segmental reporting continued
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
Proﬁt on disposal of 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 on disposal of property, plant and equipment

UK
£m

116.8

12.5
—

12.5

104.4
(82.2)
2.7
—
3.9

South
Africa
£m

74.0

(0.5)
(0.5)

(1.0)

57.1
(15.0)
2.7
0.4
2.3

Rest of
the World
£m

9.5

0.1
0.5

0.6

8.2
(1.4)
—
—
0.1

2013
£m

41.3
6.2
—

1.6
2.7
2.2
(1.2)

Auditor’s remuneration
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company’s auditor and
its associates:

Audit of the Parent Company and consolidated ﬁnancial statements
Audit of the Company’s subsidiaries
Tax services
Other services – due diligence services

2013
£m

0.1
0.1
0.1
0.1

0.4

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
0.4
6.3

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

Norcros plc Annual report and accounts 2013

4. Employees

Staff costs:
– wages and salaries
– social security costs
– pension costs:

– deﬁned beneﬁt
– deﬁned contributions

2013
£m

36.3
2.5

1.3
1.2

41.3

2012
£m

36.3
2.3

1.5
1.1

41.2

Included in wages and salaries for 2012 were £0.3m of redundancy costs which were classiﬁed as exceptional items in the income statement.
There are no redundancy costs in 2013.

Average monthly numbers employed:
– UK
– overseas

2013
Number

815
793

1,608

2012
Number

827
803

1,630

Owing to the fact that the acquisition of Vado took place on 31 March 2013, the above table does not include any Vado employees.
At 31 March 2013 Vado employed 144 staff.

Directors’ emoluments

Salaries and short-term employee beneﬁts
Post employment beneﬁts

2013
£m

0.9
0.1

1.0

Further information about the Directors’ remuneration may be found in the Directors’ Remuneration Report on pages 30 to 35.

Highest paid Director

Salaries and short-term employee beneﬁts
Post employment beneﬁts

Key management compensation

Salaries and short-term employee beneﬁts
Post employment beneﬁts

2013
£m

0.3
0.1

0.4

2013
£m

1.6
0.1

1.7

Key management is deﬁned as the Directors of Norcros plc together the Managing Directors of the Group’s signiﬁcant divisions.

5. Exceptional items
Exceptional operating items

Property provisions1
Equity related acquisition fees2
Restructuring costs3
Impairment of associate’s carrying value and related costs4

Exceptional ﬁnance costs
Write-off of capitalised costs of raising debt ﬁnance5

2013
£m

3.0
0.9
0.5
—

4.4

—

2012
£m

0.9
0.1

1.0

2012
£m

0.3
0.1

0.4

2012
£m

1.6
0.1

1.7

2012
£m

—
—
0.5
(0.5)

—

1.2

1 The provision to cover the Group’s onerous property leases was increased by £3.0m during the year, following a reappraisal of the future cash ﬂows arising from these leases.

2 The fees arose as a result of the Group’s acquisition of Vado (see note 27).

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. In 2013 this included a loss of £0.3m on the sale of the small non-core South African Nortec adhesives business.

4 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 matured in 2012 and other associated costs were paid. The cost of settling the cross currency swap was £0.5m lower than initially estimated.

5 Following the reﬁnancing of the Group’s banking facilities in September 2011, £1.2m of costs relating to the previous banking arrangements were written off.

Norcros plc Annual report and accounts 2013

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Notes to the group accounts
Year ended 31 March 2013
continued

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

7. Taxation
Taxation comprises:

Current
UK taxation
Deferred
Origination and reversal of temporary differences

Taxation

2013
£m

1.3
0.2
—
0.2

1.7

(0.9)

0.8

2013
£m

1.3

(0.4)

0.9

2012
£m

1.4
0.7
0.7
0.3

3.1

—

3.1

2012
£m

0.8

(0.8)

—

The tax for the year is different from the standard rate of corporation tax in the UK (24% 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 24% (2012: 26%)
Effects of:
– over provision in prior years
– income/expenses not chargeable/deductible for tax purposes
– recognition of overseas tax losses
– overseas tax losses for which no deferred tax asset was recognised
– recognition of UK losses and capital allowances
– origination and timing differences

Total tax charge

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

2013
£m

10.0
(2.4)

—
(0.9)
2.0
—
0.3
0.1

(0.9)

2013
£m

10.0

4.4
0.2
(0.9)
0.2
(2.2)

11.7

(0.7)

11.0

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

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.

Norcros plc Annual report and accounts 2013

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 2013 the potential dilutive ordinary shares amounted to 8,895,196 (2012: 2,383,527) 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

2013
£m

9.1
11.0

2012
£m

9.4
11.1

2013
Number

2012
Number

580,021,666
8,895,196

577,231,925
2,383,527

588,916,862

579,615,452

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 2011 (APSP)
Approved Performance Share Plan 2012 (APSP)
Save As You Earn Scheme (2) (SAYE)
Save As You Earn Scheme (3) (SAYE)
Save As You Earn Scheme (4) (SAYE)
Save As You Earn Scheme (5) (SAYE)

2013

1.6p
1.6p
1.9p
1.9p

Price
per share

1 April
2012

Granted

Exercised

Lapsed

31 March
2013

Date from
which
exercisable

0.0p 7,045,037
0.0p
9.3p 1,483,480
9.4p 1,525,367
10.1p 2,894,563
11.8p

— 7,045,037
— 12,520,560

—
— 12,520,560

—
—
(927,172)
— (556,308)
(127,146) 1,398,221
—
—
— (139,006) 2,755,557
—
— 1,229,469
—
— 1,229,469

30.06.14
30.06.15
— 01.03.12
01.03.14
01.03.15
01.03.16

2012

1.6p
1.6p
1.9p
1.9p

Expiry
date

01.09.21
22.10.22
31.08.12
31.08.14
31.08.15
31.08.16

Details of the terms of the APSP and SAYE scheme are disclosed in the Directors’ 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 £0.7m was
recognised in respect of share options in the period (2012: £0.2m). 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)

SAYE (5)

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%

20.12.12
11.8p
N/A
1,229,469
1,229,469
44.23%
3 years
2.1%
3%

Norcros plc Annual report and accounts 2013

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Notes to the group accounts
Year ended 31 March 2013
continued

10. Share-based payments continued

APSP 2011

APSP 2012

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

22.10.12
0.0p
N/A
12,520,560
12,520,560
44.23%
3 years
2.1%
3%

The share price at 31 March 2013 was 16.50p. The average price during the year was 12.50p. 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.

11. Goodwill

At beginning of the year
Additions
Exchange differences

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

Triton Showers
Tile Africa Group
Vado
One Stop Tiles

2013
£m

23.4
4.8
(0.6)

27.6

2013
£m

19.1
3.7
4.7
0.1

27.6

2012
£m

23.9
—
(0.5)

23.4

2012
£m

19.1
4.3
—
—

23.4

Additions of £4.8m in the year relate to the acquisitions of Vado and One Stop Tiles and are disclosed in note 27.

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 growth rates of 2% in the UK and 3% in South Africa applied in future periods.
The key assumptions for the value-in-use calculations are those regarding discount rates, growth rates, future gross margin improvements and
cash ﬂows. Pre-tax discount rates of 9.0% (2012: 9.0%) in the UK and 11.05% (2012: 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. No impairment review has been carried out in
respect of the goodwill relating to Vado and One Stop Tiles, on the grounds that the goodwill recognised is provisional and likely to change when
the fair value exercise is completed.

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.

Norcros plc Annual report and accounts 2013

12. Property, plant and equipment

Land and
buildings
£m

Plant and
equipment
£m

Cost
At 1 April 2011
Exchange differences
Additions
Disposals

At 31 March 2012
Exchange differences
Additions
Acquisitions (see note 27)
Disposals

At 31 March 2013

Accumulated depreciation
At 1 April 2011
Exchange differences
Charge for the year
Disposals

At 31 March 2012
Exchange differences
Charge for the year
Disposals

At 31 March 2013

Net book amount at 31 March 2012

Net book amount at 31 March 2013

35.8
(1.7)
0.5
(0.9)

33.7
(1.3)
1.4
1.3
(1.3)

33.8

10.2
(0.2)
1.0
(0.1)

10.9
(0.1)
1.0
(0.2)

11.6

22.8

22.2

77.5
(3.1)
4.9
(0.5)

78.8
(3.1)
5.3
0.7
(1.2)

80.5

54.0
(2.0)
5.2
(0.4)

56.8
(2.0)
5.2
(0.8)

59.2

22.0

21.3

Total
£m

113.3
(4.8)
5.4
(1.4)

112.5
(4.4)
6.7
2.0
(2.5)

114.3

64.2
(2.2)
6.2
(0.5)

67.7
(2.1)
6.2
(1.0)

70.8

44.8

43.5

Plant and equipment includes motor vehicles, computer equipment and plant and machinery. The Group acquired assets under ﬁnance
leases with a net book value of £0.1m as part of the acquisition of Vado (see note 27).

13. Investment properties

Cost
At 31 March 2011, 31 March 2012 and 31 March 2013

Accumulated depreciation
At 1 April 2011
Charge for the year

At 31 March 2012
Charge for the year

At 31 March 2013

Net book amount at 31 March 2012

Net book amount at 31 March 2013

Investment
property
£m

6.3

0.8
0.1

0.9
—

0.9

5.4

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 from their carrying value. Rental income
receivable in the year was £0.5m (2012: £0.5m).

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Norcros plc Annual report and accounts 2013

Notes to the group accounts
Year ended 31 March 2013
continued

14. Inventories

Raw materials
Work in progress
Finished goods

2013
£m

9.0
0.8
43.0

52.8

Included within inventories is £4.3m in respect of Vado (see note 27).

Provisions held against inventories totalled £3.4m (2012: £2.9m), of which £0.5m related to the newly acquired Vado business.

The cost of inventories recognised as an expense within cost of sales in the income statement amounted to £104.9m (2012: £110.9m).

During the year the Group charged £0.5m (2012: £0.3m) 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

2013
£m

36.7
(0.4)

36.3
4.9
2.8

44.0

2012
£m

9.9
0.7
34.9

45.5

2012
£m

33.8
(0.3)

33.5
4.3
2.9

40.7

Included within trade and other receivables is £5.2m in respect of Vado (see note 27).

The fair value of trade receivables does not differ materially 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
Provisions arising from the acquisition of Vado (see note 27)

At end of year

2013
£m

33.0
9.6
1.4

44.0

2013
£m

0.3
0.1
(0.1)
0.1

0.4

2012
£m

30.1
9.3
1.3

40.7

2012
£m

0.4
0.2
(0.3)
—

0.3

As at 31 March 2013, trade receivables of £31.9m (2012: £29.6m) were fully performing.

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.

Norcros plc Annual report and accounts 2013

15. Trade and other receivables continued
As of 31 March 2013, trade receivables of £0.4m (2012: £0.3m) were impaired and provided for. The individually impaired receivables were
impaired at 100% of their gross value (2012: 100%). The ageing of these receivables is as follows:

Less than three months
Greater than three months

2013
£m

—
0.4

0.4

2012
£m

0.1
0.2

0.3

At 31 March 2013 trade receivables of £4.4m (2012: £3.9m) were past due but not impaired, which includes £0.3m in respect of the newly
acquired business, Vado. 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

2013
£m

3.0
0.6
0.4
0.4

4.4

2012
£m

2.7
0.5
0.1
0.6

3.9

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 (see note 18)

2013
£m

6.8

2013
£m

6.8
(0.4)

6.4

2012
£m

2.9

2012
£m

2.9
(0.4)

2.5

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
Other payables
Accruals and deferred income

Included in trade and other payables is £4.7m in respect of Vado (see note 27).

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

2013
£m

31.5
2.5
1.3
16.4

51.7

2012
£m

30.9
2.1
3.5
14.1

50.6

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Norcros plc Annual report and accounts 2013

Notes to the group accounts
Year ended 31 March 2013
continued

18. Borrowings

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

Finance leases and hire purchase contracts

Total non-current

Current
Bank borrowings (secured):
– bank overdrafts (see note 16)
Finance leases and hire purchase contracts

Total current

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

2013
£m

37.7
(0.8)

36.9
0.1

37.0

0.4
0.1

0.5

37.5

2013
£m

0.5

0.1
37.7
(0.8)

37.0

37.5

2012
£m

21.0
(0.7)

20.3
—

20.3

0.4
—

0.4

20.7

2012
£m

0.4

—
21.0
(0.7)

20.3

20.7

Capital risk management
The Group has available a £70.0m committed banking facility which expires in October 2015. This was increased from £51.0m on the same
terms during the year, principally in order to ﬁnance the acquisition of Vado. The facility provides the Group with a sound ﬁnancial structure for
the medium term with £28.6m of headroom being available at 31 March 2013, after taking into account net debt and ancillary facilities in use
of £9.9m. Under this facility bank borrowings are secured by the Group’s UK assets. The Group has been in compliance with all banking
covenants during the year.

Interest rate proﬁle
The effective interest rates at the Balance Sheet dates were as follows:

Bank loans
Overdraft

2013
%

2.2
2.2

2012
%

2.2
2.0

At 31 March 2013 the bank loans carried interest based on LIBOR plus a margin of 1.75% (2012: 1.50%). Overdrafts carry interest at base rate
plus a margin of 1.75% (2012: 1.50%).

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

2013
£m

33.8
—
(2.1)
(1.0)

30.7

2012
£m

19.9
0.3
(1.3)
(1.1)

17.8

Norcros plc Annual report and accounts 2013

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
2013
£m
Assets

Forward foreign exchange contracts

0.9

2013
£m
Liabilities

—

2012
£m
Assets

—

2012
£m
Liabilities

(0.4)

Forward foreign exchange contracts
The notional principal amounts of outstanding forward foreign exchange contracts at 31 March 2013 were €7.1m and US$45.6m (2012: €16.6m
and US$24.7m).

The hedged forecast transactions denominated in foreign currency are expected to occur at various dates during the next 15 months.
Gains and losses recognised on forward exchange contracts to date have been taken to the Consolidated 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 £31.5m (excluding amortised ﬁnance costs) the effect of a 1% change in market interest rates would
be a change in the net ﬁnance costs of approximately £0.3m 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 £2.2m devaluation in net assets. Likewise a 5% weakening in Sterling
would lead to a £2.4m 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 £1.4m.
Likewise a 5% weakening in both these currencies would lead to a £1.5m 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 UK corporation tax was reduced from 26% to 24% with effect from 1 April 2012. A further announcement was made that
the rate would reduce to 23% with effect from 1 April 2013. This rate reduction was substantively enacted on 7 July 2012 and the deferred
tax asset at 31 March 2013 has been re-measured accordingly.

In the 2013 Annual Budget Statement on 20 March 2013 it was announced that the main rate of corporation tax would fall further
to 20% with effect from 1 April 2015. However, as this change had not been substantively enacted at the balance sheet date it has
not been recognised in these ﬁnancial statements.

The overall effect of the further reductions from 23% to 20%, if these applied to the deferred tax balances at 31 March 2013,
would be to reduce the deferred tax asset by £1.1m.

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Norcros plc Annual report and accounts 2013

Notes to the group accounts
Year ended 31 March 2013
continued

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 to the 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 for deferred tax is as follows:

Accelerated capital allowances
Other timing differences
Net deferred tax asset relating to net pension deﬁcit
Tax losses
Advanced corporation tax asset

2013
£m

6.4
0.4
3.4

10.2

2013
£m

0.5
2.6
0.2
6.9

10.2

2013
£m

1.2
1.5
6.9
16.1
—

25.7

The balance in respect of advanced corporation tax which stood at £5.0m in 2012 is no longer considered to be readily accessible and
therefore is no longer included in the analysis of potential deferred tax assets.

21. Provisions

At 1 April 2011
Charged to the income statement
Amortisation of discount
Utilisation

At 31 March 2012
Acquisitions (see note 27)
Charged to the income statement
Amortisation of discount
Utilisation

At 31 March 2013

Warranty
provision
£m

Restructuring
provision
£m

UK property
provision
£m

South Africa
property
provision
£m

1.1
1.3
—
(1.1)

1.3
0.2
1.2
—
(1.3)

1.4

0.7
0.8
—
(1.2)

0.3
—
—
—
—

0.3

13.1
—
0.3
(9.7)

3.7
—
3.0
0.2
(2.1)

4.8

0.4
—
—
(0.3)

0.1
—
0.4
—
(0.5)

—

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

Total
£m

15.3
2.1
0.3
(12.3)

5.4
0.2
4.6
0.2
(3.9)

6.5

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.

Norcros plc Annual report and accounts 2013

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. The scheme closed to new members and future accrual with effect from 1 April 2013. As a result of the
closure a new deﬁned contribution pension scheme has been implemented to replace the Norcros Security Plan from the same date.

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 £1.2m (2012: £1.1m).

(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 2012 and updated by Mercer,
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 2013.
Scheme assets are stated at their market value at 31 March 2013.

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 £0.1m 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

2013
Projected
unit

4.20%
3.20%
2.20%
3.05%
3.05%
3.45%

2012
Projected
unit

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

The mortality assumptions are based on standard mortality tables which allow for future mortality improvements. The assumptions are that
a member who retires in 2013 at age 65 will on average live for a further 21.3 years (2012: 20.4 years) after retirement if they are male and
23.7 years (2012: 23.2 years) if they are female.

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

Included in operating proﬁt:
Current service cost

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

Total amounts recognised in the income statement

2013
£m

1.3

18.6
(20.8)

(2.2)

(0.9)

2011
£m

1.5

19.8
(21.4)

(1.6)

(0.1)

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Norcros plc Annual report and accounts 2013

Notes to the group accounts
Year ended 31 March 2013
continued

22. Retirement beneﬁt obligations continued
(b) IAS 19, ‘Retirement beneﬁt obligations’ continued
(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

(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
Currency translation adjustments
Current service cost
Interest cost
Expected return on scheme assets
Actuarial loss

Deﬁcit at the end of the year

Long-term
rate of return
expected at
31 March
2013
%

7.25%
7.25%
4.20%
2.55%
—

Value at
31 March
2013
£m

81.0
153.2
151.7
3.6
0.1

389.6
(419.5)

(29.9)

(30.0)
0.1

(29.9)

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

7.25%
7.25%
4.95%
3.10%
—

2013
£m

(18.1)
1.2
2.0
(0.2)
—
(1.3)
(18.6)
20.8
(15.7)

(29.9)

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

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

(18.1)

The expected return on plan assets is determined by considering the expected returns available on the assets underlying the current
investment policy. Expected yields on ﬁxed interest investments are based on gross redemption yields as at the end of the reporting period.
Expected returns on equity and property investments reﬂect long-term real rates of return experienced in the respective markets.

(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
Currency translation

Closing fair value of scheme assets

2013
£m

368.2
1.2
2.0
0.8
(0.2)
20.8
(22.7)
19.5
—

389.6

2012
£m

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

368.2

Norcros plc Annual report and accounts 2013

22. Retirement beneﬁt obligations continued
(b) IAS 19, ‘Retirement beneﬁt obligations’ continued
(vi) The reconciliation of scheme liabilities is as follows:

Opening scheme liabilities
Current service cost
Employee contributions
Interest cost
Actuarial loss
Beneﬁts paid

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 gain/(loss) on scheme liabilities

2013
£m

389.6
(419.5)

(29.9)
19.5
10.5

2012
£m

368.2
(386.3)

(18.1)
3.1
—

2011
£m

363.3
(368.9)

(5.6)
5.0
—

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

Actuarial loss
Deferred tax

23. Called up share capital

2013
£m

(386.3)
(1.3)
(0.8)
(18.6)
(35.2)
22.7

(419.5)

2010
£m

354.8
(362.9)

(8.1)
57.1
(5.9)

2013
£m

(15.7)
3.4

(12.3)

2013
£000

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)

2012
£000

Issued and fully paid
583,488,584 (2012: 579,832,604) ordinary shares of 1p each

5,835

5,798

The Company issued 556,308 1p ordinary shares to members of an SAYE scheme whose options became exercisable during the year
(see note 10).

Warrant instruments
In 2009 the Company executed a warrant instrument in favour of its principal banks of the day over 5% of its fully diluted ordinary share
capital excluding any shares issued as part of a capital raising. One of the warrant holders exercised their warrant instrument in full during
the year and acquired 3,099,672 shares at the exercise price of 8.97p per share.

Taking into account the capital raising in 2010 the remaining warrants now represent 6,199,344 ordinary shares (1.07% of the issued ordinary
share capital) at 31 March 2013. The warrants are exercisable at 8.97p per share at any time up to July 2017.

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Norcros plc Annual report and accounts 2013

Notes to the group accounts
Year ended 31 March 2013
continued

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 cash contributions
– proﬁt 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 in trade and other receivables
– (decrease)/increase in trade and other payables

Cash generated from operations

2013
£m

10.0

4.4
(2.2)
6.2
(2.2)
(1.2)
1.7
(0.9)
(2.2)
0.7

14.3

(5.6)
1.9
(4.0)

6.6

(b) Outﬂow related to exceptional items
This includes expenditure charged to exceptional provisions relating to onerous lease costs, acquisition fees and other business
rationalisation and restructuring costs.

At 1 April 2011
Cash ﬂow
Other non-cash movements
Exchange movement

At 31 March 2012
Cash ﬂow
Acquisitions
Other non-cash movements
Exchange movement

At 31 March 2013

Net
cash
£m

4.6
(1.7)
—
(0.4)

2.5
4.0
—
—
(0.1)

6.4

Net
debt
£m

(15.2)
(4.0)
(1.1)
—

(20.3)
(16.8)
(0.2)
0.2
—

(37.1)

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

Total
£m

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

(17.8)
(12.8)
(0.2)
0.2
(0.1)

(30.7)

Other non-cash movements relates to additional ﬁnancing costs incurred following the increase in the ﬁnancing facilities in March 2013,
less amortisation charged for the year.

25. Dividends
A ﬁnal dividend in respect of the year ended 31 March 2012 of £1.6m (0.28p per share) was paid in July 2012 and an interim dividend of £0.9m
(0.155p per share) was paid in January 2013. A ﬁnal dividend in respect of the year ended 31 March 2013 of £1.8m (0.305p per share) is to be
proposed at the Annual General Meeting on 24 July 2013. These ﬁnancial statements do not reﬂect this ﬁnal dividend.

Norcros plc Annual report and accounts 2013

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 £0.7m (2012: £1.6m).

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

2013
£m

0.3

2013
£m

6.3
16.1
18.2

40.6

2013
£m

1.5
2.9
0.1

4.8
13.2
18.1

40.6

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

(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

2013
£m

0.6
2.2
0.1

2.9

2012
£m

0.7
3.0
1.4

5.1

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Norcros plc Annual report and accounts 2013

Notes to the group accounts
Year ended 31 March 2013
continued

27. Business combinations
On 31 March 2013, the Group acquired 100% of the ordinary share capital of Eurobath International Limited, known principally under
its trading name Vado, a leading manufacturer and global distributor of bathroom controls including taps, mixer showers, bathroom
accessories and valves. Vado is an excellent strategic ﬁt for the group as it builds on the Group’s existing product portfolio and secures
strong positions in complementary segments. Additionally, the Group intends to leverage the combined platform of Vado and the Group’s
market leading Triton shower business to drive increased demand for its products utilising the enlarged customer base, broader product
offering, dual branding, and extended geographical scope. Vado is incorporated in England and is based in Cheddar, Somerset.

The following table summarises the consideration paid for Vado and the provisional fair value of the assets acquired and the liabilities assumed:
£m

Consideration
Cash
Contingent consideration

Recognised amounts of identiﬁable assets and liabilities
Property, plant and equipment
Deferred tax asset
Inventories
Trade and other receivables
Derivative ﬁnancial instruments
Cash
Trade and other payables
Current tax liabilities
Borrowings – loans
Borrowings – hire purchase contracts
Provisions

Total identiﬁable net assets

Goodwill

Total

11.0
0.4

11.4

£m

2.0
0.1
4.3
5.2
0.4
3.1
(4.7)
(0.6)
(2.7)
(0.2)
(0.2)

6.7

4.7

11.4

Due to the fact that the acquisition took place on the last day of the accounting period it has not been possible for the Group to ﬁnalise the
fair values of Vado’s assets and liabilities. Accordingly, the amounts stated in the table above reﬂect the reported balances of Vado, as adjusted
where possible to comply with the accounting policies of the Group. The provisional fair value adjustments reﬂect the recognition of derivative
ﬁnancial instruments of £0.4m, provisions for inventory, trade receivables and warranty obligations totalling £0.7m, trade and other payables
of £0.2m and a deferred tax asset of £0.1m. A full review of the fair values of the identiﬁable assets and liabilities will take place over the coming
months with the expectation that a revised position will be presented in the Group’s interim statement for the six months ended 30 September
2013. It is not expected at this stage that any residual goodwill which remains after this review will be deductible for tax purposes.

Acquisition related costs of £0.9m have been charged to exceptional operating items for the year ended 31 March 2013 (see note 5).

The contingent consideration of £0.4m reﬂects the maximum amount and current best estimate of amounts to be paid to a number of
former minority shareholders of Vado over the next three years, subject to Vado achieving certain ﬁnancial performance targets over the
same period. The former majority shareholders of Vado also participate in this arrangement, but in view of the fact that payment of this
amount is contingent upon the continued employment of one of these individuals, no contingent consideration has been recognised in
accordance with IFRS 3 (revised). The amounts payable will instead fall to be treated as remuneration and accordingly they will be expensed
to the proﬁt and loss account over the next three years should the performance targets be achieved. The maximum amount and current
expectation is that future payments over this period to the former majority shareholders will total £3.7m.

As the transaction took place on the last day of the ﬁnancial year, the acquisition of Vado had no impact on the Consolidated Income Statement
or the Consolidated Statement of Comprehensive Income and Expense, other than the acquisition related costs of £0.9m disclosed in note 5.
Had Vado been consolidated from 1 April 2012, the Consolidated Income Statement would contain pro-forma revenue of £25.8m and a
pro-forma proﬁt after tax of £1.6m.

The net cash outﬂow from the transaction was as follows:

Cash consideration
Loan borrowings repaid at acquisition
Cash acquired

Net cash outﬂow reported in the Consolidated Cash Flow Statement

£m

11.0
2.7
(3.1)

10.6

On 20 February 2013 the Group acquired the trade and assets of One Stop Tiles (Pty) Limited, a supplier of tiles and adhesives in Tasmania,
Australia, for consideration of £0.1m. Goodwill of £0.1m was recognised in respect of this transaction. There was no cash effect of this
transaction in the year.

Norcros plc Annual report and accounts 2013

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

(a) Purchases of goods and services

Purchases of goods:
– Prism Cement Limited

Goods are purchased on normal commercial terms and conditions.

2013
£m

1.2

2012
£m

1.5

Dividends of £0.8m (2012: £0.7m) were paid to Lifestyle Investments PVT Limited which owns 24.97% of the Company’s issued share capital
(as of 21 May 2013). 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):
– Prism Cement Limited

2013
£m

(0.3)

2012
£m

(0.3)

29. Contingent liabilities
The Company’s material UK subsidiaries (with the exception of Vado) 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. Vado acceded to the guarantee and debenture on 13 May 2013.

30. 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

— Eurobath International Limited* trading as Vado

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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Norcros plc Annual report and accounts 2013

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 2013 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 36, 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.

This report, including the opinions, has been prepared for and only for the Parent 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 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 Annual 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 2013;

— 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 2013.

Martin Heath (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Manchester
13 June 2013

Norcros plc Annual report and accounts 2013

Parent company balance sheet
At 31 March 2013

Fixed assets

Investments

Deferred tax asset

Debtors

Amounts owed by Group undertakings

Creditors: amounts falling due within one year

Other

Net current assets/(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

2013
£m

177.3

0.2

177.5

7.8

(1.1)

6.7

184.2

(36.9)

147.3

5.8

0.5

141.0

147.3

The ﬁnancial statements on pages 67 to 70 were approved on 13 June 2013 and signed on behalf of the Board by:

N. P. Kelsall
Group Chief Executive

M. K. Payne
Group Finance Director

2012
£m

177.3

—

177.3

—

(6.5)

170.8

(20.3)

150.5

5.8

0.2

144.5

150.5

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Norcros plc Annual report and accounts 2013

Notes to the parent company accounts
Year ended 31 March 2013

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 Proﬁt and Loss Account 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 28.

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.

Auditor’s remuneration of £3,000 (2012: £3,000) is borne by the Company’s subsidiary, without recharge.

3. Investments

At 1 April 2012 and 31 March 2013

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 30 of the Group accounts.

Norcros plc Annual report and accounts 2013

4. Debtors

Amounts owed by Group undertakings

Amounts owed by Group undertakings were unsecured, interest free and repayable on demand.

5. Borrowings

Loans and bank overdrafts – secured
Costs of raising ﬁnance

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

2013
£m

7.8

2013
£m

37.7
(0.8)

36.9

37.7
(0.8)

36.9

2012
£m

—

2012
£m

21.0
(0.7)

20.3

21.0
(0.7)

20.3

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.

6. Creditors – amounts falling due within one year

Amounts owed to Group undertakings
Other creditors and accruals

2013
£m

—
1.1

1.1

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

7. Deferred tax
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

Deferred tax asset at the end of the year

Other timing differences

The full potential asset for deferred tax is as follows:

Other timing differences
Tax losses

2013
£m

—
0.2

0.2

2013
£m

0.2

2013
£m

0.3
6.0

6.3

2012
£m

5.9
0.6

6.5

2012
£m

—
—

—

2012
£m

—

2012
£m

—
6.3

6.3

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

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Norcros plc Annual report and accounts 2013

Notes to the parent company accounts
Year ended 31 March 2013
continued

8. Called up share capital

Issued and fully paid
583,488,584 (2012: 579,832,604) ordinary shares of 1p each

2013
£m

2012
£m

5,835

5,798

The Company issued 556,308 1p ordinary shares to members of a SAYE scheme whose options became exercisable during the year
(see note 10 of the Group accounts).

9. Reconciliation of movements in shareholders’ funds

At beginning of year
Shares issued in the year
Loss for the year
Share option schemes
Dividends paid

At end of year

Share
capital
£m

5.8
—
—
—
—

5.8

Share
premium
account
£m

0.2
0.3
—
—
—

0.5

Proﬁt
and loss
account
£m

144.5
—
(1.7)
0.7
(2.5)

141.0

Total
£m

150.5
0.3
(1.7)
0.7
(2.5)

147.3

10. Dividends
A ﬁnal dividend in respect of the year ended 31 March 2012 of £1.6m (0.28p per share) was paid in July 2012 and an interim dividend of £0.9m
(0.155p per share) was paid in January 2013. A ﬁnal dividend in respect of the year ended 31 March 2013 of £1.8m (0.305p per share) is to be
proposed at the Annual General Meeting on 24 July 2013. These ﬁnancial statements do not reﬂect this ﬁnal dividend.

11. 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.

12. Financial risk management objectives and policies
A description of the Group’s ﬁnancial risk management policies are provided in the Directors’ Report on page 25. These objectives and policies
also apply to the Company.

13. 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.

Norcros plc Annual report and accounts 2013

Notice of annual general meeting

Notice is given that the 2013 Annual General Meeting of Norcros plc (“the Company”) will be held at 11.00 am on 24 July 2013 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 11 (inclusive) below will be proposed as ordinary resolutions and resolutions 12 to 14 (inclusive) below will be proposed
as special resolutions.

To receive and adopt the audited accounts and the auditors’ and Directors’ reports for the year ended 31 March 2013.

2. To approve the Board’s remuneration report for the year ended 31 March 2013.

3. To declare a ﬁnal dividend of 0.305p per ordinary share.

4. To elect Jo Hallas as a Director.

5. To re-elect Martin Towers as a Director.

6. To re-elect Vijay Aggarwal as a Director.

To re-elect Nick Kelsall as a Director.

8. To re-elect Martin Payne as a Director.

9. To re-appoint PricewaterhouseCoopers LLP as auditors.

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

11.

That the Directors be and are hereby generally and unconditionally authorised pursuant to Section 551 of the Companies Act 2006 to
exercise all the powers of the Company to allot shares in the Company and to grant rights to subscribe for or to convert any security
into such shares (“Allotment Rights”), but so that:

(a)

the maximum amount of shares that may be allotted or made the subject of Allotment Rights under this authority are shares with
an aggregate nominal value of £3,889,923 of which:

(i) one half may be allotted or made the subject of Allotment Rights in any circumstances; and

(ii)

the other half may be allotted or made the subject of Allotment Rights pursuant to any rights issue (as referred to in the
Financial Conduct Authority’s listing rules) or pursuant to any arrangements made for the placing or underwriting or other
allocation of any shares or other securities included in, but not taken up under, such rights issue;

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 Annual General Meeting to allot shares or to grant Allotment
Rights that remain unexercised at the commencement of this Meeting are revoked.

(b)

(c)

(d)

12.

That the Directors be and are hereby 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 11 in the Notice of this Annual General
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 Conduct
Authority’s listing rules) or any other pre-emptive offer that is open for acceptance for a period determined by the Directors to
the holders of ordinary shares 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 £291,744,

and shall expire when the authority conferred on the Directors by resolution 11 in the Notice of this Annual General 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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Norcros plc Annual report and accounts 2013

Notice of annual general meeting
continued

13.

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 58,348,858;

(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
Conduct Authority’s listing rules or, in the case of a tender offer (as referred to in those rules), ﬁve per cent above the average of
the middle market quotations for an ordinary share (as derived from the Daily Official List of London Stock Exchange plc) 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.

14. That any general meeting of the Company that is not an Annual General Meeting may be convened by not less than 14 clear days’ notice.

By order of the Board

R. H. Collins
Company Secretary
13 June 2013

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

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 6pm on 22 July 2013 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, PXS at The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU so as to be
received by 11am on 22 July 2013. 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.

Norcros plc Annual report and accounts 2013

Notes continued
4.

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

As at 11 June 2013 (being the latest practicable date prior to the printing of this document), (i) the Company’s issued share capital
consisted of 583,488,584 ordinary shares carrying one vote each and (ii) the total voting rights in the Company were 583,488,584.

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.

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 11am on 22 July 2013. 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 provider(s) should take into account
the provisions of the CREST manual concerning timings as well as its section on “Practical limitations of the system”. In certain
circumstances, the Company may, in accordance with the Uncertiﬁcated Securities Regulations 2001 or the CREST manual, treat
a CREST proxy appointment instruction as invalid.

10.

The Company takes all reasonable precautions to ensure that no viruses are present in any electronic communication which it sends
but does not accept responsibility for any loss or damage arising from the opening or use of any email or attachment sent by the
Company. The Company recommends that members subject all emails and attachments to 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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Norcros plc Annual report and accounts 2013

Explanatory notes

The Annual General Meeting of the Company will take place at 11am on 24 July 2013 at Ladyﬁeld House, Station Road, Wilmslow, Cheshire
SK9 1BU. The Notice convening that meeting, together with the resolutions to be proposed, appears on pages 71 to 73 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 Directors’ Remuneration Report for the year ended 31 March 2013 is set out in full on pages 30 to 35 of this document. Any shareholder
who would like a copy of the Annual Report and Accounts 2013 can obtain one by contacting our registrar on 0871 664 0300. Alternatively,
the Annual Report and Accounts 2013 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 at a general meeting. If the meeting approves resolution 3,
the ﬁnal dividend of 0.305p per ordinary share will be paid on 30 July 2013 to ordinary shareholders who are on the register of members
on 28 June 2013 in respect of the year ended 31 March 2013.

Resolution 4
Election of Jo Hallas
It is proposed that Jo Hallas be elected as a Director.

Biographical details of Jo can be found on page 22. Jo was appointed to the Board in September 2012 and is therefore seeking election
at the ﬁrst Annual General Meeting following this. The other Directors believe that she is performing her role effectively and possesses the
necessary experience and knowledge and they unanimously recommend that Jo be elected as a Director. The Chairman conﬁrms that her
performance has been evaluated as effective and demonstrating commitment to the role.

Resolution 5
Re-election of Martin Towers
It is proposed that Martin Towers be re-elected as a Director.

Biographical details of Martin can be found on page 22. The other Directors believe that he is performing his role effectively, possesses the
necessary experience and knowledge and he has demonstrated commitment to the role. They therefore unanimously recommend that
Martin be re-elected as a Director.

Resolution 6
Re-election of Vijay Aggarwal
It is proposed that Vijay Aggarwal be re-elected as a Director.

Biographical details of Vijay can be found on page 22. The other Directors believe that he is performing his role effectively and possesses
the necessary experience and knowledge and they therefore unanimously recommend that Vijay be re-elected as a Director. The Chairman
conﬁrms that his performance has been evaluated as effective and demonstrating commitment to the role.

Resolution 7
Re-election of Nick Kelsall
It is proposed that Nick Kelsall be re-elected as a Director.

Biographical details of Nick can be found on page 22. The other Directors believe that he is performing his role effectively and possesses
the necessary experience and knowledge. They therefore unanimously recommend that Nick be re-elected as a Director.

Norcros plc Annual report and accounts 2013

Resolution 8
Re-election of Martin Payne
It is proposed that Martin Payne be re-elected as a Director.

Biographical details of Martin can be found on page 22. The other Directors believe that he is performing his role effectively and possesses
the necessary experience and knowledge. They therefore unanimously recommend that Martin be re-elected as a Director.

Resolution 9
Re-appointment of auditors
The Company is required to appoint an auditor at each general meeting before which accounts are laid, to hold office until the
end of the next such meeting. PricewaterhouseCoopers LLP has indicated that it is willing to continue as the Company’s auditor for
another year. You are therefore asked to re-appoint PricewaterhouseCoopers LLP. The Directors recommend the re-appointment
of PricewaterhouseCoopers LLP.

Resolution 10
Remuneration of auditors
The resolution follows best practice in giving authority to the Directors to determine the remuneration of the Company’s auditor.

Resolution 11
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 25 January 2014 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 11, if passed, will renew the Directors’ authority to allot shares in the capital of the Company up to a maximum aggregate nominal
value of £3,889,923 (representing 388,992,389 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 11 June 2013 (being the latest practicable date prior to the
publication of this document). Of this amount, ordinary shares to an aggregate nominal value of £1,944,961 (representing 194,496,194 ordinary
shares which is approximately one third of the Company’s issued ordinary share capital as at 11 June 2013 (being the latest practicable date
prior to the publication of this document)) can only be allotted pursuant to a rights issue.

As at 11 June 2013 (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 2014.

The Directors have no present intention of exercising this authority (save in connection with any obligation to issue shares under the
Company’s share option schemes). 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 12
Disapplication of pre-emption rights
The Directors are currently authorised, subject to certain limitations, 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 25 January 2014 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 where, for example, 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 £291,744, which represents 29,174,429 ordinary shares and is approximately ﬁve per cent of the Company’s issued ordinary share
capital as at 11 June 2013 (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 2014.

In accordance with the Statement of Principles on disapplying pre-emption rights issued by the Pre-Emption Group (which is supported by
the ABI, 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.

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Norcros plc Annual report and accounts 2013

Explanatory notes
continued

Resolution 13
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 58,348,858
ordinary shares which have an aggregate nominal value of £583,488 (representing approximately 10% of the aggregate nominal value of the
issued ordinary share capital of the Company as at 11 June 2013 (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 2014.

The Directors have no present intention of exercising the authority to purchase the Company’s ordinary shares, but will keep the matter
under review, taking into account other investment opportunities. The authority will be exercised only if the Directors believe that to do
so would result in an increase in earnings per share and would promote the success of the Company and be in the best interests of its
shareholders generally. To the extent that any shares so purchased are held in treasury (see below), earnings per share will be enhanced
until such time, if any, as such shares are resold or transferred out of treasury.

Any purchases of ordinary shares would be by means of market purchases through the London Stock Exchange. If any shares are
purchased, they will be either cancelled or held in treasury. Any such decision will be made by the Directors at the time of purchase on
the basis of the shareholders’ best interests. Shares held in treasury can be cancelled, sold for cash or, in appropriate circumstances, used
to meet obligations under employee share schemes. Any shares held in treasury would not be eligible to vote nor would any dividend be
paid on any such shares. If any ordinary shares purchased pursuant to this authority are not held by the Company as treasury shares, then
such shares would be immediately cancelled, in which event the number of ordinary shares in issue would be reduced.

The Directors believe that it is desirable for the Company to have this choice. Holding the repurchased shares as treasury shares gives the Company
the ability to re-issue them quickly and cost effectively and provides the Company with additional ﬂexibility in the management of its capital base.

As at 11 June 2013 (being the latest practicable date prior to the publication of this document), there were warrants and options over
31,152,663 ordinary shares in the capital of the Company, which represent, in aggregate, approximately 5.3% 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 5.9% of the Company’s issued ordinary share capital. As at 11 June 2013 (being the latest practicable date prior
to the publication of this document), the Company did not hold any shares in treasury.

Resolution 14
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 on not less than the 21 days’ notice which would otherwise
be required. 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 14 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 Companies (Shareholders’
Rights) Regulations 2009 before it can call a general meeting on such notice.

Norcros plc Annual report and accounts 2013

Norcros plc
Ladyﬁeld House
Station Road
Wilmslow
Cheshire SK9 1BU