Norcros Plc Annual Report 2015

FY2015 Annual Report · Norcros Plc

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Annual report
and accounts 2015

Focused on showers, taps, bathroom
accessories, tiles and adhesives.

We have four complementary
UK businesses: Triton Showers, Vado,
Johnson Tiles and Norcros Adhesives,
and three complementary businesses in
South Africa: Johnson Tiles South Africa,
TAL and Tile Africa.

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 aim to use our strong brands, our
innovative products and our leading market
positions to drive investment returns and
shareholder value.

Overview

About Norcros
Highlights
Chairman’s statement
Group Chief Executive’s statement

Strategic report

Strategic report
Strategy and objectives
Business model
Measuring our progress
Business performance
Business review
Group Finance Director’s report
Principal risks and uncertainties
Corporate responsibility and sustainability

IFC
01
02
04

07
07
08
10
11
12
18
24
28

Corporate governance

30
Introduction to governance
30
Board of Directors
32
Corporate governance
36
Audit Committee report
Nominations Committee report
40
Remuneration Committee annual statement 41
43
Directors’ remuneration policy report
49
Annual report on remuneration
58
Directors’ report
60
Statement of Directors’ responsibilities

Group accounts

61
66

Independent auditor’s report
Consolidated income statement
Consolidated statement
67
of comprehensive income
68
Consolidated balance sheet
69
Consolidated cash flow statement
Consolidated statement of changes in equity 70
71
Notes to the Group accounts

Parent Company accounts

Independent auditor’s report
Parent Company balance sheet
Notes to the Parent Company accounts
Notice of Annual General Meeting
Explanatory notes

99
101
102
105
109

p08 Business model

p07 Strategy and objectives

HIGHLIGHTS

Sixth consecutive year of growth

Strong cash generation – underlying operating cash flow
12.8% higher at £22.9m

Significant improvement in South African performance

Good progress on legacy issues

Net debt reduced to £14.2m from £26.9m

Underlying ROCE at 16.3% – ahead of strategic target

Full year dividend increased by 9.8%

FINANCIAL HIGHLIGHTS

Total revenue

£222.1m
+1.5%

Underlying operating profit

£17.0m
+5.8%

Dividends per share

0.56p
+9.8%

7
8
1
2

1
.

2
2
2

4
6
8
1

8
0
9
1

4
0
0
2

0
7
1

1
.
6
1

6
.
1
1

0
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1

8
2
1

6
5
0

1
5
0

6
4
0

2
4
0

6
3
0

OverviewNorcros plc Annual report and accounts 2015

02 Chairman’s statement

SUMMARY

— Sixth consecutive year of growth

— Strong cash generation –

underlying operating cash flow
12.8% higher at £22.9m

— Significant improvement

in South African performance

— Good progress on legacy issues

— Net debt reduced to £14.2m

from £26.9m

— Underlying ROCE at 16.3% –
ahead of strategic target

— Full year dividend increased

by 9.8%

NORCROS HAS RECORDED ANOTHER YEAR OF
REVENUE AND UNDERLYING OPERATING PROFIT
GROWTH, A FEAT THAT THE GROUP HAS NOW
ACHIEVED FOR SIX CONSECUTIVE YEARS.”

Martin Towers
Chairman

Overview
I am delighted to announce that Norcros
has recorded another year of revenue and
underlying operating profit growth, a feat
that the Group has now achieved for six
consecutive years. Group revenue from
continuing operations grew by 1.5% on
a reported basis and 5.0% on a constant
currency basis to £222.1m. Underlying
operating profit at £17.0m, was 5.8% higher
than prior year driven by a strong performance
from our South African businesses, the highlight
of which was the significant improvement
in performance of Johnson Tiles South Africa.
Also pleasing was the strong cash management
demonstrated across the Group with
underlying operating cash flow increasing
to £22.9m (2014: £20.3m).

Significant progress has been made during
the year with the resolution of a number of
our legacy issues. The disposal of Johnson
Tiles Australia completed in May 2014 for
£3.8m allowed the Group to focus on its
strategic geographies of UK, South Africa
and the Middle East. In the second half
of the year we bought out our lease
commitments on the surplus property
at Orgreave Drive, Sheffield, and acquired
the freehold for £3.4m, subsequently
disposing of this freehold along with our
remaining surplus freehold properties for
£6.5m. These actions together with the

recent resolution of our contractual dispute
with Morrisons and the expiry of another
onerous lease, means that the Group’s
legacy property issues are now resolved
in all material respects.

As a result of the strong operating cash
generation, and the proceeds from the
disposals of the surplus property and
Johnson Tiles Australia, net debt reduced
to £14.2m (2014: £26.9m), representing
leverage of just 0.6 x EBITDA
(2014: 1.2 x EBITDA).

In July 2014 we took advantage of
favourable market conditions and agreed
a new unsecured £70m banking facility
with Lloyds Bank plc, Barclays Bank plc
and HSBC Bank plc. The agreement also
includes a £30m accordion facility which
gives us further scope to fund growth
through acquisition.

Dividend
The Board is recommending a final dividend
for the year of 0.375p (2014: 0.34p) per share.
When added to the interim dividend of 0.185p
(2014: 0.17p) per share which was paid
on 7 January 2015, this will make a total
dividend for the year of 0.56p (2014: 0.51p)
per share, a 9.8% increase on the
previous year.

Norcros plc Annual report and accounts 2015

Governance
As Chairman, one of my primary
responsibilities is to ensure that the Group
operates to the highest standards in all aspects
of governance and risk management. Our
aim within Norcros is to manage a growing
business effectively, while ensuring that
proper operating procedures and internal
controls are maintained at all times.
Transparency is central to this objective
and you will find more detail about our
approach and progress over the last year
in the Corporate Governance section
of this report.

People
The people who work for the Group are
undoubtedly our key asset and I am certain
that the existing opportunities for long-term
growth will ensure that our employees find
Norcros a place where they will continue to
enjoy rewarding careers. On behalf of the
Board I congratulate them all for delivering
another year of strong progress.

As well as continuing to drive organic
revenue growth we have committed
additional resource to progress suitable
acquisitions in support of our strategy of
doubling revenue to £420m by 2018. Whilst
no further transactions have been concluded
at the date of this report, I remain confident
that we are making good progress towards
this particular strategic target and that we
will be able to respond swiftly to realise
opportunities as they arise.

I am especially pleased that we have
achieved an underlying ROCE of 16.3% in
the year, ahead of our strategic target of
12–15%, reflecting continued improvements
in our operational performance, and the
benefit of disposing of our non-core assets.

I believe the Group is very well placed to
build on the excellent progress achieved
this year, and underpinned by our strong
brands and leading market positions, I look
forward to the future with optimism.

Summary
Notwithstanding the challenges in our
markets, Norcros has continued to deliver
a creditable year on year improvement in
its trading performance in line with market
expectations. At the same time excellent
progress has been made on the legacy
issues combined with strong cash
generation resulting in a strengthening
in the Group’s financial position.

M. G. Towers
Chairman
18 June 2015

Johnson Tiles South
Africa’s Fusion, Crete
and Nostalgia ranges.

p08 Business model

p12 Business review

OverviewNorcros plc Annual report and accounts 2015

04 Group Chief Executive’s statement

I AM PARTICULARLY PLEASED TO REPORT A SIGNIFICANTLY
IMPROVED PERFORMANCE IN OUR SOUTH AFRICAN BUSINESS
WHERE REVENUE WAS 15.1% HIGHER ON A CONSTANT
CURRENCY BASIS AND 3.2% HIGHER ON A REPORTED BASIS.
UNDERLYING OPER ATING PROFIT FOR THE YEAR IN
SOUTH AFRICA INCREASED BY 68.7% TO £3.2M (2014: £1.9M).”

Nick Kelsall
Group Chief Executive

Overview
Group revenue for the year increased
by 1.5% to £222.1m (2014: £218.7m) and
by 5.0% on a constant currency basis.

The UK market has remained challenging,
with continued growth in the trade sector
driven by continued improvements in new
house build and housing transactions, but
with only limited improvements in the retail
sector impacted by sluggish consumer
confidence particularly at the lower and
middle income groups. UK revenue for the
year at £149.1m (2014: £148.0m) was 0.7%
ahead of the prior year, with higher revenue
at Triton, Vado and Norcros Adhesives
offsetting lower revenue at Johnson Tiles.
UK underlying operating profit for the year
was marginally lower at £13.8m (2014: £14.2m)
with operating margins also slightly lower at
9.2% (2014: 9.6%). Vado and Norcros Adhesives
showed good profit progression in the year,
and Triton maintained its strong profitability
despite increasing revenue investment
in order to develop new export markets.
Johnson Tiles performance was impacted
by lower revenue as well as production
inefficiencies during part of the year which
are now resolved.

I am particularly pleased to report
a significantly improved performance in our
South African business where revenue was
15.1% higher on a constant currency basis
and 3.2% higher on a reported basis.
Underlying operating profit for the year in
South Africa increased by 68.7% to £3.2m
(2014: £1.9m) despite a weaker Rand, and
operating margins improved from 2.7% to
4.4%. All three businesses contributed to
the improvement, with the benefits of the
self–help initiatives and new investment
beginning to be realised. In Johnson Tiles
South Africa, exciting new product ranges
have gained good market acceptance
following the successful installation of
our second inkjet printer, and together
with continued manufacturing efficiency
improvements, enabled the business to break
even in the year, a significant improvement

on last year. In TAL, strong revenue growth
and the benefits of investment in new
mixing and packaging equipment helped
drive an improved performance, and in Tile
Africa, although we are still in the initial
phase of our roll-out programme, our
exciting new CX store format is driving a
much improved retail performance.

Group underlying operating profit at £17.0m
(2014: £16.1m) was 5.8% higher than prior
year, with Group underlying operating
margins also ahead at 7.6% (2014: 7.3%).

Strong cash conversion in our businesses
combined with the proceeds from the
disposal of surplus property and Johnson
Tiles Australia resulted in closing net debt
at £14.2m (2014: £26.9 m), and leverage
of 0.6 times EBITDA (2014: 1.2 times).
With a new banking facility agreed in the
year the Group is well placed to capitalise
on opportunities as they arise.

Strategy
As reported in March 2013, the Board set
itself three strategic targets. These are to
double Group revenue to £420m by 2018,
to maintain revenue derived outside of the
UK at approximately 50% of Group revenue,
and to sustain a pre-tax return on capital
employed of 12% to 15% over the economic
cycle. We remain committed to these
targets and have made further progress
towards achieving them.

The Group has continued to explore
potential acquisitions and to further support
this activity we have hired an experienced
senior executive to solely focus on this key
strategic initiative. Concurrently, continued
investment in new product development
programmes in our businesses is both
generating organic revenue growth and
driving Group synergies. For example, the
first Vado branded electric shower range
was recently launched into the specialist
bathroom boutique channel and a new
brassware range sourced directly from one
of Vado’s Chinese suppliers was recently

launched in our Tile Africa business
in South Africa.

As announced last year, we completed
the sale of our Australian tiles business to
Kim Hin Industries Berhad on 30 May 2014
which resulted in a net cash inflow of £3.8m.
We also completed the lease exit and
freehold acquisition of the property in
Sheffield for £3.4m, subsequently selling
it and other surplus property to Clowes
Developments (UK) Ltd on 2 March 2015,
which resulted in proceeds after costs
of £6.1m. The disposal of these non-core
assets is an excellent outcome for shareholders,
reducing leverage and allowing executive
management to fully focus on its target
geographies of the UK, Africa and the
Middle East.

Summary and outlook
Increasing UK commercial and domestic
construction activity has driven growth in
the UK trade and specification markets and
we continue to grow strongly in this sector.
The UK retail sector has been very mixed but
improving trends in consumer confidence
and forecast growth in RMI expenditure are
both encouraging. Notwithstanding the
short term challenges, the medium-term
outlook in South Africa remains positive
and the strong revenue and self–help
momentum in our South African businesses
should ensure we will make further progress
in this year. With our strong brands, leading
market positions, continued new product
investment and self-help initiatives focused
on market share gain, the Board remains
confident that the Group should continue
to make further progress for the year
to 31 March 2016.

N. P. Kelsall
Group Chief Executive
18 June 2015

Norcros plc Annual report and accounts 2015

O
v
e
r
v
e
w

GA RSFON TEIN CASE ST UDY

THE NEW CX
STORE CONCEPT

Revenue growth (Nov–Mar)

78.2%

Increase in footfall

82.2%

Growth in bathroom ware and taps (Nov–Mar)

331.8%

Project aims:

To move the Tile Africa customer experience in store,
not in line with, but well ahead of the competition.

To make the store easier to sell from, enabling the staff
to improve customer service

To bring a welcoming ‘wow’ factor into the overall look,
while increasing an exciting retail buzz

To improve sales of bathroom ware and taps

Some of the new innovations
incorporated into the store as a result
of comprehensive customer research:

The creation of an ‘Ideas Hub’ where customers can spread
out floor plans, mix and match tiles and décor, and see tiles
under different lighting conditions

The creation of a ‘store within a store’ for bathroom ware,
taps and accessories, featuring bathroom sets put together
according to style and price by group

Moving the popular lifestyle settings from the perimeter
of the store to centrally placed groups of four

Creating easily visible colour coded category
signs to guide customers in store

Laying out the tile displays intuitively,
according to design type

Norcros plc Annual report and accounts 2015

CASE ST UDY

STANTON MANOR
CARE HOME

The Challenge
Stanton Manor Care Home in Derbyshire needed to find
an all inclusive showering solution for their new downstairs
bathroom that would suit the majority of their residents
and yet allow Stanton Manor to future proof their
personal care facilities.

Stanton Manor is a beautiful 20th century building
so it was also important to the owners that the new
extension was also stylish and homely.

The Solution
When Stanton Manor contacted Triton with their
requirements for their new downstairs bathroom, it was
clear the Safeguard+ was the perfect fit for them. Mindful
of the ever-changing needs of care home residents who
need every possible safety assurance without compromising
the appearance of their bathroom, the inclusive design
of the Safeguard+ was ideal. For additional assurance
and functionality, we also recommend that we fitted the
Safeguard+ with the Grab Riser Kit which provides a grab
bar in the showering area tested up to 150kg if accidently
or intentionally grabbed.

The Result
Priya Soni, director at Stanton Manor Care Home,
commented: “Since installing the new shower, we’ve been
able to offer all our residents safer showering than before,
which is thanks to the variety of features offered by the
product. We have a responsibility to ensure the products
we use comply with quality and safety standards while
being easy to use for residents and staff and the
Safeguard+ certainly ticks all the boxes.”

Features such as the Grab Riser kit and automatic setting
of the duration of shower have already increased the
independence of the residents, which in turn is better
for their own personal well-being.

Strategic report

Norcros plc Annual report and accounts 2015

To the members of Norcros plc
The Strategic Report provides a review of the business for the financial year and describes how we manage risks.

The report outlines the developments and performance of the Group during the financial year, the position at the end of the year
and discusses the main trends and factors that could affect the future.

Key performance indicators are published to show the performance and position of the Group. Also provided is an outline
of the Group’s strategy and objectives, along with the business model.

Approval
The Group Strategic Report on pages 7 to 29 of Norcros plc was approved by the Board and signed on its behalf by:

N.P. Kelsall
Group Chief Executive
18 June 2015

Strategy and objectives
A focused growth strategy and strong results

OUR STRATEGY:

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

Leverage revenue synergies within our
portfolio of complementary businesses

Maintain investment in our strong
brands and new product development

Target acquisitions in complementary
markets with attractive returns on capital

Continue to ensure high standards of
corporate governance and responsibility

OUR STRATEGIC TARGETS:

Grow Group revenue
to £420m by 2018

Maintain approximately
50% of Group revenue
derived outside the UK

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

About our strategy
The Board believes the implementation of this strategy will enhance shareholder value.

Organic growth will continue to be driven by capitalising on our leading market positions in the UK and South Africa. Our strategic
initiatives will ensure we maintain the provision of innovative new product programmes, excellent customer service and investment
in our brand portfolio. We will also reinforce our “designed and built in Britain” credentials as well as capture the growth opportunities
in South Africa, sub-Saharan Africa and the Middle East, 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.

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 acquisition of Vado in 2013
represented a first step in this approach.

Strategic reportNorcros plc Annual report and accounts 2015

08 Business model

Consistent standards. Considerable resources.

We have a long, successful track record of serving consumers, architects, designers, retailers
and wholesalers. Our emphasis is on innovation, quality and service. We base our business on
understanding our customers’ needs. Norcros is a substantial group with consistent, high quality
standards and considerable resources. We invest significantly and continuously in our people,
product development and processes and we aim to develop our business in both the quality
of our products and the scale of our activities.

Maximising shareholder value through continuous investment

cesses

o
r
P

CONTINUOUS
INVESTMENT

Produ c t

We serve consumers, architects, designers,
retailers and wholesalers across the globe

Wide product range

Strong brands

We offer a “one-stop shop” of showering, bathroom controls,
tiles and fixing solutions

Operating in the UK and South Africa, many of our brands
are household names and hold market-leading positions

Trusted quality

Outstanding service

Leveraging our established positions, we have a reputation
for innovation and leading edge technical capability

We offer outstanding customer service, bespoke solutions
and unrivalled technical support

Norcros plc Annual report and accounts 2015

Our portfolio of brands is well-established,
with leading market positions.

SOUTH AFRICA

In the UK we offer a wide range of quality bathroom and
kitchen products both for domestic and commercial applications.
Our portfolio of businesses is well established, services a broad
customer base and benefits from leading market positions and
strong brands.

Our complementary businesses in South Africa operate
principally from a shared manufacturing and administrative site
near Johannesburg, allowing them to maximise operational,
revenue and cost synergies.

Triton

Johnson Tiles South Africa

Manufacturer and
distributor of electric
and mixer showers
and accessories

Providing high quality and innovative electric
and mixer showers to a wide range of retail
and trade customers, assembled in the UK
using parts sourced from Europe and the
Far East

Manufacturer and
distributor of ceramic
wall and floor tiles

A well invested plant and technological
know-how has positioned JTSA as the
number two ceramic tile manufacturer
in South Africa

Vado

Manufacturer
and distributor of
taps, mixer showers,
bathroom accessories
and valves

Johnson Tiles

Manufacturer and
distributor of ceramic
wall and floor tiles

Providing a wide range of high end brassware
and accessories to retail and trade customers,
assembled in the UK using parts sourced
from Europe and the Far East

TAL

Leading manufacturer
of tile adhesives,
pourable floor
coverings and
tiling tools

Tile Africa

Offering a range of products and accessories
to be a “one-stop shop” for tile fixing solutions

Offering a mixture of own manufactured
wall tile from our plant in Stoke on Trent,
and wall and floor tile sourced from around
the world, it is a “one-stop shop” for all
customers’ ceramic tile needs, from high
volume floor tiles all the way to bespoke
individual projects

Leading retailer of
local and international
tiles and associated
bathroom and
kitchen products

A network of 33 showrooms throughout
South Africa and sub-Saharan Africa
selling both own manufactured tiles
and adhesives from its sister companies
and sourced products

Norcros Adhesives

Manufacturer of tile
and stone adhesives
and ancillary products

From our state-of-the-art manufacturing
facility in Stoke on Trent, we supply ceramic tile
adhesives and self-levelling compounds as well
as backing boards and other requirements for
wet rooms to both retail and trade customers

Strategic reportNorcros plc Annual report and accounts 2015

10 Measuring our progress

We use the following key performance indicators (KPIs)
to measure our progress against our strategic priorities.

Total revenue (£m)

£222.1m
+1.5%

7
8
1
2

1
.

2
2
2

4
6
8
1

8
0
9
1

4
0
0
2

Definition
Reported Group revenue for the year
which excludes discontinued operations.

Performance
Total revenue for the year increased
by £3.4m (1.5%) or 5.0% on a constant
currency basis. UK revenues increased
by 0.7% and South African revenues
rose by 3.2%. The increase in sales in
our South African business was 15.1%
on a constant currency basis.

Group revenue outside the UK (%)

44.6%
-0.3%

9
6
4

5
6
4

5
4

9
4
4

6
4
4

Definition
Revenue from the Group’s South
African operating segment plus
export revenue from the Group’s
UK operating segment.

Performance
Group revenue outside the UK fell
slightly to 44.6% which was mainly
due to the adverse translation impact
of the weaker South African Rand
coupled with challenging conditions
in some export markets of our
UK businesses.

Underlying operating profit (£m)

Underlying return on capital employed (%)

£17.0m
+5.8%

0
7
1

1
.
6
1

6
.
1
1

0
2
1

8
2
1

Definition
Reported operating profit as adjusted
for IAS 19R administrative expenses,
acquisition related costs and exceptional
operating items, as defined in note 8
to the financial statements.

Performance
Underlying operating profit increased
by £0.9m (5.8%) principally reflecting
an improved performance in the Group’s
South African operating segment.

16.3%
+1.3%

6
1

0
5
1

5
2
1

2
1

6
2
1

Definition
Underlying operating profit expressed
as a percentage of the average of
opening and closing underlying capital
employed (as defined in note 8 to the
financial statements).

Performance
Underlying ROCE increased to 16.3%
in the year from 15.0%, due to improved
profitability, strong cash generation
and the disposal of the legacy surplus
freehold property.

Dividends per share (p)

Underlying operating cash flow (£m)

0.56p
+9.8%

6
5
0

1
5
0

6
4
0

2
4
0

6
3
0

Definition
The total of the interim dividend and
the proposed final dividend for the
financial year.

Performance
In line with the Board’s progressive
dividend policy the dividend per share
increased 9.8% to 0.56p per share from
0.51p per share.

£22.9m
+12.8%

2
2

3
0
2

4
7
1

1
.
8
1

8
0
1

Definition
Cash generated from continuing
operations as adjusted for cash flows
from exceptional items and pension
fund deficit recovery contributions,
as defined in note 8 to the
financial statements.

Performance
Underlying operating cash generation
increased by £2.6m due to increased
profits and continued strong working
capital management.

Business performance

Norcros plc Annual report and accounts 2015

Norcros has made significant progress during the year, recording
a sixth consecutive year of revenue and underlying operating profit
growth. A summary of our key financials can be found below.

Revenue

Operating profit

IAS 19R administrative expenses

Acquisition related costs

Exceptional operating items

Underlying operating profit

Revenue – UK

Revenue – South Africa

Revenue – Group

Underlying operating profit – UK

Underlying operating profit – South Africa

Underlying operating profit – Group

Underlying operating profit margin – UK

Underlying operating profit margin – South Africa

Underlying operating profit margin – Group

Underlying operating profit

Depreciation

Underlying EBITDA

Net working capital movement

Share-based payments

Other non-cash items

Underlying operating cash flow

2015
£m

222.1

10.6

1.7

2.2

2.5

17.0

2015
£m

149.1

73.0

222.1

13.8

3.2

17.0

9.2%

4.4%

7.6%

2015
£m

17.0

6.0

23.0

(1.5)

1.3

0.1

22.9

2014
£m

218.7

12.8

1.4

0.7

1.2

16.1

2014
£m

148.0

70.7

218.7

14.2

1.9

16.1

9.6%

2.7%

7.3%

2014
£m

16.1

5.9

22.0

(2.6)

0.9

—

20.3

Strategic reportNorcros plc Annual report and accounts 2015

12 Business review

Continued good progress in Triton Showers and Vado
and a particularly strong performance in Norcros Adhesives
were partly offset by lower revenue in Johnson Tiles.

In the UK, revenue increased in the year by
0.7% to £149.1m (2014: £148.0m). Continued
good progress in Triton Showers and Vado
and a particularly strong performance in
Norcros Adhesives were partly offset by
lower revenue in Johnson Tiles. Underlying
operating profit was lower at £13.8m
(2014: £14.2m) with margins also slightly
lower at 9.2% (2014: 9.6%). This performance
reflects the mixed market conditions which
have prevailed, with gains in trade and
specification markets offset by more
challenging retail and export environments.

Triton Showers
Triton Showers, our market leading UK
domestic shower business, grew revenue
by 0.4% to £52.1m (2014: £51.9m). The
UK shower market remained challenging
during the last year, although Triton’s
main export market, Ireland, showed
good growth.

UK revenue was 2.1% lower than the prior
year. Despite some good progress in
specification sales, trade sector revenue
was 4.7% lower than prior year, driven by
specific destocking in a small number of
key accounts. Retail sector revenue was
in line with last year, which given the
contraction in the retail market in the year
was testament to Triton’s leading position,
the strength of its consumer franchise
and its reputation for quality, service
and innovation.

Triton’s new Safeguard+ range of thermostatic
electric showers, which have been designed
principally for the care market, have been
very well received during the year and are
the subject of case study on page 6.

Export revenue, which represents
approximately 15% of overall revenue,
was 17.3% higher compared to prior year.
Triton’s primary export market is Ireland
and our strong performance here reflects
the recovery in the Irish economy which

is beginning to drive increased activity in both
the domestic and commercial construction
sectors. Increased revenue investment in
the year has been focused on developing
a range of electric showers that operate in
a low pressure, high ambient temperature
environment. Testing is progressing well,
and when completed, the products will
allow us to realise opportunities in new
export markets in the coming year.

Triton has again delivered a strong
underlying operating profit performance
as well as excellent cash conversion.

After 23 years in the business, Lorna Fellowes
will step down from her role as Managing
Director of Triton on 30 June 2015. Lorna
will take up a Group role with particular focus
on business development and acquisitions.
David Tutton, Business Development Director
at Triton for the last twelve months, will
become Managing Director, and his
experience in this role will ensure that the
success of Triton achieved during Lorna’s
tenure will continue.

Vado
Vado, our leading manufacturer of taps,
mixer showers, bathroom accessories and
valves recorded revenue of £30.5m for the
period (2014: £29.1m), 4.7% higher than
prior year. During the year Vado continued
its successful penetration of the UK market
although challenging conditions in its major
export markets resulted in revenue lower
than the prior year.

UK revenue was 19.8% higher than the prior
year with strong performances in both the
retail and trade sectors. UK retail revenue
was 20.9% higher, as a result of the continuing
success of the Vado Partnership Programme
and growth with national buying groups.
During the year Vado has not only increased
revenue through established relationships
with existing customers, but also achieved
preferred supplier status with new buying

groups. UK trade sales also grew
considerably by 18.5% against the prior
year, similarly through growth via its
existing customer base and also winning
new accounts, such as Avant Homes
and Lovell.

Performance in our export markets was
disappointing with a 15.8% reduction in
revenues against the previous year. This
predominantly reflected key customer
destocking in the early part of the year
together with a number of construction
projects being delayed in the Middle East.
However, additional sales resource has
been deployed in this area and new
channels have been opened in India,
South America and the Far East which we
expect to benefit from in the coming year.

During the year, a new ERP system was
successfully implemented in order to provide
the business with a strong platform to support
its continued growth. The new system is
already yielding operational improvements
and enhanced business information.

In addition, we continue to make solid
progress with a number of Group wide
synergy initiatives. These include the launch
of the first range of Vado electric showers
into the specialist bathroom boutique
channel which has already has gained good
momentum and a joint project with Tile
Africa, our leading specialist retailer in
South Africa, where we have recently
introduced a new own label range of
brassware sourced from Vado’s specialist
supply base. In the coming year, we plan to
launch a range of high end Vado branded
brassware to complement our existing offer.

Underlying operating profit was in line
with expectations and ahead of last year
with good cash generation.

Norcros plc Annual report and accounts 2015

The performance in the year reflects the mixed market conditions
which have prevailed, with gains in trade and specification markets
offset by more challenging retail and export environments.

Share of Group revenue

UK revenue (£m)

67%

£149.1m

148.0

149.1

114.0

116.8

122.8

4
5
5

1
.

5
5

1
.
4

1
.
9
5

6
3
5

4
4

3
7
6

1
.
1
5

.
1
6

1
.
9
2

9
.
1
5

8
6

7
9
5

5
0
3

1
.

2
5

£149.1m
+0.7%

Total
Norcros Adhesives
Johnson Tiles
Vado
Triton

Our divisions

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

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

Vado
Leading manufacturer and global distributor of bathroom controls
including taps, mixer showers, bathroom accessories and valves

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

Strategic reportNorcros plc Annual report and accounts 2015

14 Business review continued

During the year, the business was very proud to be involved in the
supply of ceramic poppies for the “Blood Swept Lands and Seas
of Red” art and charity fund raising installation at the Tower
of London to commemorate the beginning of World War I.

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 decrease by
3.2% to £59.7m (2014: £61.7m).

UK revenue was 2.8% lower overall,
although there were marked differences in
sector performance with a 9.6% increase in
trade revenue offset by an 11.9% reduction
in retail revenue.

The trade sector has grown in the year as a
result of increased construction activity and
additional specification business, the latter
aided by a reconfiguration of our product
range in the year and the introduction of
new “on trend” colours. During the year,
the business was very proud to be involved
in the supply of ceramic poppies for the
“Blood Swept Lands and Seas of Red” art
and charity fund-raising installation at the
Tower of London to commemorate the
beginning of World War I. A bespoke hand
crafted manufacturing cell was created for
this project in the space of three weeks,
and the success of this project is testament to
the skills and commitment of our workforce.

The disappointing retail performance
mainly reflects range reviews at a number
of our key customers which resulted in the
number of stocked lines being reduced.
We have however made good progress
at other accounts such as Topps Tiles,
introducing the Minton Hollins range during
the year which has been well received.

Export revenue, which represents
approximately 13% of overall revenue,
returned to growth in the second half
of the year albeit was 5.5% lower for the
full year overall. The year’s performance
reflected both lower revenue in the
Middle East and the fact that the prior year
included the benefit of a number of large
commercial specifications such as the
Waikiki Beach Hilton Hotel mural. The
second half performance also benefited
from the restructuring of our Middle East
sales operation and the closure of our
US warehouse.

Manufacturing process improvements
which reduced wastage over the past two
years eventually necessitated a change
to our body recipe to reduce the amount
of recycled waste ceramic material used.
This change in recipe was implemented in
July, but despite significant off line testing,
it resulted in significant disruption and a
reduction in production output in the year.
Manufacturing performance improved and
returned to normal levels of efficiency
in the last two months of the year which
has been maintained in this financial year.
This, coupled with the challenging retail
conditions, resulted in a small operating
loss being recorded in the year.

Norcros Adhesives
Norcros Adhesives, our UK manufacturer
and supplier of tile and stone adhesives and
ancillary products, achieved another year
of very strong momentum gaining market
share as revenue increased by 28.4%
to £6.8m (2014: £5.3m).

The increase in share reflects further
penetration into the DIY multiples channel
and increased sales resource targeted at
the specification sector. Tailored sales,
marketing and promotional initiatives
targeted at each segment and our multi
brand strategy supported by our technical
advice and excellent customer service have
proved highly successful.

Investment in new product development
remains central to the business and has
continued with the launch of a range of
new adhesives and colour matched silicone
which has received a good initial response
from the market. These products will further
support our position in the specification
market. The reinforced polymer technology
used in these products is new to the market
and provides a degree of differentiation.

To support the growth of the business
we have also invested in both new plant
and human resources with improvements
in our operational efficiency.

Another year of strong revenue growth
and improved operational efficiencies has
resulted in underlying operating profits
higher than last year.

Norcros plc Annual report and accounts 2015

CASE ST UDY

POPPIES BLOOM AT
TOWER OF LONDON S

t
r
a
t
e
g
c
r
e
p
o
r
t

The Challenge
The Tunstall-based company Johnson Tiles was
approached by project artist Paul Cummins to help meet
the target of creating 888,246 poppies to fill the moat
at the Tower of London, with each ceramic flower representing
a person who died in the war.

The Solution
Johnson Tiles recruited a team of specialist ceramic artists,
who worked at the factory over the spring/summer,
individually making and decorating every poppy by hand.
Around 8,000 poppies a day were made by the team at the
factory in Tunstall, Stoke-on-Trent, for Cummins’ Blood
Swept Lands and Seas of Red installation, in a labour intensive
process involving a very traditional, skilled method of making.
The manufacture of each poppy began with processing clay
to produce slabs. Flower templates were then cut from the
slabs, with the two layers formed into the poppy shape.
Each poppy was dried for a minimum of six hours in a cabinet
dryer, which reduced the moisture content enough to fire
them in the kiln. The poppies were “biscuit fired” and then
hand-dipped and re-fired to high temperature before being
dispatched to Cummins’ studio in Derby, where they were
hand-finished and sent to the Tower of London. The moat
installation, which was officially unveiled by the Duke and
Duchess of Cambridge in the summer, was filled up as the
flowers were made, with volunteers planting each one.
The final poppy was “planted” on Armistice Day to mark
the end of the conflict.

The Result
After receiving an estimated five million visitors since the
Blood Swept Lands and Seas of Red installation was officially
unveiled, more than 11,000 volunteers then embarked on the
task of dismantling the 888,246 poppies, which are thought
to have raised in excess of £1.2m for each of the six service
charities involved. Harry Foster, Specialist Products Manager
at Johnson Tiles, said: “Standing in the moat on the morning
of the 11th whilst the last roll of honour was being read out,
the magnitude of what had been achieved began to set in,
along with the emotion and a realisation of the sheer scale
of the loss, it had admittedly become impossible to hold back
the tears. The nod of acknowledgement from a similarly tearful
Paul Cummins confirmed that it was mission accomplished,
and that we could now rest easy in the knowledge that we
had succeeded in our efforts to deliver a fitting tribute
to the sacrifice made during the conflict.”

Norcros plc Annual report and accounts 2015

Business review continued

Underlying operating profit for the year improved substantially to
£3.2m (2014: £1.9m) despite the weaker Rand adversely impacting
Sterling reported profits by approximately £0.3m.

Our South African business recorded
another year of double digit growth with
revenue 15.1% higher on a constant currency
basis. The average exchange rate for Sterling to
Rand for the year was 11.6% weaker at ZAR17.82
(2014: ZAR15.97), resulting in full year reported
revenue of £73.0m (2014: £70.7m), which
was 3.2% higher than prior year. Underlying
operating profit for the year improved
substantially to £3.2m (2014: £1.9m) despite
the weaker Rand adversely impacting Sterling
reported profits by approximately £0.3m.

Johnson Tiles South Africa
Johnson Tiles South Africa continued
to build on the excellent progress of
the last few years and achieved a break
even operating result in line with our
expectations notwithstanding the disruption
from the legal strike action earlier in the
year and the recent national electricity
load-shedding programme. As a result of
the ongoing likelihood of further electricity
stoppages we have invested in a standby
diesel generator which will be installed
in quarter two of this year.

Independent sector revenue grew 9.5%
in the year on a constant currency basis
albeit on a reported basis was 2.5% lower
at £10.3m (2014: £10.6m). The improvement
in performance reflects the second phase
of our turnaround plan which is focused
on enhancing our product offer. After the
successful installation of our second inkjet
printer our new product programme has
delivered a number of exciting new ranges
of inkjet printed product that have been
well received in the market.

Given the significant improvements made
in our manufacturing operations over the
last few years and more recently from the
market reaction to our improving product
offer we remain confident of making
further progress in this financial year.

TAL
TAL, our market leading adhesives business
in South Africa, delivered another strong
performance with constant currency
revenue growth of 11.7% compared to prior
year or 0.3% growth on a reported basis to
£17.2m (2014: £17.1m). This strong revenue
growth reflected both market share gain
in the domestic market as well as strong
growth in exports to sub-Saharan Africa
with export revenue 19.1% higher than
prior year.

Significant investment in plant and equipment,
particularly new mixers and packing heads
at our main Olifantsfontein plant was
instrumental in driving improvements in
plant efficiency during the year. This was
supplemented by investment in a new
grout packaging line which delivered both
manufacturing and revenue benefits.

In particular, store-based retail revenue grew
by 26.9% on a like-for-like basis as a result of
an improved in-stock position and our store
upgrade programme.

This year we have focused our efforts
on improving performance in our existing
store portfolio. We launched our new CX
store format which has been developed
to step up our overall retail customer
experience as well as to include our first
bathroom store-within-a-store concept.
Our Garsfontein and Alberton stores have
been upgraded to this format with the initial
results exceeding our expectations and
more detail can be found in the case study
on page 5.

During the second half of the year, we acquired
our strategically located franchise store in
Port Elizabeth for a total consideration of
£0.3m, and two unprofitable stores were
closed. Due to delays in planning permission,
no new stores were opened in the year, but
we expect to open new stores in Boksburg
and Southgate within the next twelve months.
Tile Africa currently has 29 owned stores
and four franchises.

Underlying operating profit for the year
was ahead of last year driving good cash
conversion in the business.

Underlying profit showed good progress
and was ahead of last year.

Tile Africa
Tile Africa, our leading retailer of wall and
floor tiles, adhesives, showers, sanitaryware
and bathroom fittings, grew revenue by 17.8%
on a constant currency basis and 5.7% on a
reported basis to £45.5m (2014: £43.0m).

Norcros plc Annual report and accounts 2015

South Africa

Significant investment in plant and equipment, store development
and new products has led to considerable year on year growth
in revenue and underlying operating profit.

Share of Group revenue

South Africa revenue (£m)

33%

£73.0m

72.4

74.0

6
6

8
4

0
7
1

7
7
4

1
.

8
1

77.6

.
1
1

9
6
4

4
9
1

70.7

73.0

6
0
1

0
3
4

1
.
7
1

3
0
1

5
4

2
7
1

£73.0m
+3.2%

Total
Johnson Tiles
South Africa
Tile Africa
TAL

Our divisions

South Africa revenue (ZAR m)

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
TAL is 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

Tile Africa
Tile Africa is our South African retailer of tiles, adhesives,
sanitaryware and bathroom fittings. The business operates
from 33 showrooms located mainly in South Africa but
also in Namibia and Botswana

1,037

1,130

806

868

3
7

4
4
5

9
8
1

6
9

0
6
5

2
1
2

2
5
1

6
2
6

9
5
2

8
6
1

8
8
6

4
7
2

1,300

4
8
1

0
1
8

6
0
3

ZAR1,300m
+15.1%

Total
Johnson Tiles
South Africa
Tile Africa
TAL

Strategic reportNorcros plc Annual report and accounts 2015

18 Group Finance Director’s report

UNDERLYING OPERATING CASH FLOW WAS £2.6M
HIGHER THAN IN THE PREVIOUS YEAR AT £22.9M,
AS A RESULT OF HIGHER OPERATING PROFITS AND
STRONG MANAGEMENT OF WORKING CAPITAL.”

SUMMARY

— Group revenue increased by

Martin Payne
Group Finance Director

Financial overview

Continuing operations

1.5% to £222.1m (2014: £218.7m)

Revenue

— Group underlying operating
profit of £17.0m was 5.8%
ahead of prior year

— Group profit before tax of
£11.0m was 88.4% ahead
of prior year

— Group underlying profit before
tax of £15.8m was 8.3% ahead
of prior year

— Group underlying return on
capital employed was 16.3%
(2014: 15.0%)

— Underlying operating cash flow

of £22.9m was 12.8% ahead
of the prior year

— Underlying operating

cash generation was 99.6%
of underlying EBITDA
(2014: 92.3%)

— Net debt reduced to £14.2m

from £26.9m

Underlying operating profit

IAS 19R administrative costs

Acquisition related costs

Exceptional operating items

Operating profit

Net finance income/(costs)

Exceptional finance costs

Profit before taxation

Taxation

Profit for the year from continuing operations

Profit/(loss) for the year from discontinued operations

Profit for the year

2015
£m

222.1

17.0

(1.7)

(2.2)

(2.5)

10.6

0.8

(0.4)

11.0

(2.9)

8.1

0.1

8.2

2014
£m

218.7

16.1

(1.4)

(0.7)

(1.2)

12.8

(7.0)

—

5.8

4.3

10.1

(1.4)

8.7

Revenue
Group revenue at £222.1m (2014: £218.7m)
increased by 1.5% on a reported basis
and 5.0% on a constant currency basis.

Underlying operating profit
Underlying operating profit increased by 5.8%
to £17.0m (2014: £16.1m). Our UK businesses
delivered underlying operating profit of
£13.8m (2014: £14.2m), and our South African
businesses generated an underlying operating
profit of £3.2m (2014: £1.9m). On a constant
currency basis the improvement in underlying
operating profit in South African businesses
was £1.6m. Group underlying operating
profit margins improved to 7.6% (2014: 7.3%).

IAS 19R administrative costs
These costs represent the costs incurred by
the Trustee of administering the UK pension
schemes and are reflected in the income

statement following the implementation
of IAS 19R in the previous year. Costs have
risen to £1.7m (2014: £1.4m) largely as a
result of an increase in the levy charged
by the Pension Protection Fund.

Acquisition related costs
As described more fully in the Audit
Committee report on page 37 and in
note 29 to the Group accounts, we have
reclassified certain costs related to business
combination activities in line with emerging
market practice. Costs of £2.2m (2014: £0.7m)
have been recognised in the year and have
increased principally due to a £0.8m higher
deferred remuneration charge related to
Vado and £0.8m (2014: £nil) incremental
staff costs and external advisory fees. A full
breakdown is provided in note 5 to the
Group accounts.

Norcros plc Annual report and accounts 2015

Exceptional operating items
A net exceptional operating charge of £2.5m (2014: £1.2m) was recorded as shown in the
table below. These are items of expense or income which arise from transactions which
occur outside of the Group’s normal operations.

Profit on disposal of residual property

Sheffield lease surrender

Loss on disposal of property portfolio

Legal costs

Pension scheme settlement gain

Restructuring costs

2015
£m

(0.4)

2.5

1.5

0.3

(1.7)

0.3

2.5

2014
£m

(0.5)

—

0.2

—

1.5

1.2

A small parcel of land in Braintree was sold
in the year generating a profit of £0.4m.
In the previous year a surplus facility in
South Africa was sold at a profit of £0.5m.

led to a settlement gain of £1.7m which
is more fully described in note 23 to the
Group accounts.

The Group acquired the freehold and exited
its onerous lease in connection with a
property at Orgreave Drive, Sheffield in
November 2014, leading to a charge of £2.5m.
This property, together with other surplus
properties in Tunstall and Boston, were sold
to Clowes Developments (UK) Ltd for cash
consideration of £6.5m in March 2015
which led to a loss on disposal of £1.5m.

Legal costs of £0.3m (2014: £0.2m) related
to the contractual dispute with Morrisons
regarding the disposal of part of the surplus
land in Tunstall. This dispute has subsequently
been settled in May 2015.

During the year we successfully implemented
a number of liability management initiatives
in connection with the Group’s UK defined
benefit pension scheme. These exercises

Restructuring costs relate principally
to redundancies and asset write-downs
at the Group’s businesses and was much
higher in 2014 due to the actions taken by
management to restructure the Johnson
Tiles business early in that year.

Operating profit for the year was £10.6m
(2014: £12.8m).

Net finance income/(costs)
and exceptional finance costs
Net finance income/(costs) decreased by
£7.8m to income of £0.8m (2014: £7.0m
cost), although £7.0m of this increase
related to the movement on fair value of
foreign exchange contracts. Bank interest
payable of £1.2m (2014: £1.5m) was lower
than last year and reflects the decrease in
average net debt and the lower interest
margins agreed as part of the new banking

facility completed in July 2014. Also as
a result of entering a new banking facility,
the remaining unamortised costs of raising
debt finance related to the old facility
were written off which led to an exceptional
charge of £0.4m being recognised.

The Group has recognised a £1.1m interest
cost in respect of the pension scheme
liability (2014: £1.3m) which decreased
by £0.2m principally due to the lower
opening liability.

Taxation
The tax charge for the year was £2.9m
(2014: credit of £4.3m). In the previous
year the remaining unrecognised deferred
tax assets in relation to both the UK and
South African businesses of £4.4m were
recognised in respect of tax losses and
capital allowances, and consequently
the current years charge represents
a more normalised tax charge.

The effective tax rate for the year was
26.6% which was broadly in line with
expectations, and is higher than the
standard rate of tax in the UK because of
the geographic mix of profits and because
certain expenses, such as amortisation, are
generally not allowable for tax purposes.
The standard rate of UK corporation tax
reduced to 21% from 1 April 2014 has
reduced further to 20% from 1 April 2015.
In South Africa the standard rate of tax
is 28%, unchanged from 2014.

Strategic reportNorcros plc Annual report and accounts 2015

20 Group Finance Director’s report continued

It is the Board’s intention to continue a progressive yet prudent
dividend policy subject to the Group’s earnings, cash flow
and balance sheet position.

Earnings per share
Underlying diluted earnings per share
amounted to 2.1p (2014: 2.8p). Excluding
the effect of deferred tax assets recognised
in 2014, underlying diluted earnings per share
for that year would have been 2.1p. Basic
earnings per share were 1.4p (2014: 1.5p).

Dividends
As previously announced it is the Board’s
intention to continue a progressive yet
prudent dividend policy subject to the Group’s
earnings, cash flow and balance sheet
position. As such the Board is recommending
a final dividend of 0.375p (2014: 0.34p) per
share, which, if approved, together with the
interim dividend of 0.185p (2014: 0.17p),
makes a total dividend of 0.56p (2014: 0.51p)
in respect of the year ended 31 March 2015.

This final dividend, if approved at the
Annual General Meeting, will be payable on
29 July 2015 to shareholders on the register
on 26 June 2015. The shares will be quoted
ex-dividend on 25 June 2015.

2014
£m

5.8

1.4

0.7

1.2

0.3

—

3.7

0.2

1.3

14.6

2015
£m

11.0

1.7

2.2

2.5

0.1

0.4

(3.3)

0.1

1.1

15.8

Profit before tax
Underlying profit before tax was £15.8m (2014: £14.6m), reflecting the increased
underlying operating profit of £0.9m noted above and the lower bank interest payable
of £0.3m. Underlying profit before tax is reconciled as shown below:

Profit before taxation from continuing operations

Adjusted for:

– IAS 19R administrative expenses

– acquisition related costs

– exceptional operating items

– amortisation of costs of raising finance

– amortisation of costs of raising finance – exceptional

– net movement on fair value of derivative

financial instruments

– discount on property lease provisions

– IAS 19R finance cost

Underlying profit before taxation

The Group reported profit before tax
of £11.0m (2014: £5.8m).

Profit/(loss) from discontinued operations
On 30 May 2014, the Company completed
a transaction to dispose of 100% of the
issued share capital of Norcros Industry
(Pty) Limited (NIPL), which owned its
Australian tiles business, to Kim Hin
Industries Berhad (KHIB).

A loss of £1.6m relating to this sale was
recognised in the year to 31 March 2014,
which, together with the results of the year
for NIPL of £0.2m, was disclosed within
profit/(loss) for the year from discontinued
operations. Following the completion of
the transaction, the actual loss on disposal

was £1.5m meaning that a small profit of
£0.1m has been recognised in the year to
31 March 2015. Further details are provided
in note 28 to the financial statements.

Restatement of prior year results
As described more fully in the Audit
Committee report on page 37 and in
note 29 to the Group accounts, we have
reclassified certain costs related to business
combination activities in line with emerging
market practice. In order to effect fair
comparison, the results for the year ended
31 March 2014 have been restated to
conform to this style of presentation. The
restatement has no impact on operating
profit or cash flows.

Norcros plc Annual report and accounts 2015

Balance sheet
The Group’s balance sheet is summarised below.

Property, plant, equipment and investment properties

Goodwill and intangible assets

Deferred tax

Net current assets excluding cash, borrowings
and assets held-for-sale

Pension scheme liability

Other non-current assets and liabilities

Cash and borrowings

Net assets before assets held-for-sale

Assets held-for-sale

Net assets

2015
£m

37.6

26.9

13.8

37.6

(44.3)

(4.7)

(14.2)

52.7

—

52.7

2014
£m

41.3

27.1

11.6

36.7

(21.8)

(6.3)

(27.4)

61.2

4.3

65.5

Property, plant, equipment and investment
properties fell by £3.7m, which was chiefly
due to the sale of the surplus investment
property portfolio. Additions in the year
were £6.9m (2014: £4.3m).

Deferred tax increased principally as a result
of the full recognition of the increase in the
pension scheme liability.

Pension schemes
The Group contributed £2.1m (2014: £2.1m)
into its UK defined benefit pension scheme
during the year. This included deficit recovery
contributions of £2.1m (2014: £2.0m) as part
of the 2012 deficit recovery plan.

The gross defined benefit pension scheme
valuation on the UK scheme showed a
deficit of £44.3m compared to a deficit of
£21.8m last year. The increase in the deficit
reflects an increase in the present value of
scheme liabilities due to a lower discount
rate of 3.30% (2014: 4.30%) net of a higher

than expected return on scheme assets
driven by rising equity markets.

The Plan has undertaken a number of
liability management exercises during the
year which have resulted in a number of
benefits being settled and some changes
to pension increases in payment. The net
impact of these exercises was to reduce
the net deficit by £1.7m which has been
reflected in the Consolidated Income
Statement as an exceptional operating
item as follows:

£m

Liabilities extinguished on settlements

6.8

Assets distributed on settlements

(4.4)

IAS 19R pension administration
expenses - liability management
exercises

Total

(0.7)

1.7

The Group’s contributions to its defined
contribution pension schemes were £2.6m
(2014: £2.2m). The main reason for the
increase is due to the implementation
of salary exchange scheme for all UK
employees with effect from 1 April 2014.
This scheme has had no overall impact
on UK employment costs as the scheme
operates by employees electing to
exchange a proportion of their salary
for an employer pension contribution.

Cash flow and net debt
Net debt decreased by £12.7m in the year
to £14.2m (2014: £26.9m). A summary of the
movement in net debt is shown overleaf.

Underlying operating cash flow was £2.6m
higher than in the previous year at £22.9m,
as a result of higher operating profits and
strong management of working capital. This
represents excellent cash conversion, being
99.6% of underlying EBITDA (2014: 92.3%).
The Group’s working capital outflow was
£1.5m (2014: £2.6m), principally reflecting
investment in inventory to improve
the in-stock position of products
in Tile Africa stores.

Net cash generated from operating activities
was £4.1m higher than the previous year at
£14.4m, largely due to improved underlying
operating cash flow, lower tax and interest
payments and lower outflows in respect
of exceptional items.

The £0.9m purchase of investment property
relates to the freehold purchase of the
property at Orgreave Drive, Sheffield. This
was subsequently sold together with the
remaining surplus investment properties in
Tunstall and Boston resulting in net proceeds
of £6.1m. A small parcel of land in Braintree
was also sold in the first half of the year
for £0.4m.

Strategic reportNorcros plc Annual report and accounts 2015

22 Group Finance Director’s report continued

The new banking facility has been secured to July 2019,
and at current levels of net debt and leverage, is expected
to reduce interest costs by approximately £0.2m per annum.

Cash flow and net debt continued

Underlying operating cash flow

Cash flows from exceptional items and acquisition related
costs

Pension fund deficit recovery contributions

Cash used in discontinued operations

Cash flow generated from operations

Net interest paid

Taxation

Net cash generated from operating activities

Capital expenditure

Purchase of investment property

Proceeds from sale of investment property

Acquisitions and disposals

Dividends

Costs of raising debt finance

Issue of share capital

Other items

Movement in net debt

Opening net debt

Closing net debt

2015
£m

22.9

(4.7)

(2.1)

0.1

16.2

(1.3)

(0.5)

14.4

(7.0)

(0.9)

6.5

3.3

(3.1)

(0.7)

0.2

—

12.7

(26.9)

(14.2)

2014
£m

20.3

(4.4)

(2.0)

(0.3)

13.6

(1.6)

(1.7)

10.3

(4.2)

—

1.4

0.1

(2.8)

(0.2)

0.4

(1.2)

3.8

(30.7)

(26.9)

Acquisitions and disposals principally
comprises a £3.8m inflow resulting from
the sale of the Australian tiles business in
May, net of £0.3m deferred consideration
paid to the former shareholders of Vado
and the £0.2m cost of acquiring the Port
Elizabeth franchise store in South Africa.

Capital expenditure at £7.0m (2014: £4.2m)
included a second inkjet printer at Johnson
Tiles South Africa, Tile Africa store upgrades
and improvements to mixers and packing
heads at TAL. In the UK, there was a new
selection line at Johnson Tiles, a new
filling machine at Norcros Adhesives,
a replacement ERP system at Vado and
continued investment in tooling for new
product in Triton Showers.

Bank funding
In July 2014 the Group agreed a new
unsecured £70m revolving credit facility plus
a £30m accordion facility with Lloyds Bank
plc, Barclays Bank plc and HSBC Bank plc.
The new banking facility has been secured
to July 2019, and at current levels of net
debt and leverage is expected to reduce
interest costs by approximately £0.2m
per annum. As a consequence, non-cash
financing costs of £0.4m relating to the
old facility were expensed to the income
statement as exceptional finance costs.
A cash outflow of £0.7m was incurred
in the period in relation to the costs
of the new facility.

Norcros plc Annual report and accounts 2015

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

The movement in average exchange rates
compared to 2014 had the effect of reducing
2014 reported Group revenue and Group
underlying operating profit by £7.3m
and £0.3m respectively.

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 2015 and 2014
are shown opposite.

South African Rand

Australian Dollar

Euro

US Dollar

South African Rand

Australian Dollar

Euro

US Dollar

M. K. Payne
Group Finance Director
18 June 2015

Revenue

Underlying operating profit*

Underlying profit before tax

Underlying diluted earnings per share
– pence

Underlying return on capital employed**

Underlying operating cash flow***

Net debt

2015
£m

222.1

17.0

15.8

2.1p

16.3%

22.9

(14.2)

Average rate vs £

2015

17.82

1.81

1.28

1.62

Closing rate vs £

2015

17.88

—

1.37

1.49

2014
£m

218.7

16.1

14.6

2.8p

15.0%

20.3

(26.9)

2014

15.97

1.72

1.19

1.59

2014

17.63

1.80

1.21

1.66

Change
%

+1.5%

+5.8%

+8.1%

-25.0%

+1.3%

+12.8%

-47.2%

Underlying operating profit is defined as operating profit before IAS 19R administrative expenses,
acquisition related costs and exceptional operating items.

** 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 in note 8
to the financial statements.

*** Underlying operating cash flow is defined in note 8 to the financial statements.

Strategic reportNorcros plc Annual report and accounts 2015

24 Principal risks and uncertainties

Norcros has a system of risk management
which seeks to mitigate risks as far as possible.

There are a number of potential risks and uncertainties which could have
a material impact on the Group’s performance. The key risks to which the
Group is exposed, together with the potential effects and mitigating actions
taken pertaining to them, are noted below.

Norcros plc Annual report and accounts 2015

RISK AND DESCRIP TION

POTENTIAL EFFECTS

MITIGATING ACTIONS

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

Many of the contractual arrangements
with customers are short term in
nature (as is common in our markets)
and there exists some risk that the
current performance of a business
may not be maintained if such
contracts were not renewed or
extended, or were maintained at
lower volumes due to a decline
in economic activity.

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

None

Accounting for customer
rebates and other trade
promotional spend
The Group operates rebate and
incentive agreements for a number
of selected customers.

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

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

Incorrectly accounting for
rebate and incentive arrangements
could result in the Group’s turnover
and operating profits being
materially misstated.

The Group’s businesses prepared detailed management
information and forecasts on a monthly basis, including
revenue and margins by customer and analyses of rebate
provisions. These are monitored by divisional and Group
management with any variances investigated.

New in
year

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.

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

All significant rebate and incentive agreements are approved
by Group management prior to agreements with customers
being entered into.

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.

None

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

None

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.

Strategic reportNorcros plc Annual report and accounts 2015

Principal risks and uncertainties continued

RISK AND DESCRIP TION

POTENTIAL EFFECTS

MITIGATING ACTIONS

Staff retention and recruitment
The Group employs around 1,750
people worldwide.

The Group’s ability to grow and
increase its market share depends
significantly on its continuing ability
to recruit and retain highly skilled
employees in each area of its activities.
Future growth plans may be restricted
or delayed by difficulties experienced
in recruiting and retaining
appropriate staff.

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 incentivised via an
Approved Performance Share Plan (APSP) which was approved
at the 2011 AGM. A grant of options under the APSP has taken
place annually since 2011.

Succession planning is an agenda item at Group Board level.

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

CHANGE

None

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 and Euro).
The continued economic uncertainty
in Europe has raised the possibility
of a breakup of the Euro.

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

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

Increased

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.

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

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

Given the current low interest rates negotiated as part of
the refinancing of bank debts in 2014, 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.

None

Pension scheme management
The UK companies in the Group
participate in a defined benefit
pension scheme. Corporate bond
and gilt yields have reduced
significantly over the past year.

The Group’s financial results show
an aggregate deficit in this scheme,
as at 31 March 2015 of £44.3m
(2014: £21.8m) assessed in
accordance with IAS 19 (revised).
There are various risks that could
adversely affect the funding of the
defined benefits under the scheme
and consequently the Group’s
funding obligations.

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.

Increased

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 19R
valuation and each triennial valuation) to re-assess its position
with regard to its pension commitments in conjunction with
external actuarial advice.

A number of liability management exercises were undertaken
in the year resulting in a net £1.7m reduction in the deficit.

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

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

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

None

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

Norcros plc Annual report and accounts 2015

RISK AND DESCRIP TION

POTENTIAL EFFECTS

MITIGATING ACTIONS

Additional capital requirements
to fund ongoing operations

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

The Group’s current and forecast performance against its banking
facilities 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.

CHANGE

Reduced

The Group refinanced its facilities in 2014 on improved terms and
agreed an accordion option of £30m in addition to the committed
facility of £70m. This facility remains in place until July 2019.

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

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

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

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

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

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.

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.

In response to the recent electricity load-shedding programme
in South Africa, the Group has invested in a standby diesel
generator which will be installed in quarter two of this year.

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

The Group may be exposed to
risks outside of its control including
political, social and economic instability,
industrial action, reliability of energy
supply, 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.

None

Acquisition risk
Part of the Group’s strategy is to grow
through selective acquisitions.

Performance of acquired businesses
may not reach expectations impacting
Group profitability and cash flows.

The Group employs senior managers who have considerable
experience of identifying and appraising suitable opportunities.

None

The recent acquisition of Vado provides demonstrable
evidence of the Group’s ability to integrate a new business
and provides a template for future acquisitions.

Strategic reportNorcros plc Annual report and accounts 2015

Corporate responsibility and sustainability

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

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

For example, the Group is particularly
proud of the fact that Triton Showers has
recently achieved “Zero to Landfill” status.

The Group aims to minimise its carbon
footprint. Its greenhouse gas emissions
are reported on in detail on page 58.
In addition, we are cognisant of our
obligations in the UK as regards the Energy
Savings Opportunity Scheme initiative, and
we will be compliant with this in the current
financial year.

For further information on Norcros’
commitment to the environment and
sustainability please visit the “Corporate
Responsibility” section of www.norcros.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 countries within which
it operates. The Group makes every effort
to ensure its employees are aware of,
and comply with, the relevant business’
ethical code.

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

particularly in the fields of education and
healthcare. One such charity is the South
African Medical and Education Forum,
which presented Norcros South Africa
with a recognition award at their 2015
Gala Awards Evening.

In order to ensure an open culture of
legal and ethical compliance, all of the
businesses in the Group have in place
“whistleblowing” procedures, so that
any concerns can be raised.

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

Many examples of this commitment can be
seen in Norcros South Africa, where in the
2015 financial year the business continued
its commitment to both initiate and support
programmes which empower people by
equipping them with vital skills. Starting
with in-house training Norcros looked at
empowering staff at all levels from basic
literacy and numeracy to nationally accredited
vocational skills to management and life
skills. Moving out towards the community,
the Norcros Tiling Academy took in
unemployed people and taught them
how to tile as well as the skills needed
to set up a small business.

In addition, Norcros South Africa donated
both money and product to a wide variety
of charities focussing on empowerment,

Another exciting initiative supported by
Norcros South Africa was the Nedbank
Sani2C mountain biking event. As a sponsor
of this three day race through impoverished
rural areas, Tile Africa donated tiles for the
ablutions of the rest camps, and arranged
training for local people to learn to tile
during the installation of the tiles. These
facilities will be available for use by the
local communities between the annual
race events.

In the UK, of particular note this year has
been Triton Showers’ new partnership with
the “Dare2Dream” charity, which extends
the business’s existing outreach into the
community through its longstanding
support of Warwickshire Young Carers.

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 businesses in

Norcros plc Annual report and accounts 2015

Human rights
The Directors do not consider human rights
to be a material risk for the Group, principally
due to the existing regulatory frameworks
in place in the UK and South Africa, being
the primary geographical locations
in which we operate.

Whilst the Group does not have any
policies which specifically address human
rights at the present time, our values focus
on respect, integrity and fairness, and
consequently we welcome the debate
on the role of business in promoting
human rights.

the Group are strongly encouraged to devise
and adopt whatever means of employee
consultation best suits their circumstances.

Gender of directors and employees
The number of people employed by the
Group of each gender can be shown
as follows:

Norcros also recognises the need to train
its 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 Vado’s Advanced Level Management
Training Programme provides practical and
business-focussed management training
for a cross-section of the staff, to ensure
the sustainable growth of the business.

Company
Directors

Other senior
managers1

Total
employees

Male

Female

Total

1,210

518

1,728

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.

1. As defined by the Companies Act this category

includes all employees responsible for planning,
directing or controlling the activities of the Group,
excluding Company Directors.

Our people are key to our success as
a business and we value the individuality
and diversity that each employee brings.

At senior leadership levels 20% of employees
are female.

Prior to any senior appointment the
Nominations Committee ensures the
best person for the role is appointed
and in doing so gives due consideration
to gender and diversity.

Strategic reportNorcros plc Annual report and accounts 2015

30 Board of Directors

A strong leadership team committed to driving growth.

INTRODUC TION TO GOVE R N A NCE

Dear shareholder,

For the year under review, the Company has complied
with the UK Corporate Governance Code issued in 2012
(“the Code”) in all respects. The following sections of this
statement describe the Board’s approach to corporate
governance and how the principles of the Code
are applied.

M. G. Towers
Chairman
18 June 2015

Governance structure

The Board
1

Martin Towers (C)

Audit
Committee
David McKeith (C)

Remuneration
Committee
Jo Hallas (C)

Nominations
Committee
Martin Towers (C)

Martin Towers

David McKeith

Jo Hallas

David McKeith

Jo Hallas

1. 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, Tyman plc and
KCOM Group plc (although
he will retire from this role at
KCOM on 31 July 2015). 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.

2. 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.

Norcros plc Annual report and accounts 2015

3. 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.

4. David McKeith
Non-executive Director
Appointed to the
Board in July 2013, David is
Senior Independent Director
and Chairman of the Audit
Committee. David was a senior
partner of the Manchester
and Liverpool offices of
PricewaterhouseCoopers LLP
and served on its UK supervisory
board. David is a non-executive
director and audit committee
chairman of Sportech plc,
and is the chairman of the
Halle Orchestra and of
Greater Manchester Chamber
of Commerce. He is a Fellow
of the Institute of Chartered
Accountants in England
and Wales.

5. Jo Hallas
Non-executive Director
Appointed to the Board in
September 2012, Jo also
serves as Chairman of the
Remuneration Committee.
She is a Business Group
Director for Spectris plc with
responsibility for the In-Line
Instrumentation and Industrial
Controls segments. Prior to
that Jo was general manager
of the Invensys Residential
Controls business and she
has held a number of senior
management positions with
Bosch and Procter & Gamble
both in the UK and overseas.
Jo is a Chartered Engineer.

6. 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 was
company secretary and head
of legal with Tribal Group plc,
Blick plc and Aggregate
Industries plc.

Re-election of all Directors
It is proposed that each Director will seek re-election at the 2015 AGM. The Board is satisfied that the Directors, individually and collectively,
contain the balance of technical expertise, skills and experience to manage the Company’s affairs and to further the Group’s strategic
objectives. In particular, each Director has experience of growing an international business, organically, as well as by acquisition.

Corporate governanceNorcros plc Annual report and accounts 2015

32 Corporate governance

Martin Towers
Chairman

Breakdown of Executive
and Non-executive Directors

Non-executive Chairman 1
Non-executive Directors 2
Executive Directors 2

p30 Board of Directors

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 2012 (the “Code”) in all
respects. 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, two
Non-executive Directors and two 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 30 and 31.

Taking into account the provisions of the Code, the Chairman and
the two Non-executive Directors 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 judgment.
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.

David McKeith is the Senior Independent Non-executive Director.
He is available to shareholders if they have reasons for concern
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 Company Secretary.

Norcros plc Annual report and accounts 2015

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.

Board, Committee and Director evaluation
The performance of the Board is appraised by the Chairman.
The Executive and Non-executive Directors are evaluated
individually by the Chairman. The Board, led by the Senior
Independent Non-executive Director, appraises the Chairman,
and the Board evaluates the performance of its three Committees.
Evaluation processes are conducted periodically and they are
organised to fit in with Board priorities and succession planning
activity. A formal evaluation took place in the year under review
in accordance with the requirements of the Code. 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.

Advice for Directors
Procedures have been adopted for the Directors to obtain access
through the Company Secretary to independent professional
advice at the Company’s expense, where that Director judges it
necessary in order to discharge their responsibilities as a Director
of the Company.

All Directors have access to the advice and services of the
Company Secretary who is responsible to the Board for ensuring
that Board policies and procedures are complied with. Both the
appointment and removal of the Company Secretary 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, namely
the Nominations Committee, Audit Committee and Remuneration
Committee. The terms of reference of those Committees are
published on the Company’s website at www.norcros.com.
The report of the Nominations Committee is on page 40,
the report of the Audit Committee is on page 36 and the
report of the Remuneration Committee is on page 41.

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

The Directors and management teams of each Group company
are responsible for those business entities. They are tasked with
the delivery of targets approved by the Board on budgets,
strategy and policy.

Directors’ roles
The Executive Directors work solely for the Group and none has
taken on any non-executive directorship. However, in appropriate
circumstances, Executive Directors will be encouraged to take
on one non-executive directorship in another non-competing
company or organisation.

The terms and conditions of appointment of the Non-executive
Directors are available upon written request from the Company.
All the Non-executive Directors confirm that they have sufficient
time to meet the requirements of their role. They also confirm
to disclose to the Company their other commitments and to give
an indication of the time involved in each such commitment.
The annual evaluation process includes an assessment of
whether the Non-executive Director is spending enough time
to fulfil 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.

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 30 and 31 where
there is also a statement on the Directors’ suitability for re-election.

Corporate governanceNorcros plc Annual report and accounts 2015

34 Corporate governance continued

Financial reporting
When releasing the annual and interim financial statements the
Directors aim to present a fair, balanced and understandable
assessment of the Group’s results and prospects. The Directors
have a collective responsibility for the preparation of the Annual
Report and Accounts which is more fully explained in the
Statement of Directors’ Responsibilities on page 60.

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
6 meetings

Nominations
Committee
2 meetings

M. G. Towers,
Chairman

J. C. Hallas

D. W. McKeith

N. P. Kelsall

M. K. Payne

9/9

3/3

—

6/6

—

2/2

—

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, develops 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.

For each resolution, proxy appointment forms should provide
shareholders with the option to direct their proxy to vote either
for or against the resolution or to withhold their vote. The
Company ensures that all valid proxy appointments received for
general meetings are properly recorded and counted. For each
resolution the Company ensures that the following information is
given at the meeting and made available as soon as reasonably
practicable on a website which is maintained by or on behalf
of the Company:

— the date of the meeting;

— the text of the resolution;

— the number of votes validly cast;

— the proportion of the Company’s issued share capital

represented by those votes;

— the number of votes cast in favour of the resolution;

— the number of votes against the resolution; and

— the number of shares in respect of which the vote was withheld.

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

Accountability and audit
The respective responsibilities of the Directors and auditor in
connection with the financial statements are explained in the
Statement of Directors’ Responsibilities on page 60 and the
auditor’s report on page 65. The Directors ensure the independence
of the auditor by requesting annual confirmation of independence
which includes the disclosure of all non-audit fees.

Risk management and internal control
The Board is responsible for the Group’s system of internal
control and for reviewing its effectiveness (covering all material
controls including financial, operational, risk management and
compliance). This is undertaken via an annual programme to
review the internal control environment at each business unit.
Each review is carried out by 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 24 to 27.

Norcros plc Annual report and accounts 2015

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 59.

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 18 June 2015 and signed
on its behalf by:

M. G. Towers
Chairman

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

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

Corporate governanceNorcros plc Annual report and accounts 2015

36 Audit Committee report

David McKeith
Audit Committee
Chairman

ROLE OF THE AUDIT COM MIT TE E

The main responsibilities of the Audit Committee are:

— reviewing the Company’s financial reporting;

— monitoring the Company’s risk management

and internal control procedures; and

— overseeing the appointment and work

of the external auditor.

Members
The Committee consists of all the Non-executive Directors
including the Chairman. Biographies of the members of the
Committee appear on page 30 and 31.

The Chairman of the Audit Committee, David McKeith, is considered
to have recent and relevant financial experience as he is a fellow
of the Institute of Chartered Accountants in England and Wales
and a former senior partner of PricewaterhouseCoopers LLP.
He also acts as Chairman of the Audit Committee for Sportech plc
where he is a non-executive director.

The Board is satisfied that the Committee has the appropriate
level of expertise to fulfil its Terms of Reference. Additionally,
an appraisal of the Committee was undertaken as part of an
evaluation of the entire Board in the year to 31 March 2015
which concluded that the Committee is operating effectively.

Responsibilities
The Committee is a sub-committee of the Board whose main
responsibilities include:

— reviewing the Company’s Annual and Interim Reports and other
results announcements, including considering and challenging
significant financial reporting issues and judgments;

— monitoring the Company’s risk management and internal

control procedures; and

— overseeing the appointment and work of the external auditor.

The Committee also advises the Board on whether it considers
the Annual Report and Accounts, taken as a whole, to be fair,
balanced and understandable and provides the information
necessary for shareholders to assess the Company’s strategy,
business model and performance.

Terms of Reference
The Committee’s Terms of Reference, which are in compliance
with the UK Corporate Governance Code, were reviewed
on 5 March 2015 and deemed fit for purpose. A copy can be
obtained from the Company’s website, www.norcros.com.

Meetings of the Committee
The Committee met formally three times during the year
ended 31 March 2015. The Group Chief Executive, Group Finance
Director, Company Secretary and Group Financial Controller also
attended each of these meetings together with the engagement
partner and other members of the audit team from the
external auditor.

Norcros plc Annual report and accounts 2015

Meetings of the Committee continued
The Committee may invite other individuals either from within
the Company or external technical advisers to attend meetings
to provide information or advice as it sees fit.

At each meeting the Committee had the opportunity to discuss
matters with the external auditor without management being
present. The Chairman of the Committee also has regular
discussions with the external audit partner outside the formal
Committee process.

The Committee receives regular papers on incidences of fraud
and whistleblowing and reviews any financial communications
issued to the market at each meeting.

Financial reporting
The principal role of the Committee in connection with financial
reporting is to advise the Board on whether it considers the
Annual Report and Accounts, taken as a whole, to be fair,
balanced and understandable and provides the information
necessary for shareholders to assess the Company’s strategy,
business model and performance. In order to make this
assessment the Committee considers:

— the suitability of accounting policies and practices;

— the clarity of disclosures and compliance with financial

reporting and governance requirements; and

— material areas of judgment, particularly where the matter has
been considered an area of focus by the external auditor.

Significant financial reporting matters in the 2015 Annual Report
Following discussions with management and the external auditor,
the Committee determined that there were three significant
financial reporting matters impacting the 2015 Annual Report.
These risks, together with the actions taken by the Committee
in respect of each, are described below.

Accounting for customer rebates and other trade
promotional spend
As part of its trading activities and in accordance with industry
norms, a number of the Group’s customers are offered rebates
and promotional incentives in order to encourage trade and
cement strong relationships. Rebates and promotional spend
are recognised as a deduction from revenue over the period
of the agreement with the customer. Accounting for such
arrangements involves judgment as agreement periods typically
run for a number of months or years, and may involve assumptions
around volumes of product purchased or sold into the future.

The Committee considered the approach taken by management
and the detailed testing undertaken by the external auditor and
concluded that the commercial substance of the arrangements
was appropriately reflected in the financial statements
in accordance with accounting standards.

Defined benefit pension plan liabilities
The Group’s UK defined benefit pension scheme is significant both
in terms of its context in the overall balance sheet and the results
of the Group, particularly given that the net deficit has increased
from £21.8m in 2014 to £44.3m in 2015. The valuation of the
present value of scheme liabilities involves significant judgment
and expertise particularly in respect of the assumptions used.

In order to value the liabilities, management had engaged an
independent firm of qualified actuaries. The Committee reviewed
the outputs from this work and benchmarked the assumptions,
particularly the net discount rate, with those applied by other
companies with defined benefit pension schemes with similar
characteristics and having the same measurement date. The
Committee concurred with the assumptions put forward by
management to value the liability.

Carrying value of property, plant and equipment in South Africa
The Group holds property, plant and equipment relating to the
manufacturing facilities of Johnson Tiles South Africa with a carrying
value of £5.8m at 31 March 2015. Historically, this division has been
loss making, and whilst improvements have been made in recent
years culminating in the division achieving break even in the year
to 31 March 2015, there remained the possibility that these
improvements would not be sustained. Against this backdrop,
judgment had to be applied to determine whether there had
been a trigger for an impairment review of these assets.

The Committee reviewed management’s paper which considered
whether a trigger for an impairment review was in evidence. Having
reflected on the paper and consulted with the external auditor, the
Committee was satisfied that no impairment trigger was present
and consequently an impairment review was not required.

Other areas of judgment considered by the Committee
Presentation of acquisition related costs
The Committee were asked to consider management’s proposal
regarding the classification of acquisition related costs and their
presentation as a separate line item in the income statement in
accordance with emerging market practice. After consulting with
the external auditor, the Committee agreed to the change in
accounting policy and presentation, noting that the comparative
financial information, where required, should be restated
to reflect this revision.

Corporate governanceNorcros plc Annual report and accounts 2015

38 Audit Committee report continued

Principal activities during the year
A wide variety of issues were addressed in the year and they are summarised in the table below:

Date

Activities

April 2014

Review of the Company’s year end trading statement

June 2014*

Review of the Company’s Annual Report and Accounts for the year ended 31 March 2014, together with a report
from the external auditor covering the findings of their work

Review of the Company’s preliminary announcement for the year ended 31 March 2014

Review of the Company’s risk register

Review of the analyst presentation communicating the results for the year ended 31 March 2014

July 2014

Review of the Company’s interim trading statement and announcement of refinancing

October 2014

Review of the Company’s interim trading statement

November 2014*

Review of the Company’s announcement in connection with legacy property leases

Review of the Company’s Interim Report for the six months ended 30 September 2014, together with a report
from the external auditor covering the findings of their work

Review of the analyst presentation communicating the results for the half year ended 30 September 2014

Determination and assessment with the external auditor of the principal financial reporting risks facing the Company

Review of the external auditor’s proposed audit work plan for the year ended 31 March 2015

Review of the external auditor’s terms of engagement and proposed fees

Assessment of the external auditor’s independence, objectivity, qualifications and expertise, including a review
of their internal quality control checks

December 2014

Review of the Company’s announcement in connection with the sale of surplus property

March 2015*

Conduct of an initial review of IT security risks facing the Company and current measures in place to manage
and mitigate such risks

Consideration of revisions to the external auditor’s proposed audit work plan for the year ended 31 March 2015

Assessment of the work carried out to test and review internal controls

Evaluation of the Company’s compliance, whistleblowing and fraud prevention procedures

Consideration of whether an internal audit function is required

Review of the Group’s policy in respect of the employment of former employees of the external auditor

Review of the Group’s policy in respect of the engagement of the external auditor for non-audit services
and non-audit services provided by the external auditor during the year

Conduct of an appraisal of the performance of the Committee and a review of the Terms of Reference

Consideration of management’s proposal to revise the presentation of acquisition related costs

Consideration of management’s proposal to adopt FRS 101 for UK subsidiaries with effect from 1 April 2015

Consideration of the Company’s response to the proposed changes to audit rotation rules

* Formal meeting of the Committee.

Norcros plc Annual report and accounts 2015

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

The significant risks facing the Company, together with the
actions taken to mitigate them, are highlighted on pages 24 to 27
of the Strategic Report. Lower-level risks are discussed at monthly
divisional management meetings and highlighted to the Board
as appropriate.

The external auditor, PricewaterhouseCoopers LLP, was re-appointed
in November 2011 following a competitive tender process. The
Committee is mindful of the consultation documents issued by
the Department for Business, Innovation and Skills (BIS) and the
Financial Reporting Council (FRC) on how to adopt the EU Regulations
on mandatory firm rotation in the UK. The timing of a competitive
tender will continue to be assessed on an annual basis, considering
both the results of the annual effectiveness review and changes
to UK legislation. The Committee has, however, committed
to conducting a tender process for the role of external auditor
at least every ten years.

The Committee is aware of the need to safeguard the auditor’s
objectivity and independence and the issue is discussed by the
Committee and periodically with the audit engagement partner
from PricewaterhouseCoopers LLP. As required by Auditing
Practices Board requirements, external auditor independence is
maintained by the rotation of the engagement partner every five
years. The current engagement partner, Mr. M. Heath, has been
in place for four years. In addition to this, policies on the award
of non-audit work to the external auditor and the employment
of ex-employees of the external auditor are in place which
are reviewed annually.

The external audit starts with the design of a work plan that
tackles the key risks of the audit which were determined at the
November 2014 meeting of the Committee and revised in March
2015. At each meeting the Committee had the opportunity to
discuss matters with the external auditor without management
being present. The Chairman of the Committee also has regular
discussions with the external audit partner outside the formal
Committee process.

For the year ended 31 March 2015, the Committee was satisfied
with the independence, objectivity and effectiveness of the
relationship with PricewaterhouseCoopers LLP as external
auditor. In the light of this the Committee has recommended to
the Board that PricewaterhouseCoopers LLP be re-appointed for
the forthcoming year and a resolution proposing this will be put
to the 2015 Annual General Meeting.

D. W. McKeith
Chairman of the Audit Committee
18 June 2015

The Company operates a robust monthly financial reporting
and forecasting process and an annual budgeting cycle. This
incorporates several levels of management review to provide
assurance that the data is reconciled to the underlying records,
and each month’s performance and the annual budget is
ultimately approved by the Board.

Transaction-level financial reporting risks are identified and
managed by each business within the Group completing an
annual self-assessment questionnaire, the responses to which
are considered during the internal controls reviews. To bolster
this, a management representation process is in place requiring
each division to confirm that all known material facts have been
appropriately communicated to the Executive Directors.

Although there is no dedicated Group-wide internal audit
resource, internal control work is performed by members of
the Group Finance function who are appropriately qualified to
undertake this type of work. Additionally, due to the particular
risks faced by the Group’s retail and satellite manufacturing
operations in South Africa, the Group employs a dedicated
internal auditor focused on those risks. The work undertaken
principally involves performing a cycle of Tile Africa store audits
to ensure standard operating procedures are being followed and
conducting internal controls reviews of other satellite facilities
in southern Africa operated by the Group.

At its meeting in March the Committee considered whether
there was a need to have a dedicated Group-wide internal audit
function and concluded that due to the size and nature of the
Company there is no requirement at the present time.

The strategy for reviewing internal controls is discussed with the
external auditor and agreed with the Committee. Findings from
the internal control reviews together with any recommendations
from the external auditor are considered by the Committee with
improvements and weaknesses highlighted being followed up as
appropriate. During the year there has been a focus on controls
concerning accounts receivable, inventory management and
valuation and the timeliness of recording transactions.

External auditor
The Committee has primary responsibility for making
recommendations to the Board on the appointment, re-appointment
and removal of the external auditor. The Committee keeps under
review the scope and results of the audit and its effectiveness,
as well as the independence and objectivity of the auditor.

Corporate governanceNorcros plc Annual report and accounts 2015

40 Nominations Committee report

Martin Towers
Chairman

ROLE OF THE
NOMIN ATIONS COM MIT TE E

The main responsibilities of the Nominations
Committee are:

— evaluating the balance of skills, knowledge,

diversity and experience of the Board;

— succession planning for the Board; and

— determining 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 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.
The search for Board candidates will continue to be conducted
and appointments made on the basis of merit and the most
appropriate experience against objective criteria in the best
interests of shareholders. In selecting candidates due regard
will be given to the balance of the Board, and to the benefits
of different backgrounds and experience, and to diversity
on the Board including gender.

If a new Director is selected, the Nominations Committee
will use the appropriate selection process.

In the year under review the Committee reviewed the Company’s
succession plan for the Board and senior executives. It is satisfied
that succession issues are being adequately managed, and
it will keep this under review in the light of the Group’s
strategic evolution.

M. G. Towers
Chairman of the Nominations Committee
18 June 2015

Remuneration Committee annual statement

Norcros plc Annual report and accounts 2015

Jo Hallas
Remuneration
Committee
Chairman

ROLE OF THE
R E MUNE R ATION COM MIT TE E

The main responsibilities of the Remuneration
Committee are:

— determine and agree with shareholders the

remuneration policy and keep it under review;

— implement the approved remuneration policy as

regards Executive Director remuneration, benefits
and incentives, including the design of, and targets for,
all incentive arrangements; and

— as necessary determine the remuneration packages
for new senior executives and the terms of any
cessation of office.

Dear shareholders,

I am pleased to present the Directors’ Remuneration Report
for the year to 31 March 2015.

The Group’s remuneration policy was presented to the AGM in
2014 and was approved with 99.9% of votes cast in support of the
policy. No changes to the policy are proposed for 2015. However,
for your convenience, the policy is included in full on pages 43 to 48.

Remuneration strategy
The Committee’s overall approach to executive remuneration
remains unchanged. We are focused on ensuring the Group’s
remuneration policy is closely aligned with shareholders’ interests
whilst also enabling us to attract, retain and motivate our executive
leadership, but without paying more than is necessary for this purpose.
We do this with a simple remuneration structure comprising base
salary and benefits, an annual bonus and a single performance-based
long-term incentive. Targets for the annual bonus and long-term
incentive are set at levels that are stretching and provide a clear
link between pay and our strategic objectives.

This produces a package with an anticipated on-target reward
mix for the Group Chief Executive and Group Finance Director
comprising 61% Fixed Pay (51% base salary, 8% pension and 2%
benefits), 26% annual bonus and 13% long-term incentive. Under
a scenario where all performance conditions are met in full, the
balance of the Executive Directors’ package is 38% Fixed Pay,
31% annual bonus and 31% long-term incentive.

To further ensure remuneration is aligned with shareholder
interests, half of any bonus paid is deferred for three years, shares
vesting from APSP awards made in 2015 onwards need to be held
for a further two years (i.e. until the fifth anniversary of grant), and
the Executive Directors are additionally required to build and
maintain a shareholding of at least 100% of salary. Finally, in the
event of material mis-statement in accounting records or gross
misconduct, deferred bonus and APSP awards may be subject
to malus or clawback.

Year in review
As highlighted in the Chairman’s statement and Group Chief
Executive’s statement on pages 2 and 4, Norcros continues to
perform strongly with a sixth consecutive year of growth in both
revenue and underlying operating profit. Highlights for the year
to 31 March 2015 include:

— Revenue growth of 1.5% (5.0% on a constant currency basis)

to £222.1m

— Underlying operating profit up 5.8% to £17.0m

— Continued progress with the South African business (underlying

profit up 68.7%)

— Disposal of the Australian business in line with Group strategy

— Legacy property issues largely resolved

— Underlying ROCE at 16.3%, ahead of the Group strategic target

of 12–15%

This strong performance delivered underlying profit above the target
set by the Committee for the year, resulting in an annual bonus of
c.69% of base salary being awarded to Executive Directors for the year
ended 31 March 2015. This will be delivered half in cash and half in the
form of nil cost options under the 2011 Deferred Bonus Plan.

Corporate governanceNorcros plc Annual report and accounts 2015

42 Remuneration Committee annual statement

continued

Year in review continued
The Group has also exceeded its targets for aggregate underlying
earnings per share (EPS) over the period from 1 April 2012 to
31 March 2015. As a result, c.99% of the APSP awards granted in 2011
will vest on 28 July 2015. The Committee considers this outcome
to appropriately reflect the Group’s very strong performance over
the period.

2015 Remuneration
In accordance with our Remuneration Policy, the Executive
Director base salaries were increased by 2.0% in line with the
wider UK-based workforce. There are no other changes to
Executive Director remuneration for the year to 31 March 2016.

The Committee believes that our remuneration strategy and its
implementation remain appropriate. I hope you will support this
view with your advisory vote on the Annual Report on
Remuneration at the 2015 AGM.

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

J. C. Hallas
Chairman of the Remuneration Committee
18 June 2015

“ T HE COM MIT TEE IS FOCUSED ON

ENSURING THE GROUP’S REMUNER ATION
POLICY IS CLOSELY ALIGNED WITH
SHAREHOLDERS’ INTERESTS WHILE AL SO
ENABLING US TO AT TR ACT, RE TAIN AND
MOTIVATE OUR E XECUTIVE LE ADERSHIP.”

R E MUNE R ATION DISCLOSUR E

This Directors’ Remuneration Report has been
prepared in accordance with the provisions of the
Companies Act 2006 and Schedule 8 of the Large and
Medium-sized Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013. The Report
meets the requirements of the UK Listing Authority’s
Listing Rules and the Disclosure and Transparency Rules.
In this Report we describe how the principles of good
governance relating to Directors’ remuneration, as set
out in the UK Corporate Governance Code (the Code),
are applied in practice. The Remuneration Committee
confirms that throughout the financial year the Group
has complied with these governance rules and best
practice provisions.

Norcros plc Annual report and accounts 2015

Directors’ remuneration policy report

Directors’ Remuneration Policy
This section of the report sets out the Remuneration Policy for Executive Directors and Non-executive Directors, which came into effect
on 23 July 2014, immediately after it was approved by a binding vote at the 2014 AGM. It remains unchanged for 2015, other than
the following minor updates:

— Pay scenario charts have been updated to reflect the 2016 financial year packages for Executive Directors

— Page references have been updated.

Executive Director remuneration policy table
This Policy has been designed to support the principal objective of enabling the Group to attract, motivate and retain the people it needs
to maximise the value of the business.

COMPONENT AND OBJECTIVE OPER ATION

OPPORTUNIT Y

PERFOR M ANCE ME ASURES

Base salary
To enable the Group to attract,
motivate and retain the people
it needs to maximise the value
of the business

Pension
To provide a level of retirement
benefit that is competitive in the
relevant market

Benefits
Provision of benefits in line
with the market

Generally reviewed each year,
with increases effective 1 April with
reference to salary levels at other
FTSE companies of broadly similar
size or sector to Norcros.

The Committee also considers
the salary increases applying across
the rest of the UK business when
determining increases for
Executive Directors.

Base salary increases are applied
in line with the outcome of the
annual review.

Executive Directors receive pension
contributions (either as a direct
payment or a cash allowance).

Base salary is the only element of
remuneration that is pensionable.

Executive Directors are provided with
a company car (or a cash allowance
in lieu thereof) and medical insurance.
Other benefits may be introduced
from time to time to ensure the
benefits package is appropriately
competitive and reflects the needs
and circumstances of the Group
and individual Executive Director.

Salaries in respect of the year under
review (and for the following year)
are disclosed in the Annual Report
on Remuneration.

n/a

Salary increases for Executive Directors
will normally not exceed those of the
wider workforce over the period this
policy will apply. Where increases are
awarded in excess of the wider employee
population, for example if there is a
material change in the responsibility,
size or complexity of the role, the
Committee will provide the rationale
in the relevant year’s Annual Report
on Remuneration.

Maximum of 15% of base salary.

n/a

Benefits may vary by role, and the
level is determined each year to
be appropriate for the role and
circumstances of each individual
Executive Director.

n/a

It is not anticipated that the current
cost of benefits (as set out in the
Annual Report on Remuneration)
would increase materially over the
period for which this policy will apply.

The Committee retains the discretion
to approve a higher cost in exceptional
circumstances (e.g. relocation expenses
or an expatriation allowance on
recruitment, etc.) or in circumstances
where factors outside the Company’s
control have changed materially (e.g.
market increases in insurance costs).

Annual bonus and
Deferred Bonus Plan (DBP)
To focus Executive Directors
on achieving demanding
annual targets relating to
Group performance and
encourage retention

Maximum opportunity:

100% of base salary

Target opportunity:

50% of base salary

For threshold performance, the
bonus payout is 25% of maximum.

Performance targets are set at the
start of the year and aligned with the
annual budget agreed by the Board.
At the end of the year, the Committee
determines the extent to which these
targets have been achieved.

50% of the total bonus payment is
paid in cash, and 50% is converted
into nil-cost options over Norcros
shares under the 2011 Deferred
Bonus Plan (DBP). These options are
exercisable after three years, subject
to continued employment and malus
(in whole or in part) during the deferral
period in the event of a material
mis-statement in accounting records
or gross misconduct.

A payment equivalent to the dividends
that would have accrued on deferred
bonus awards that vest will be made
to participants on vesting.

The bonus will be based primarily on the
achievement of financial performance
targets and may, from time to time as
considered appropriate by the Committee,
include non-financial performance
measures (the weighting of which, if any,
will be capped at 20% of the total
opportunity).

The primary measure is Group underlying
operating profit, although the Committee
may, in its discretion and from time to
time, supplement operating profit with
additional financial measures that reflect
the strategic priorities for Norcros for the
financial year.

The Committee has discretion to adjust
the formulaic bonus outcomes (including
down to zero) within the limits of the
scheme to ensure alignment of pay
with performance.

Further details including targets attached
to the bonus for the year under review
are given on page 51 of the Annual
Report on Remuneration.

Corporate governanceNorcros plc Annual report and accounts 2015

44 Directors’ remuneration policy report continued

Executive Director remuneration policy table continued

COMPONENT AND OBJECTIVE OPER ATION

OPPORTUNIT Y

PERFOR M ANCE ME ASURES

Approved Performance
Share Plan (APSP)
To incentivise Executive Directors
to deliver long-term performance
by aligning their performance
with shareholders’ interests

Maximum opportunity:

100% of base salary.

In exceptional circumstances, such
as to facilitate the recruitment of an
external hire, the Committee may,
in its absolute discretion, exceed
this maximum annual opportunity,
up to 150% of salary.

Threshold performance results
in 25% vesting.

Details of actual APSP awards in
respect of each year will be disclosed
in the Annual Report on Remuneration.

APSP awards comprise annual
conditional awards of nil-cost
options following the announcement
of the Group’s final results.

Awards normally vest after three
years, subject to the achievement
of a performance condition and
continued employment with the
Group until the vesting date.

To the extent an award vests,
Executive Directors will be required
to hold net vested shares for an
additional holding period of one year
(for 2014 APSP awards) and two years
for future awards.

A payment equivalent to the
dividends that would have accrued
on APSP awards that vest will be
made to participants on vesting.

APSP awards are also subject to malus
over the vesting period and clawback
over the holding period (in both cases
in whole or in part) in the event of a
material mis-statement in accounting
records or gross misconduct.

SAYE
To encourage the ownership
of Norcros plc shares

An HMRC approved scheme where
employees (including Executive
Directors) may save up to the individual
monthly limit set by HMRC from time
to time over three years. Options
granted at a discount of up to 20%.

Savings capped at the individual
monthly limit set by HMRC from
time to time.

Shareholding requirements
To align Executive Director
and shareholder interests
and reinforce long-term
decision-making

n/a

Executive Directors are required
to retain at least 50% of any DBP
or APSP awards that vest (net of tax)
until they have built up a personal
holding of Norcros plc shares
worth 100% of salary.

Only shares that are held beneficially
count in the assessment of whether
an Executive Director has met the
required ownership level.

Vesting of APSP awards is dependent
upon the Group’s earnings per share (EPS)
performance over a three-year period.

At the start of each cycle, the Committee
will determine the targets that will apply
to an award.

If the performance targets are not met at
end of the performance period, awards
will lapse.

The Committee has discretion to
adjust the formulaic APSP outcomes
within the limits of the scheme if certain
relevant events take place (e.g. a capital
restructuring, a material acquisition/
divestment etc.) with any such adjustment
to result in the revised targets being no
more or less challenging to achieve.

The Committee will consult major
shareholders on changes to the APSP,
although retains discretion to make
non-significant changes to the
performance measure without
reverting to a full shareholder vote.

Further details, including the targets
attached to the APSP in respect of each
year, are disclosed in the Annual Report
on Remuneration.

n/a

Notes to the policy table
Payments from previous awards
The Group will honour any commitment entered into, and Executive Directors will be eligible to receive payment from any award made,
prior to the approval and implementation of the remuneration policy detailed in this report, i.e. before 23 July 2014. Details of these
awards are, and will be, disclosed in the Annual Report on Remuneration.

Performance measure selection and approach to target setting
The use of Group underlying operating profit in the annual bonus directly reinforces our medium-term growth-oriented strategy
(see page 7 of the Annual Report for further details). For the APSP, the Committee considers that EPS is a transparent, objective
and effective measure of performance which is in the long-term interests of all of our shareholders.

Targets applying to the bonus and APSP are reviewed annually, based on a number of internal and external reference points. Bonus targets
are aligned with the annual budget agreed by the Board. Annual bonus targets are considered to be commercially sensitive but will be
disclosed retrospectively in next year’s Annual Report on Remuneration (see page 51 of the Annual Report on Remuneration). APSP targets
reflect industry context, expectations of what will constitute appropriately challenging performance levels, and factors specific to the Group.
The Committee will determine the APSP targets at the time awards are made and these targets (along with other relevant details of the
grant) will be disclosed in next year’s Annual Report on Remuneration (see page 52 of the Annual Report on Remuneration).

Norcros plc Annual report and accounts 2015

Notes to the policy table continued
Differences from remuneration policy for other employees
The remuneration policy for other employees is based on broadly consistent principles as described above. Annual salary reviews across the
Group take into account Group performance, local pay and market conditions, and salary levels for similar roles in comparable companies.

Executives and senior managers are eligible to participate in annual bonus schemes. Opportunities and performance measures vary by
organisational level, geographical region and an individual’s role. Other members of the Group senior leadership team participate in the APSP
on similar terms as the Executive Directors, although award sizes may vary by organisational level. All UK employees are eligible to participate
in the Group’s SAYE scheme on identical terms.

GROUP CHIEF EXECUTIVE

GROUP FINANCE DIRECTOR

Minimum

100%

£409k

13%

Minimum

100%

£277k
13%

On-target

61%

26%

£666k

On-target

61%

26%

£449k

Maximum

38%

31%

31% £1,093k

Maximum

38%

31%

31% £736k

Fixed pay

Annual bonus

APSP

Total

Performance scenario charts
The graphs above provide estimates of the potential future reward opportunity for Executive Directors, and the potential mix between the
different elements of remuneration under three different performance scenarios: “Minimum”, “On-target” and “Maximum”. This information
is for the current financial year, as explained below.

Potential opportunities illustrated above are based on the policy applied to the base salary at 1 April 2015. For the annual bonus, the amounts
illustrated are those potentially receivable in respect of performance for the year to 31 March 2016. It should be noted that any bonus deferred
into the DBP and APSP awards do not normally vest until the third anniversary of the date of grant. This illustration is intended to illustrate the
relationship between executive pay and performance. The values of the DBP and APSP assume no increase in the underlying value of the
shares, and actual pay delivered will further be influenced by changes in factors such as the Group’s share price and the value of dividends paid.

Valuation assumptions
The “Minimum” scenario reflects base salary, pension and benefits (i.e. fixed remuneration), being the only elements of the Executive
Directors’ remuneration package not linked to performance.

The “On-target” scenario reflects fixed remuneration as above, plus target bonus payout (50% of salary) and APSP threshold vesting
at 25% of the maximum award level.

The “Maximum” scenario reflects fixed remuneration, plus full payout under all incentives (100% of salary under each of the annual bonus
and APSP).

Approach to Executive Director recruitment remuneration
External appointment
In cases of hiring or appointing a new Executive Director from outside the Group, the Remuneration Committee may make use of all
existing components of remuneration, as follows:

COMPONENT

Base salary

Benefits

Pension

SAYE

POLICY

The base salaries of new appointees will be determined by reference to relevant market data, experience and skills
of the individual, internal relativities and the current salary of the incumbent in the role.

Where a new appointee has an initial base salary set below market, the Committee may make phased increases over
a period of three years, subject to the individual’s development and performance in the role.

As set out in the Policy table, benefits may include (but are not limited to) the provision of a company car
or car allowance, medical insurance, and any necessary expatriation allowances or expenses relating
to an executive’s relocation.

New appointees will receive pension contributions into a defined contribution pension arrangement or an equivalent
cash supplement, or a combination of both. The maximum employer contribution will be 15% of salary on the same
terms as other Executive Directors.

New appointees will be eligible to participate on identical terms to all other employees.

Corporate governanceNorcros plc Annual report and accounts 2015

46 Directors’ remuneration policy report continued

Approach to Executive Director recruitment remuneration continued
External appointment continued

COMPONENT

Annual bonus

POLICY

The bonus structure described in the policy table will apply to new appointees. The maximum opportunity will
be 100% of salary, pro-rated in the year of joining to reflect the proportion of that year employed. Performance
measures may include strategic and operational objectives tailored to the individual in the financial year of joining.

50% of any bonus earned will be deferred into the DBP on the same terms as other Executive Directors.

APSP

New appointees will be granted annual awards under the APSP on the same terms as other Executive Directors,
as described in the policy table.

In determining the appropriate remuneration structure and level for the appointee, the Remuneration Committee will take into
consideration all relevant factors to ensure that arrangements are in the best interests of our shareholders. It is not the intention of the
Committee that a cash payment such as a ‘golden hello’ would be offered. However, the Committee may make an award in respect of a
new appointment to ‘buy out’ incentive arrangements forfeited on leaving a previous employer, over and above the approach and award
limits outlined in the table above. Any such award will be made under existing incentive structures, where appropriate, and will be subject
to the normal performance conditions of those incentives. The Committee may also consider it appropriate to make “buy out” awards
under a different structure, using the relevant Listing Rule, where necessary to replicate the structure of forfeited awards. Any “buy out”
award (however this is delivered) would have a fair value no higher than that of the awards forfeited, taking into account relevant factors
including performance conditions, the likelihood of those conditions being met and the proportion of the vesting period remaining.
Details of any such award will be disclosed in the first Annual Report on Remuneration following its grant.

Internal promotion to the Board
In cases of appointing a new Executive Director by way of internal promotion, the policy will be consistent with that for external
appointees detailed above. Where an individual has contractual commitments made prior to their promotion to the Board, and it is
agreed that a commitment is to continue, the Group will continue to honour these arrangements even if there are instances where they
would not otherwise be consistent with the prevailing Executive Director remuneration policy at the time of promotion.

Service contracts and policy for payment for loss of office
Executive Directors have signed rolling contracts, terminable on 12 months’ notice by either the Group or the Director. The Group
entered into a contract with Nick Kelsall on 1 April 2011, and with Martin Payne on 18 March 2011. Copies of these contracts are available
to view at the Group’s registered office.

The Committee’s policy for Directors’ termination payments is to provide only what would normally be due to Directors had they
remained in employment in respect of the relevant notice period, and not to go beyond their normal contractual entitlements. Any
incentive arrangements will be dealt with subject to the relevant rules, with any discretion exercised by the Committee on a case by
case basis taking into account the circumstances of the termination. Termination payments will also take into account any statutory
entitlement at the appropriate level, to be considered by the Committee on the same basis. The Committee will monitor and where
appropriate enforce the Directors’ duty to mitigate loss. When the Committee believes that it is essential to protect the Group’s interests,
additional arrangements may be entered into (for example post-termination protections above and beyond those in the contract
of employment) on appropriate terms.

Under the current service contract for each of Nick Kelsall and Martin Payne, the Company has the discretion to terminate the
employment lawfully without any notice by paying to the Director a sum equal to, but no more than, the salary and other contractual
benefits of the Director. The payment would be in respect of that part of the period of notice which the Director has not worked, less any
appropriate tax and other statutory deductions. The Director would be entitled to any holiday pay which may otherwise have accrued in
what would have been the notice period. The Company may pay any sums due under these pay in lieu of notice provisions as one lump
sum or in instalments of what would have been the notice period. If the Company elects to pay in instalments, the Director is under an
express contractual duty to mitigate his losses and to disclose any third-party income he has received or is due to receive. The Company
reserves the right to reduce the amount of the instalments by the amount of such income. The Committee would expect to include
similar pay in lieu of notice provisions in any future executive director’s service contract. These pay in lieu of notice provisions can also be
activated by the Director if they exercise their contractual right to terminate their employment upon a change of control of the Company
or a transfer of their employment to an acquirer of the Company’s business. The Committee would not envisage including a similar right
to terminate in any future executive director’s service contract.

Also under their service contracts, if the Director’s employment is terminated for whatever reason, he agrees that he is not entitled to
any damages or compensation to recompense him for the loss or diminution in value of any actual or prospective rights, benefits or
expectations under or in relation to the APSP, DBP, SAYE plan or the annual discretionary bonus scheme. This is without prejudice to any
of the rights, benefits or entitlements which may have accrued to the Director under such arrangements at the termination of employment.

Norcros plc Annual report and accounts 2015

Service contracts and policy for payment for loss of office continued
The table below summarises how awards under the annual bonus, DBP and APSP are typically treated in specific circumstances,
with the final treatment remaining subject to the Committee’s discretion:

RE ASON FOR CESSATION

CALCUL ATION OF VESTING/PAYMENT

TIMING OF VESTING

Annual bonus

Voluntary resignation
or summary dismissal

All other circumstances

No bonus paid

n/a

Bonuses are paid only to the extent that the associated objectives, as set at the
beginning of the plan year, are met. Any such bonus would normally be paid
on a pro-rata basis, taking account of the period actually worked

At the normal vesting
date unless the Committee,
in its absolute discretion,
determines that awards
should vest on cessation
of employment

n/a

At the normal vesting
date unless the Committee,
in its absolute discretion,
determines that awards
should vest on cessation
of employment

If the Committee
determines that an award
should vest, then awards
will vest on their normal
vesting date, unless the
Committee, in its absolute
discretion, determines that
awards should vest on
cessation of employment

On change of control

DBP

Summary dismissal

Awards lapse

Injury, illness, disability, death,
retirement with the agreement of the
Group, redundancy or employing
company leaving Group

Unvested awards vest

Voluntary resignation or other
reason not stated above

Unvested awards lapse unless the Committee, in its absolute discretion,
determines that an award should vest

Change of control

APSP

Unvested awards will be pro-rated for the portion of the vesting period elapsed
on change of control, unless the Committee, in its absolute discretion, determines
otherwise. Awards may alternatively be exchanged for new equivalent awards
in the acquirer, where appropriate

Summary dismissal

Awards lapse

n/a

Voluntary resignation, injury,
retirement with the agreement of
the Group, redundancy or other
reason that Committee determines
in its absolute discretion

Unapproved option awards lapse unless the Committee, in its absolute discretion,
determines that awards should vest, subject to being pro-rated for time and
performance to the date of cessation of employment. Approved option awards lapse,
except in the case of retirement with the agreement of the employer, when awards
will vest, subject to pro-rating as stated above.

On cessation of
employment unless the
Committee, in its absolute
discretion, determines
otherwise

Death

Change of control

Unapproved option awards vest in full, but may be subject to the application of the
performance conditions attached to them. Approved option awards are pro-rated
for time and performance to that date.

Immediately

Awards vest, subject to being pro-rated for time and performance to the date of cessation
of employment, unless the Committee determines otherwise. Awards may alternatively
be exchanged for new equivalent awards in the acquirer, where appropriate.

On change of control

Corporate governanceNorcros plc Annual report and accounts 2015

48 Directors’ remuneration policy report continued

External appointments
Executive Directors are permitted to take up non-executive positions on the boards of other companies, subject to the prior approval
of the Board. The Executive Director may retain any fees payable in relation to such appointment. Details of external appointments
and the associated fees received are included in the Annual Report on Remuneration.

Consideration of employment conditions elsewhere in the Group
The Group seeks to promote and maintain good relations with employees and (where relevant) their representative bodies as part
of its broader employee engagement strategy. The Committee is mindful of salary increases applying across the rest of the business
in relevant markets when considering salaries for Executive Directors, but does not currently consult with employees specifically
on executive remuneration policy and framework.

Consideration of shareholder views
The Committee considers shareholder views received during the year and at the Annual General Meeting each year, as well as guidance
from shareholder representative bodies more broadly, in shaping remuneration policy. The vast majority of shareholders continue to express
support of remuneration arrangements at Norcros. The Committee keeps the remuneration policy under regular review, to ensure it
continues to reinforce the Group’s long-term strategy, and aligns Executive Directors with shareholders’ interests. We will consult
shareholders before making any significant changes to our remuneration policy.

Non-executive Director remuneration policy
Non-executive Directors (including the Chairman) have letters of appointment which specify an initial term of at least three years,
although these contracts may be terminated at one month’s notice by either the Company or Director. In line with the UK Corporate
Governance Code guidelines, all Directors are subject to re-election annually at the AGM.

Details of terms and notice periods for Non-executive Directors are summarised below:

Non-executive Director

Martin Towers

Jo Hallas

David McKeith

Date of appointment

28 July 2011

27 September 2012

24 July 2013

Notice period

1 month

It is the policy of the Board of Directors that Non-executive Directors are not eligible to participate in any of the Group’s bonus, long-term
incentive or pension schemes. Details of the policy on fees paid to our Non-executive Directors are set out in the table below:

COMPONENT AND OBJECTIVE

OPER ATION

OPPORTUNIT Y

Fees
To attract and retain Non-executive
Directors of the highest calibre with
broad commercial experience
relevant to the Group

The fee paid to the Chairman is determined by
the Committee excluding the Chairman. The
fees paid to the other Non-executive Directors
are determined by the Chairman and the
Executive Directors.

Fee levels are reviewed periodically, with any
adjustments effective 1 April. Fees are reviewed
by taking into account external advice on best
practice and fee levels at other FTSE companies
of broadly similar size and sector to Norcros.
Time commitment and responsibility are also
taken into account when reviewing fees.

Additional fees are payable for acting as Chairman
of the Audit and Remuneration Committees.

Aggregate fees are limited to
£350,000 p.a. by the Group’s
Articles of Association.

Fee increases will be applied
taking into account the outcome
of the review.

The fees paid to Non-executive
Directors in respect of the year under
review (and for the following year)
are disclosed in the Annual Report
on Remuneration.

PERFOR M ANCE
ME ASURES

n/a

Approach to Non-executive Director recruitment remuneration
In recruiting a new Non-executive Director, the Remuneration Committee will use the policy as set out in the table above. A base fee
in line with the prevailing fee schedule would be payable for serving as a Director of the Board, with additional fees payable for acting
as Chairman of the Audit or Remuneration Committees.

Annual report on remuneration

Norcros plc Annual report and accounts 2015

The following section provides details of how our policy was implemented during the year to 31 March 2015.

Remuneration Committee membership in the year to 31 March 2015
The Remuneration Committee is responsible for recommending to the Board the remuneration policy for Executive Directors and the
members of the Group’s senior management and for setting the remuneration packages for the Board Chairman and each Executive
Director. The Committee’s responsibilities are set out in its Terms of Reference which can be found on the Company’s website at
www.norcros.com.

During the year under review, the following Directors were members of the Remuneration Committee:

— Jo Hallas (Chair);

— David McKeith; and

— Martin Towers.

All members of the Committee are independent. They serve on the Committee for a minimum three-year term and a maximum of six
years. As part of an effectiveness review for the entire Board, an evaluation of the Remuneration Committee was undertaken in the year
to 31 March 2015. We are pleased to report this review concluded that the Committee has operated effectively.

In addition, the Group Chief Executive and the Group Finance Director were invited to attend Committee meetings to advise on specific
questions raised by the Committee and on matters relating to the performance and remuneration of senior managers, other than in
relation to their own remuneration. The Group Counsel and Company Secretary acts as Secretary to the Committee. No individual was
present while decisions were made regarding their own remuneration.

The Committee met six times during the year. Attendance by individual members at meetings is detailed on page 34.

Main activities of the Committee during the year to 31 March 2015
The main activities carried out by the Committee during the year under review were:

— reviewing and setting salary levels for Executive Directors and senior management;

— determining the annual bonus outcome for the year ended 31 March 2014;

— setting operating profit targets for the annual bonus for the year to 31 March 2015;

— calibrating EPS targets for, and granting of, 2014 APSP awards;

— reviewing and setting the fees payable to the Non-executive Chairman; and

— aligning, where appropriate, the benefits provided to senior management.

Advisers
In February 2014, following a competitive tendering process, the Company appointed Kepler Associates as the independent remuneration
advisers to the Remuneration Committee. Kepler Associates is a founding member and signatory of the Code of Conduct for Remuneration
Consultants, details of which can be found at www.remunerationconsultantsgroup.com. In the year to 31 March 2015, Kepler Associates
provided the following services:

Services provided

Kepler Associates

Benchmarking remuneration, guidance on setting incentive targets, Remuneration Report drafting support,
general support to the Remuneration Committee throughout the year

Kepler provides no other services to the Company or its Directors and the Committee considers them to be independent.

Fees
£

25,055

Corporate governanceNorcros plc Annual report and accounts 2015

50 Annual report on remuneration continued

Summary of shareholder voting at the 2014 AGM
The results of the binding remuneration policy vote and the advisory vote on the 2014 Remuneration Report at the 2014 AGM
are summarised below:

For (including discretionary)

Against

Policy (binding)

Advisory

Total number
of votes

% of
votes cast

Total number
of votes

424,480,213

99.89%

424,843,727

483,296

0.11%

246,817

Advisory

% of
votes cast

99.94%

0.06%

Total votes cast (excluding withheld votes)

424,963,509

100.00%

425,090,544

100.00%

Votes withheld

Total votes (including withheld votes)

137,035

425,100,544

10,000

425,100,544

The Committee welcomes the very strong support received from shareholders at the 2014 AGM for remuneration at Norcros.

Single figure for total remuneration for Executive Directors (audited information)
The following table provides a single figure for total remuneration of the Executive Directors for the year to 31 March 2015, together with
comparative figures for the year to 31 March 2014. The values of each element of remuneration are based on the actual value delivered,
where known. The value of the annual bonus includes the element of bonus deferred under the Deferred Bonus Plan.

Base salary

Taxable benefits1

Annual bonus2

Long term incentives3

Pension benefit4

SAYE5

Total

Nick Kelsall

Martin Payne

2015
£

335,000

16,347

231,920

427,297

78,479

1,891

2014
£

274,495

30,462

148,228

374,082

90,263

—

2015
£

225,000

13,347

155,768

295,678

34,349

—

2014
£

190,035

21,312

102,618

258,980

42,148

—

1,090,934

917,530

724,142

615,093

1. Taxable benefits consist of car allowance (N. P. Kelsall - 2015: £15,000 p.a., 2014: £29,150 p.a., M. K. Payne - 2015: £12,000 p.a.; 2014: £20,000 p.a.) and private medical insurance.

2. Annual bonus comprises both the cash annual bonus for performance during the year and the face value of the deferred bonus element on the date of deferral. The deferred

share element (50% of the figures shown in the table above) is deferred for three years. See ‘Annual Bonus in respect of 2015 performance’ below for further details.

3. For 2015, the APSP value reflects the estimated value of APSP awards granted in October 2012, of which 99.25% will vest on 28 July 2015. The value of awards is estimated using
the three-month average share price to 31 March 2015 of 16.79p, and will be trued-up to reflect the vest-date value of awards in next year’s Annual Report on Remuneration.
See the relevant sections on page 52 for further details. For 2015 the figures also include £9,519 and £6,447 of dividend accrual for N. P. Kelsall and M. K. Payne respectively
(2014: nil). For 2014, the APSP value has been trued up from that disclosed in last year’s Remuneration Report to reflect the Group’s share price of 17.625p on the date of vesting
(1 September 2014) of awards granted in September 2011.

4. The pension benefit provided to Nick Kelsall and Martin Payne in 2015 comprises cash in lieu (N. P. Kelsall – £50,250, M. K. Payne – £33,750) and amounts related to the defined

benefit scheme (N. P. Kelsall – £28,229, M. K. Payne – £599). In 2014, pension benefits comprised cash in lieu (N. P. Kelsall – £72,363, M. K. Payne – £41,748), and amounts related
to the defined benefit scheme (N. P. Kelsall – £17,900, M. K. Payne – £400). See “Total pension entitlements” on page 52 for further details.

5. Value of Save As You Earn scheme grants made. See “2014 SAYE” on page 52 for further details.

Norcros plc Annual report and accounts 2015

Incentive outcomes for the year to 31 March 2015 (audited information)
Annual bonus in respect of performance in the year to 31 March 2015
The 2015 annual bonus plan was based 100% on Group underlying operating profit performance for the year to 31 March 2015. Based on
the Company’s performance in 2015, against targets set at the start of the year, the Committee decided to make an annual bonus award
of 69.23% of base salary to each of the Group Chief Executive and Group Finance Director. Further details, including the profit targets set
and actual performance, are provided below:

Maximum

Target

Threshold

Underlying
profit target
£m

17.8

16.5

15.2

Payout
(% of max.)

2015
outturn

Bonus
(% of max.)

100

17.0

69.23%

50% of the annual bonus award of 69.23% of base salary for each Executive Director, i.e. 34.615% of salary, will be deferred into shares under
the DBP. This DBP award will vest on the third anniversary of grant, subject to continued employment.

The table below sets out the actual bonuses to be paid in cash and deferred shares for each Executive Director for the year
to 31 March 2015:

Nick Kelsall

Martin Payne

Annual cash bonus

% of salary

34.615%

Deferred
share bonus

Value of
deferred shares

£115,960

£77,884

£115,960

£77,884

Total

£231,920

£155,768

Deferred Bonus Plan (DBP)
The grant of options under the DBP in respect of the year to 31 March 2015 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 2015 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 £115,960 and £77,884 respectively by the share price at the date of grant.

2012 APSP awards vesting
Effective July 2012, APSP awards of 2,507,056 and 1,735,654 shares were granted to Nick Kelsall and Martin Payne, respectively. Vesting of
these awards was based on Norcros’ aggregate diluted underlying EPS over the three financial years to 31 March 2015. Based on performance
over this period, the Committee determined that 99.25% of this award will vest on 28 July 2015, being the end of the relevant three-year
vesting period according to the APSP rules. Performance targets, and actual performance against these, are summarised in the table below:

Performance level

Threshold

Maximum

Aggregate
underlying EPS

5.39p

6.39p

% vesting

25%

100%

Norcros’
performance

Award vesting
(% of APSP award)

6.38p

99.25%

Scheme interests awarded in 2015 (audited information)
2014 DBP
During the year under review, the following DBP awards were made to the Executive Directors (relating to the annual bonus earned
for performance over the year to 31 March 2014):

Nick Kelsall

Martin Payne

Basis of award

Grant date

Number of nil-cost options granted

Grant-date share price (p)

Grant-date face value (£)

Normal vesting date

Performance conditions

50% of earned bonus

23 July 2014

411,744

18.0

74,114

23 July 2017

None

50% of earned bonus

23 July 2014

285,050

18.0

51,309

23 July 2017

None

Corporate governance
Norcros plc Annual report and accounts 2015

52 Annual report on remuneration continued

Scheme interests awarded in 2015 (audited information) continued
2014 APSP
During the year under review, the following APSP awards were granted to the Executive Directors:

Basis of award

Grant date

Number of nil-cost options granted

Grant-date share price (p)

Grant-date face value (£)

Normal vesting date

Performance period

Nick Kelsall

100% of base salary

23 July 2014

1,861,111

18.0

335,000

23 July 2017

Martin Payne

100% of base salary

23 July 2014

1,250,000

18.0

225,000

23 July 2017

1 April 2014 – 31 March 2017

Performance conditions

Three-year aggregate underlying EPS

Threshold: 5.94p (25% of element vesting)

Maximum: 6.81p (100% of element vesting)

Straight-line vesting between these points

Holding period

23 July 2017 – 23 July 2018

2014 SAYE
During the year under review, the following SAYE awards were granted to the Executive Directors:

Basis of award

Grant date

Number of options granted

Invitation date share price (p)

Exercise price (p)

Normal vesting date

Expiration date

Performance conditions

Nick Kelsall

Fixed £ savings contract

19 December 2014

113,924

17.46

15.8

1 March 2018

31 August 2018

None

Martin Payne did not enter into a savings contract under the SAYE in the year to 31 March 2015.

Total pension entitlements (audited information)
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. For the year under review and for future years (but unlike the
practice in the previous year), if a payment is made in the form of taxable pension allowance, the amount payable is not reduced to allow
for employment taxes.

During the year Nick Kelsall elected to take taxable pension allowance of £50,250 (2014: £72,363) with no amounts paid directly into a
pension scheme (2014: £nil). Martin Payne elected to take taxable pension allowance of £33,750 (2014: £41,748) with no amount paid into
a personal pension plan (2014: £nil). In line with the Regulations, the single figure table reflects the total of these amounts, as well as the
capitalised increase in accrued pension (net of inflation) under the UK defined benefit scheme, of which neither Nick Kelsall nor Martin
Payne are active members. Martin Payne’s entitlement relates to his former employment at H&R Johnson Tiles Limited between 1993
and 2001. Details of Executive Directors’ retirement benefits under the Group’s UK defined benefit scheme and taxable pension allowances
are summarised in the following table.

Director

N.P. Kelsall

M.K. Payne

Accrued Increase in accrued
pension pension net of CPI
£

Transfer value
of net increase
in the year
£

Normal
retirement date

Additional value
of pension on
early retirement
£

Pension value
in the year from
DB scheme
£

Pension value
in the year from
cash allowance
£

18,915

11,167

1,411

24,910

2,077

16.12.21

31.07.30

28,229

599

50,250

33,750

Total
£

78,479

34,349

Norcros plc Annual report and accounts 2015

Single figure for total remuneration for Non-executive Directors (audited information)
The table below sets out a single figure for the total remuneration received by each Non-executive Director for the year to 31 March 2014
and the prior year:

Total fee

2015
£

95,000

40,000

2014
£

80,000

40,000

27,590

Martin Towers

Jo Hallas

David McKeith1

1. David McKeith joined the Board on 24 July 2013. His 2014 fee reflects the part-year served.

Payments to past Directors (audited information)
During the year under review, no payments were made to past Directors.

Exit payments made in the year (audited information)
No exit payments to Directors were made during the year under review.

External appointments in the year
No external appointments were held by the Executive Directors during the year.

Percentage change in CEO remuneration
The table below shows the percentage change in the CEO’s salary, benefits (excluding pension) and annual bonus between the 2014 and
2015 financial years compared with the percentage change in the average of each of those components of pay for all staff employed in
continuing operations. The comparison uses a per capita figure and accordingly this reflects an average across the Group’s businesses.
No account is therefore taken of the impact of a substantially weaker South African Rand and operational factors such as new joiners
and leavers and the mix of employees.

Salary

Benefits

Bonus

CEO
% change
2014–2015

22.0%1

-46.3%1

56.5%

Average of
other employees
% change
2014–2015

1.9%

-0.5%

18.2%

1. The percentage changes for the CEO’s Salary and Benefits reflect the rebalancing of the CEO’s fixed pay mix (effective 1 April 2014) by increasing base salary but offsetting

this increase by decreasing employer cash pension contributions and car allowances to bring each component more into line with FTSE market norms. The percentage change
in the CEO’s overall fixed pay between 2014 and 2015 was 6.4%.

Relative importance of spend on pay
The table below shows shareholder distributions (i.e. dividends – there were no share buybacks in either year) and Norcros’ expenditure
on total employee pay for the year under review and the prior year, and the percentage change year on year.

Dividends

Total staff costs

2015
£000

3,098

44,125

2014
£000

2,770

44,283

% change

+11.8%

-0.4%

Corporate governanceNorcros plc Annual report and accounts 2015

54 Annual report on remuneration continued

Performance graph and table
The following graph shows the six-year TSR performance of the Company relative to the FTSE All-Share Construction & Materials Index.
This comparator was chosen because the Company is a constituent member of this index.

Total Shareholder Return
(Value of £100 invested on 31 March 2009)

Norcros plc
Construction & Materials

)

(

t
n
e
m

t
s
e
v
n

500.00

450.00

400.00

350.00

300.00

250.00

200.00

150.00

100.00

50.00

0.00

31 March
2009

31 March
2010

31 March
2011

31 March
2012

31 March
2013

31 March
2014

31 March
2015

The table below details the Chief Executive’s single figure of remuneration over the same period:

2010

2011

2012

2013

2014

2015

CEO single figure of
remuneration (£000)

Incumbent

J Matthews

N Kelsall

Total remuneration

£488,000

£611,000

£380,780

£526,282

£917,530

£1,090,934

Annual bonus
(as a % of max. opportunity)

APSP vesting
(as a % of max. opportunity)

38%

n/a

81%

n/a

50%

n/a

54%

100%

69%

99%

Implementation of Executive Director remuneration policy for the year to 31 March 2016
The Remuneration Committee conducted its normal review of Executive Directors’ remuneration, effective 1 April 2015.
The results of this review are as follows:

Base salary
Base salaries are reviewed taking into account individual performance and competitive practice for similar roles in the Company’s
remuneration peer group, and remuneration awards within the Group. The Committee decided to increase Executive Director salaries
in line with the rest of the Group by 2%. For the year to 31 March 2016, Nick Kelsall’s salary will be £341,700, and Martin Payne’s salary
will be £229,500.

Norcros plc Annual report and accounts 2015

Implementation of Executive Director remuneration policy for the year to 31 March 2016 continued
Pension
Executive Directors’ pension contributions were reduced to 15% of salary (from 30% of salary for Nick Kelsall and 25% of salary for Martin
Payne) with effect from 1 April 2014. Contributions will be made either directly into a pension or as a cash allowance, at the choice of
each Executive Director. There is no change in the contribution percentage for either Executive Director for the year to 31 March 2016.

Car allowance
The annual car allowance was reduced from £29,000 to £15,000 for Nick Kelsall and from £20,000 to £12,000 for Martin Payne
with effect from 1 April 2014. There is no change in the car allowance for either Executive Director for the year to 31 March 2016.

Annual bonus
The annual bonus opportunity for Executive Directors will remain unchanged for the 2016 financial year with a maximum bonus
entitlement of 100% of salary. The bonus outcome for Executive Directors will continue to be based entirely on Group underlying
operating profit. Of any bonus earned 50% will be deferred into nil cost options for a further three years under the Deferred Bonus Plan.
Annual bonus targets are considered to be commercially sensitive but will be disclosed retrospectively in next year’s Annual Report
on Remuneration.

APSP
The structure of APSP awards to be made in the 2016 financial year will be unchanged from 2015 except that, to the extent an award
vests, vested shares will be subject to a further two year holding period (compared to one year for 2015 awards). Awards with face values
of 100% of salary will be granted to Nick Kelsall and Martin Payne, with vesting subject to the achievement of three year aggregate diluted
underlying EPS targets. The Committee will determine these targets at the time awards are made and these targets (along with other
relevant details of this grant) will be disclosed in next year’s Annual Report on Remuneration.

SAYE
Executive Directors will be able to participate in any SAYE contract offered to all employees, on identical terms.

Implementation of Non-Executive Director remuneration policy for the year to 31 March 2016
The Committee has reviewed the Board Chairman’s fee and concluded that an increase to £97,000 p.a. was appropriate. The Board Chairman
and the Executive Directors reviewed Non-executive Director fees at the same time, and concluded that a similar small percentage increase
would be appropriate. Accordingly, for the 2016 financial year, Non-executive Director fees will be as follows:

Executive Director

Board Chairman

Non-executive Director

Additional fee for chairing Audit or Remuneration Committees

Fee at
1 April 2014

£95,000

£35,000

£5,000

Fee from
1 April 2015

£97,000

£35,875

£5,125

Percentage
increase

2.1%

2.5%

Executive Director shareholdings (audited information)
The table below shows the shareholding of each Executive Director and their respective shareholding requirement as at 31 March 2015:

Options held

Shares owned
outright (A)

Vested but
not exercised (B)

Unvested and subject
to performance (C)

Unvested,
but not subject
to performance (D)

Shareholding
guideline % salary

Current holding

Requirement met?

Nick Kelsall

Martin Payne

7,954,251

803,549

—

3,191,996

2,171,382

3,320,243

2,219,756

100%

7,954,251

803,549

Value of current shareholding based on average share price over three months to 31 March 2015 of 16.79p.

Details of the scheme interests contained in columns B-D are provided in the table overleaf.

Corporate governance
Norcros plc Annual report and accounts 2015

56 Annual report on remuneration continued

Directors’ share scheme interests (audited information)
Share options

Notes

Scheme

Date
of grant

Vested
date

Expiration
date

Exercise
price

Shares
under option
1 April 2014

Granted
in 2015

Vested
in 2015

Exercised
in 2015

Nick Kelsall

DBP

26.09.13

26.09.16

26.09.23

23.07.14

23.07.17

23.07.24

—

306,322

—

411,744

Total

306,322

411,744

—

Shares
under option
31 March 2015

306,322

411,744

718,066

Martin Payne

b,c

APSP

01.09.11

01.09.14

01.09.21

—

2,122,449

— 2,122,449 2,122,449

—

28.07.12

28.07.15

28.07.22

— 2,507,056

27.09.13

27.09.16

27.09.23

— 1,330,885

—

23.07.14

23.07.17

23.07.24

—

1,861,111

—

— 2,507,056

— 1,330,885

—

1,861,111

Total

5,960,390

1,861,111 2,122,449 2,122,449

5,699,052

SAYE

23.12.11

01.03.15

31.08.15

19.12.14

01.03.18

31.08.18

10.1p

15.8p

89,108

—

89,108

—

113,924

—

113,924

Total

89,108

113,924

89,108

113,924

DBP

26.09.13

26.09.16

26.09.23

23.07.14

23.07.17

23.07.24

—

212,069

—

285,050

Total

212,069

285,050

—

212,069

285,050

497,119

b,c

APSP

01.09.11

01.09.14

01.09.21

— 1,469,388

— 1,469,388 1,469,388

—

28.07.12

28.07.15

28.07.22

27.09.13

27.09.16

27.09.23

23.07.14

23.07.17

23.07.24

—

1,735,654

921,382

—

— 1,250,000

—

1,735,654

921,382

— 1,250,000

Total

4,126,424 1,250,000 1,469,388 1,469,388

3,907,036

a. Outstanding Deferred Bonus Plan (DBP) awards are subject to the terms set out on page 51.

b. On 12 June 2014, the Committee determined that 100% of the 2011 APSP award should vest in accordance with the performance condition based on the Company’s EPS

performance as described on page 46 of the Company’s 2014 Annual Report and Accounts.

c. Outstanding APSP awards are subject to the following three-year aggregate EPS targets:

Performance

Threshold

Maximum

Three-year aggregate EPS targets

% vesting

28.07.12 award

27.09.13 award

23.07.14 award

25%

100%

5.39p

6.39p

5.60p

6.40p

5.94p

6.81p

d. On 2 March 2015 N. P. Kelsall exercised options amounting to 89,108 shares under an SAYE scheme open to all UK employees. Based on the share price of 16.50p on the exercise

date and the exercise price of 10.10p, the value of the shares vesting was £5,703.

e. During the year N. P. Kelsall chose to participate in a SAYE scheme open to all UK employees. Under the scheme he received 113,924 options with an exercise price of 15.80p.

Norcros plc Annual report and accounts 2015

Directors’ share scheme interests (audited information) continued
Shareholder dilution
The Group’s share incentive plans operate in line with the ABI principles, which require that commitments under all share schemes
satisfied by newly issued shares must not exceed 10% of the issued share capital in any rolling ten-year period, of which up to 5% may
be used to satisfy options under executive share schemes. The Group’s position against the dilution limits at 31 March 2015 was 5.7%
for the all share schemes limit and 4.0% for executive schemes.

Statement of Directors’ shareholding and share interests (audited information)

Director

N. P. Kelsall

M. K. Payne

M. G. Towers

J. C. Hallas

D. W. McKeith

This report was approved by the Board of Directors on 18 June 2015 and signed on its behalf by:

J. C. Hallas
Chairman of the Remuneration Committee

31 March 2014
Ordinary Shares

31 March 2015
Ordinary Shares

7,865,143

7,954,251

400,000

843,635

200,000

150,000

803,549

1,214,208

200,000

150,000

Corporate governanceNorcros plc Annual report and accounts 2015

58 Directors’ report

The Directors present their Annual Report and the audited
consolidated financial statements for the year ended
31 March 2015.

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 and South Africa.

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, Group Chief Executive’s statement
and the Strategic Report on page 2 to page 29. Key performance
indicators are shown on page 23.

The Directors recommend a final dividend for the year ended
31 March 2015 of 0.375p (2014: 0.340p). This follows the decision
to pay an interim dividend earlier in the year of 0.185p (2014: 0.170p).

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 (2014: nil). At the Company’s
2014 Annual General Meeting, the shareholders authorised
the Company to make market purchases of up to 58,788,549
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.

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.

and promotion of disabled persons should, as far as possible,
be identical to that of an able-bodied person.

Directors
Biographical details of the present Directors are set out on pages
30 and 31. The Directors who served during the year and to the
date of this report are set out below:

Director

Martin Towers

Jo Hallas

David McKeith

Nick Kelsall

Martin Payne

Role

Chairman

Non-executive Director

Group Chief Executive

Group Finance Director

The interests of the Directors in the shares of the Company
at 31 March 2015 and 31 March 2014 are shown on page 57.

Substantial shareholding
As at 15 June 2015 the Company had received notification that
the following were interested in 3% or more of the Company’s
issued share capital:

Percentage of issued share capital

Schroders plc

Artemis Fund Managers

Standard Life Investments

Fidelity Worldwide Investment

Hargreave Hale

SVM Asset Management

Invesco Ltd

10.70

9.67

7.42

5.38

4.94

4.77

4.23

Greenhouse gas emissions
The Board presents this report in order to meet the Company’s
obligation under the Companies Act 2006 (Strategic Report and
Directors’ Reports) Regulations 2013 to disclose the Group’s
worldwide emissions of the six Kyoto gases attributable to human
activity measured in tonnes of carbon dioxide equivalent. As stated
in the Corporate Responsibility and Sustainability section on
pages 28 and 29, the Company is committed to reducing and
minimising its impact on the environment.

Global GHG emissions data
Year ended 31 March

Tonnes of CO2e
2015

Tonnes of CO2e
20141

Emissions from:

Combustion of fuel and
operation of facilities (Scope 1)

Electricity, heat, steam and cooling
purchased for own use (Scope 2)

61,671

64,062

32,609

38,197

94,280

102,259

424.5

467.6

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

Total

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

Company’s chosen
intensity measurement2

1. Restated on same basis of calculation as 2015.

2. Emissions per £m of revenue.

Norcros plc Annual report and accounts 2015

Greenhouse gas emissions continued
We have reported on all of the emission sources, being Scope 1
and Scope 2 emissions. These are emissions from activities for
which the Group is responsible, plus emissions resulting from
the purchase of electricity, heat, steam or cooling by a business in
the Group for its own use. These sources use the same reporting
boundary as for our consolidated financial statements. We do not
have responsibility for any emission sources that are not included
in our consolidated financial statements.

We have used the GHG Protocol Corporate Accounting and
Reporting Standard (revised edition), data gathered to fulfil our
requirements under the CRC Energy Efficiency scheme, and
emission factors from the UK Government’s GHG Conversion
Factors for Company Reporting 2014. Where no more suitable
data sources are available, we have used, where practicable,
estimates based on the appropriate information that is available
to the Group.

Political donations
There were no political donations (2014: £nil).

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

Corporate governance
Details of the Group’s corporate governance are contained on
pages 32 to 35. This Corporate Governance Report forms part of
the Directors’ Report and is incorporated into it by cross reference.

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

Interest rate risk
The Group has the ability to secure a substantial proportion of its
bank loans at fixed rates via interest rate swaps. However, due to
the current low level of debt and historically low UK LIBOR rates,
the Group has decided not to take out any such swaps at the
present time. This position is regularly reassessed.

Credit risk
Credit risk arises from cash and cash equivalents, derivative
financial instruments and deposits with banks and financial
institutions, as well as credit exposures to customers. The Group
maintains a credit insurance policy for all its operations which
covers a substantial portion of the Group’s trade debtors. For
banks and financial institutions only independently rated parties
with a strong rating are accepted.

Liquidity risk
The Group’s banking facilities are designed to ensure there are
sufficient funds available for the current operations and the
Group’s further development plans.

Exchange rate risk
Through its centralised treasury function the Group seeks
to hedge its UK-based transactional foreign exchange risk
on a rolling annual basis through the use of forward exchange
contracts and similar hedging instruments. The Group’s principal
UK-based foreign currency exposures are largely hedged until at
least March 2016 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 57.

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 21 July 2014 in respect of the £70.0m unsecured
revolving credit facility and the £30.0m accordion facility which
contain mandatory prepayment provisions on a change
of control.

There are no provisions within Directors’ employment contracts
which allow for specific termination payments upon a change
of control.

Statement of disclosure of information to auditor
In the case of each of the persons who are Directors,
the following applies:

(a)

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

(b)

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

Independent auditor
A resolution to re-appoint PricewaterhouseCoopers LLP
as auditor 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 22 July 2015 at Mottram Hall, Wilmslow Road,
Mottram St Andrew, Cheshire SK10 4QT. The notice convening
that meeting, together with the resolutions to be proposed,
appears on pages 105 to 108 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.

R. H. Collins
Company Secretary
18 June 2015

Corporate governanceNorcros plc Annual report and accounts 2015

60 Statement of Directors’ responsibilities

In respect of the Annual Report, the Directors’ Remuneration Report and the financial statements

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.

The Directors consider that the Annual Report and Accounts,
taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess
the Company’s performance, business model and strategy.

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 Strategic Report and Directors’ Report include 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
18 June 2015

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 judgments 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.

Norcros plc Annual report and accounts 2015

Independent auditor’s report
To the members of Norcros plc

Report on the Group financial statements
Our opinion
In our opinion, Norcros plc’s Group financial statements (the “financial statements”):

— give a true and fair view of the state of the Group’s affairs as at 31 March 2015 and of its profit and cash flows for the year then ended;

— have been properly prepared in accordance with International Financial Reporting Standards (“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 IAS Regulation.

What we have audited
Norcros plc’s financial statements comprise:

— the consolidated balance sheet as at 31 March 2015;

— the consolidated income statement and consolidated statement of comprehensive income for the year then ended;

— the consolidated cash flow statement for the year then ended;

— the consolidated statement of changes in equity for the year then ended; and

— the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.

Certain required disclosures have been presented elsewhere in the Annual Report and accounts (the “Annual Report”), rather than
in the notes to the financial statements. These are cross-referenced from the financial statements and are identified as audited.

The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and IFRSs
as adopted by the European Union.

Our audit approach
Overview
Overall Group materiality: £765,000 which represents approximately 5% of underlying profit before tax.

The Group consists of seven operating divisions, alongside its head office functions. Our audit focused on the most significant of these in terms
of materiality to the Group financial statements. The components within the scope of our work accounted for 100% of Group revenue and 98%
of Group underlying profit before tax.

1. Accounting for customer rebates and other trade promotional spend.

2. Defined benefit pension plan liabilities.

3. Carrying value of property, plant and equipment in South Africa.

The scope of our audit and our areas of focus
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”).

We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular,
we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making
assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management
override of internal controls, including evaluating whether there was evidence of bias by the directors that represented a risk of material
misstatement due to fraud.

The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are identified
as “areas of focus” in the table below. We have also set out how we tailored our audit to address these specific areas in order to provide
an opinion on the financial statements as a whole, and any comments we make on the results of our procedures should be read in this
context. This is not a complete list of all risks identified by our audit.

Group accountsNorcros plc Annual report and accounts 2015

Independent auditor’s report continued
To the members of Norcros plc

Area of focus

How the scope of our audit addressed the area of focus

Accounting for customer rebates and other
trade promotional spend

Refer to note 1 (Accounting policies) and page 73
(Critical accounting estimates and judgements).

As is normal industry practice, the Group has a number
of trading agreements in place with its largest customers
to encourage them to purchase and promote the Group’s
products. These consist of various types of rebates and
other trade spend commitments, which may then be subject
to variation from time to time.

Rebates on sales are recognised as a deduction from revenue
and are earned over the period of the contractual agreements
with individual customers. The total amount recognised in a
year is therefore based on the expected amount payable up
to the balance sheet date under each customer agreement.

Promotional spend is a further deduction from revenue.
The funding paid is recognised in the period to which it
relates in accordance with the agreement with the customer.

We focused on such arrangements because of the significance
of the amounts to the Group’s gross profit, the significant
number of transactions and agreements in place, and the
industrywide focus on this area of accounting.

The amount to be recognised in the income statement for
such arrangements requires the directors to apply judgement
based on the agreements in place with each of the Group’s
customers, together with estimates of amounts the Group
owes where transactions span the financial year end.

The relative level of judgement in each of the categories
of arrangements noted above is considered below:

Volume based rebates
Volume based rebates are driven by customers achieving sales
volume targets agreed with the Group for specific products
over a pre-determined period. There is, therefore, judgement
involved in estimating the volume of sales, particularly where
rebate agreements span a financial year end, which is the
case in a large number of instances. In such instances the key
judgement that we focused on was the estimate of the rebate
expense accrued at year end.

Other trade promotional spend
This expense varied with regards to the nature and timing of
the activity to which it relates, and is recognised in accordance
with the terms agreed with customers.

It derives from a number of varying agreements and its recognition
requires the Group to determine the extent to which the promotional
activity has taken place and, hence, the amount payable by the
Group. Our focus was therefore on assessing whether evidence
of the promotional spend existed, whether the relevant promotion
had taken place, and whether the expense recognised was
recorded in the appropriate period.

Our audit work in respect of accounting for customer rebates
and other trade promotional spend comprised a combination
of substantive testing, controls testing, and an assessment of
the Group’s disclosures in this area. Each element of our work
was considered in more detail below.

Substantive testing
We tested a sample of the underlying agreements to provide the
core evidence to support the amount and timing of recognition
of both customer rebates and other trade promotional spend.
This work involved evaluating whether the amount and timing
of recognition was consistent with the contractual arrangements.

Where such agreements spanned the year end, or where the
agreements were on a calendar year basis and the 2015 calendar
year agreements had not yet been agreed, we critically assessed
the judgements taken by the directors in estimating year end
accruals for amounts owing to customers. This work included
the use of look back tests to assess the accuracy of the accruals
in previous years, alongside the use of “reasonableness checks”
around the key assumptions of rebate terms and, in the case of
volume rebates, the level of sales likely to occur in the rebate
period, with reference to historic events. This testing did not
identify any evidence of bias in the directors’ judgements.

We also analysed rebate expense and promotional expense
recognised each month and compared them to gross sales to
identify whether there were any unusual trends in the amounts
or timing of rebate expense and promotional expense recognised
in each period. Alongside this we held discussions with members
of management within the sales teams to further understand the
substance of these agreements and trends in the year. No unusual
trends were identified.

Controls testing
Our controls work encompassed understanding, evaluating and
testing key controls in respect of the recognition of customer
rebates and other trade promotional spend. These key controls
primarily related to the approval of rebate and recording of
promotional agreements. We determined that we were able
to obtain evidence from the operation of these controls for the
purpose of our audit of whether customer rebates and other
trade promotional spend had been recorded appropriately and
in the correct period.

Disclosures
We read the disclosures within the financial statements in respect
of customer rebates and other trade promotional spend and,
based on our work, determined that they are consistent with
accounting standards and the recent guidance on the reporting
of complex supplier arrangements issued by the Financial
Reporting Council.

Norcros plc Annual report and accounts 2015

Area of focus

How the scope of our audit addressed the area of focus

Defined benefit pension plan liabilities

Refer to note 1 (Accounting policies), page 73 (Critical accounting
estimates and judgements) and note 23.

The Group has a defined benefit pension plan net liability of
£44.3m (2014: £21.8m), which is significant in the context of both
the overall balance sheet and the results of the Group, particularly
given the significant movement in the valuation of the net liability in
the current year. A major constituent of this net liability is the value
attributed to the gross liabilities of the pension scheme.

The valuation of these gross liabilities requires significant judgement
and expertise primarily in respect of the key assumptions which
are used. These assumptions include both financial assumptions
e.g. the discount rate and inflation, but also key demographic
assumptions e.g. mortality rates. Modest changes in a number
of these key assumptions can have a material impact on the
calculation of the liability. We therefore focused our work
on this area.

Carrying value of property, plant and equipment
in South Africa

Pension liabilities
We obtained the external actuary’s report used in valuing the
scheme’s liabilities and determined, using our experience of the
valuation of similar schemes, and our pension expertise, that the
methodologies adopted by the actuary in forming the valuation
were consistent with industry practice and our expectations.

We also agreed the key financial assumptions used within the
valuation of the scheme’s liabilities, including the discount
and inflation rates, to our internally developed benchmarks.
We compared the assumptions around salaries increase and
mortality to national and industry averages. The assumptions
used within the valuation of the scheme’s liabilities were in line
with our benchmarks and the external data.

Disclosures
We read the disclosures within the financial statements in
respect of the defined benefit scheme and, based on our work,
determined that they are consistent with accounting standards.

Refer to note 1 (Accounting policies) and page 73
(Critical accounting estimates and judgements).

We critically assessed the directors’ conclusion that no trigger
for an impairment review existed.

The Group holds property, plant and equipment relating to the
manufacturing facilities held by Johnson Tiles South Africa with
a carrying value of £5.6m as at 31 March 2015.

These manufacturing facilities have historically been loss making
and, whilst operational improvements were achieved in prior
years, there remained a possibility that these improvements
would not be sustained. Given these factors, the consideration
as to whether there had been a trigger for an impairment review
of these assets required judgement during the year. We focused
our work on this consideration by the directors at the balance
sheet date.

This assessment included comparing the division’s performance
for the year against budget and the prior year. In this comparison,
we focused on the division’s overall result, production volumes
and other operational key performance indicators.

We also considered whether there were external factors which may
indicate a requirement for an impairment review and budgets for
the year ending 31 March 2016.

We found that the actual performance of the division during the
year, together with the budget for 2016, supported the directors’
conclusion that no trigger for impairment existed.

How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements
as a whole, taking into account the geographic structure of the Group, the accounting processes and controls, and the industry in which
the Group operates.

The Group is managed divisionally, with the seven operating divisions across the UK and South African operating segments, with the head
office function incurring certain central costs on behalf of the Group. The Group’s accounting process is structured around a local finance
function in each of these divisions. These functions maintain their own localised accounting records and controls, distinct from those
at the head office level.

Consistent with the Group’s operations, we scoped our audit at a divisional level. The work at the operating divisions in the UK was
performed by the UK engagement team. The work at the South African operating divisions was performed by a team based in South Africa.
The UK team instructed the South African team to perform a full scope audit of the South African operations, and to focus their work
on customer rebates/other trade promotional spend and the carrying value of property, plant and equipment in South Africa. A senior
member of the UK team visited South Africa to discuss the results of the work with the South African team and to attend meetings with
local management at which the financial results were discussed. Furthermore, the UK engagement team performed procedures over
the Group’s consolidation of these divisions and significant consolidation entries.

Group accounts
Norcros plc Annual report and accounts 2015

Independent auditor’s report continued
To the members of Norcros plc

Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures
and to evaluate the effect of misstatements, both individually and on the financial statements as a whole.

Based on our professional judgement, and consistent with last year, we determined materiality for the financial statements as a whole as follows:

Overall Group materiality

£765,000 (2014: £730,000).

How we determined it

Approximately 5% of underlying profit before tax.

Rationale for benchmark applied

We believe that profit before tax, adjusted for those items set out in note 8 to the Group
financial statements (“underlying profit before tax”), provides us with a consistent year on year
basis for determining materiality based on the underlying trading performance of the Group,
but eliminating non-recurring and non-cash items.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £40,000 (2014: £25,000)
as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Going concern
Under the Listing Rules we are required to review the directors’ statement, set out on page 35, in relation to going concern. We have
nothing to report having performed our review.

As noted in the directors’ statement, the directors have concluded that it is appropriate to prepare the financial statements using the going
concern basis of accounting. The going concern basis presumes that the Group has adequate resources to remain in operation, and that
the directors intend it to do so, for at least one year from the date the financial statements were signed. As part of our audit we have
concluded that the directors’ use of the going concern basis is appropriate.

However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the Group’s ability
to continue as a going concern.

Other required reporting
Consistency of other information
Companies Act 2006 opinion
In our opinion, the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements.

ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:

Information in the Annual Report is:

— materially inconsistent with the information in the audited financial

statements; or

— apparently materially incorrect based on, or materially inconsistent with, our
knowledge of the Group acquired in the course of performing our audit; or

— otherwise misleading.

— the statement given by the directors on page 60, in accordance with provision
C.1.1 of the UK Corporate Governance Code (“the Code”), that they consider
the Annual Report taken as a whole to be fair, balanced and understandable
and provides the information necessary for members to assess the Group’s
performance, business model and strategy is materially inconsistent with our
knowledge of the Group acquired in the course of performing our audit.

We have no exceptions to report arising
from this responsibility.

— the section of the Annual Report on page 36, as required by provision C.3.8 of
the Code, describing the work of the Audit Committee does not appropriately
address matters communicated by us to the Audit Committee.

We have no exceptions to report arising
from this responsibility.

Norcros plc Annual report and accounts 2015

Other required reporting continued
Adequacy of information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion, we have not received all the information
and explanations we require for our audit. We have no exceptions to report arising from this responsibility.

Directors’ remuneration
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. We have no exceptions to report arising from this responsibility.

Corporate governance statement
Under the Listing Rules we are required to review the part of the Corporate Governance Statement relating to the parent company’s
compliance with ten provisions of the UK Corporate Governance Code. We have nothing to report having performed our review.

Responsibilities for the financial statements and the audit
Our responsibilities and those of the directors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 60, the directors are responsible for the preparation
of the 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 financial statements in accordance with applicable law and ISAs (UK & 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.

What an audit of financial statements involves
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.

We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our own judgements,
and evaluating the disclosures in the financial statements.

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a
reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures
or a combination of both.

In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited
financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge
acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies
we consider the implications for our report.

Other matter
We have reported separately on the parent company financial statements of Norcros plc for the year ended 31 March 2015 and on the
information in the Directors’ Remuneration Report that is described as having been audited.

Martin Heath (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Manchester
18 June 2015

Group accountsNorcros plc Annual report and accounts 2015

Consolidated income statement
Year ended 31 March 2015

Continuing operations

Revenue

Underlying operating profit

IAS 19R administrative expenses

Acquisition related costs

Exceptional operating items

Operating profit

Finance costs

Exceptional finance costs

Total finance costs

Finance income

IAS 19R finance cost

Profit before taxation

Taxation

Profit for the year from continuing operations

Profit/(loss) for the year from discontinued operations

Profit for the year

Earnings per share attributable to equity holders of the Company

Basic earnings per share:

From continuing operations

From discontinued operations

From profit for the year

Diluted earnings per share:

From continuing operations

From discontinued operations

From profit for the year

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

* The prior year comparatives have been restated to reflect the revised presentation of acquisition related costs (see note 29).

Notes

2015
£m

2014*
£m

222.1

218.7

17.0

(1.7)

(2.2)

(2.5)

10.6

(1.4)

(0.4)

(1.8)

3.3

(1.1)

11.0

(2.9)

8.1

0.1

8.2

1.4p

—

1.4p

1.3p

—

1.3p

592.2

15.8

13.0

2.2p

2.1p

16.1

(1.4)

(0.7)

(1.2)

12.8

(5.7)

—

(5.7)

—

(1.3)

5.8

4.3

10.1

(1.4)

8.7

1.7p

(0.2p)

1.5p

1.6p

(0.2p)

1.4p

584.0

14.6

17.0

2.9p

2.8p

Norcros plc Annual report and accounts 2015

Consolidated statement of comprehensive income
Year ended 31 March 2015

Profit for the year

Other comprehensive income and expense:

Items that will not subsequently be reclassified to the income statement

Notes

2015
£m

8.2

Actuarial (losses)/gains on retirement benefit obligations

(18.8)

Items that may be subsequently reclassified to the income statement

Foreign currency translation adjustments

Other comprehensive expense for the year

Total comprehensive (expense)/income for the year

Attributable to equity shareholders arising from:

Continuing operations

Discontinued operations

Items in the statement are disclosed net of tax.

(0.6)

(19.4)

(11.2)

(11.4)

0.2

(11.2)

2014
£m

8.7

6.2

(9.5)

(3.3)

5.4

7.7

(2.3)

5.4

Group accountsNorcros plc Annual report and accounts 2015

Consolidated balance sheet
At 31 March 2015

Non-current assets

Goodwill

Intangible assets

Property, plant and equipment

Investment properties

Deferred tax assets

Current assets

Inventories

Trade and other receivables

Derivative financial instruments

Cash and cash equivalents

Assets classified as held-for-sale

Current liabilities

Trade and other payables

Derivative financial instruments

Current tax liabilities

Financial liabilities – borrowings

Liabilities associated with assets classified as held-for-sale

Net current assets

Total assets less current liabilities

Non-current liabilities

Financial liabilities – borrowings

Pension scheme liability

Derivative financial instruments

Other non-current liabilities

Provisions

Net assets

Financed by:

Share capital

Share premium

Retained earnings and other reserves

Total equity

Notes

2015
£m

22.2

4.7

37.6

—

13.8

78.3

52.2

40.5

2.1

5.6

—

2014
£m

22.1

5.0

36.9

4.4

11.6

80.0

50.2

41.9

—

3.9

6.2

100.4

102.2

(54.9)

(1.0)

(1.3)

(1.4)

—

(58.6)

41.8

120.1

(18.4)

(44.3)

—

(1.4)

(3.3)

(67.4)

52.7

6.0

1.0

45.7

52.7

(52.3)

(1.8)

(1.3)

(0.8)

(1.9)

(58.1)

44.1

124.1

(30.5)

(21.8)

(0.3)

(1.6)

(4.4)

(58.6)

65.5

5.8

0.9

58.8

65.5

The financial statements of Norcros plc, registered number 3691883, were approved on 18 June 2015 and signed on behalf of the Board by:

N. P. Kelsall
Group Chief Executive

M. K. Payne
Group Finance Director

Norcros plc Annual report and accounts 2015

Consolidated cash flow statement
Year ended 31 March 2015

Cash generated from operations

Income taxes paid

Interest paid

Net cash generated from operating activities

Cash flows from investing activities

Proceeds from sale of investment property

Proceeds from sale of property, plant and equipment

Purchase of investment property

Purchase of property, plant and equipment

Acquisition of subsidiary undertakings (including payment of deferred consideration)

Disposal of subsidiary undertakings net of cash divested

Net cash generated from/(used in) investing activities

Cash flows from financing activities

Net proceeds from issue of ordinary share capital

Repayment of borrowings

Costs of raising debt finance

Dividends paid to the Company’s shareholders

Net cash used in 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 the 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

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

Cash at bank and in hand and bank overdrafts per the balance sheet

Cash at bank and in hand included within assets classified as held-for-sale

Notes

2015
£m

16.2

(0.5)

(1.3)

14.4

6.1

0.4

(0.9)

(7.0)

(0.5)

3.8

1.9

0.2

(12.1)

(0.7)

(3.1)

(15.7)

0.6

3.7

(0.1)

4.2

—

4.2

2014
£m

13.6

(1.7)

(1.6)

10.3

—

1.4

—

(4.2)

0.1

—

(2.7)

0.4

(6.9)

(0.2)

(2.8)

(9.5)

(1.9)

6.4

(0.8)

3.7

3.2

0.5

3.7

The net increase in cash at bank and in hand and bank overdrafts in the year from discontinued operations included in the above
was £3.9m (2014: decrease of £0.3m). Details are provided in note 28.

Group accountsNorcros plc Annual report and accounts 2015

Consolidated statement of changes in equity
Year ended 31 March 2015

At 1 April 2013

Comprehensive income:

Profit for the year

Other comprehensive income/(expense):

Actuarial gain 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 2014

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 2015

Ordinary
share
capital
£m

5.8

Share
premium
£m

0.5

—

5.8

—

0.2

—

6.0

—

0.4

—

0.9

—

0.1

—

1.0

Treasury
reserve
£m

Translation
reserve
£m

Retained
earnings/
(losses)
£m

1.0

54.3

—

(0.1)

—

(0.1)

—

(9.5)

—

(8.5)

—

(0.6)

—

8.7

6.2

—

6.2

—

(2.8)

0.9

67.3

(18.8)

—

(18.8)

—

(3.1)

1.3

(9.1)

54.9

Total
£m

61.6

8.7

6.2

(9.5)

(3.3)

0.4

(2.8)

0.9

65.5

(18.8)

(0.6)

(19.4)

0.2

(3.1)

1.3

52.7

8.2

Norcros plc Annual report and accounts 2015

Notes to the Group accounts
Year ended 31 March 2015

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 18 June 2015.

Basis of preparation
The consolidated financial statements have been prepared under the historical cost convention, except for derivative financial instruments
which are stated at their fair value. 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 consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree
of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are detailed
in the risk management section. Although these estimates are based on management‘s best knowledge of amounts, events or actions,
actual results may differ from expectations.

Going concern
In July 2014 the Group agreed a new unsecured £70m revolving credit facility plus a £30m accordion facility with Lloyds Bank plc,
Barclays Bank plc and HSBC Bank plc. The new banking facility has been secured to July 2019. Forecasts have been prepared for the
period to 30 September 2016 which show that the Group will be able to operate within with the terms of this facility over this period
and will remain in compliance with banking covenants.

At the time of approving the consolidated financial statements, the Directors have a reasonable expectation that the Company and Group
have adequate resources to continue in operational existence for the foreseeable future, and consequently they consider that it is appropriate
to adopt the going concern basis of preparation.

Accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies
have been consistently applied to the information presented, unless otherwise stated.

The Group has reclassified certain costs related to business combination activities in line with emerging market practice such that they are
now presented as a separate line entitled “Acquisition related costs” in the Consolidated Income Statement. In order to effect fair comparison,
the results for the year ended 31 March 2014 have been restated to conform to this style of presentation. The impact of the restatement
is shown in note 29.

Standards, amendments and interpretations effective in 2015
The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning
1 April 2014.

The Group has adopted the following new standards, amendments and interpretations now applicable. None of these standards
and interpretations has had any material effect on the Group’s results or net assets.

Standard or interpretation

Content

Amendment to IFRS 10
Amendment to IFRS 11
Amendment to IFRS 12
Amendment to IAS 27
Amendment to IAS 32
Amendment to IAS 36
Amendment to IAS 39
IFRIC 21

Consolidated financial statements
Joint ventures
Disclosures of interests in other entities
Separate financial statements
Financial instruments: presentation
Impairment of assets
Financial instruments: recognition and measurement
Levies

Applicable for
financial years
beginning on or after

1 April 2014
1 April 2014
1 April 2014
1 April 2014
1 April 2014
1 April 2014
1 April 2014
1 April 2014

Group accountsNorcros plc Annual report and accounts 2015

1. Group accounting policies continued
Standards, amendments and interpretations effective in 2015 continued
The following standards, amendments and interpretations are not yet effective and have not been adopted early by the Group:

Standard or interpretation

Content

IFRS 8
Amendment to IAS 19 (revised)
IFRS 15
IFRS 9

Operating segments
Employee benefits
Revenue from contracts with customers
Financial instruments: classification and measurement

Applicable for
financial years
beginning on or after

1 April 2015
1 April 2015
1 April 2017
1 April 2018

None of these standards, amendments or interpretations are expected to have a material impact on the Group’s financial statements.

Summary of significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out as follows. These policies have been
consistently applied to all periods presented.

Basis of consolidation
Subsidiaries
Subsidiaries are those entities in which the Group has an interest of more than one half of the voting rights or otherwise has the power
to govern the financial and operating policies. The existence and effect of potential voting rights that are presently exercisable or presently
convertible are considered when assessing whether the Group controls another entity.

The results of subsidiaries acquired or disposed of in the year are included in the consolidated financial statements from the date on which
the Group has the ability to exercise control, and are no longer consolidated from the date that control ceases.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring them into line with those used by the Group.
All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair value at the date of acquisition,
and where necessary, the accounting policies of acquired subsidiaries are adjusted to bring them in line with those of the Group.
Any excess of the consideration (excluding payments contingent on future employment) over the fair values of the identifiable net
assets acquired is recognised as goodwill. Any deficiency in the cost of acquisition below the fair values of the identifiable net assets
acquired (discount on acquisition) is credited to the Income Statement in the period of acquisition. Payments that are contingent
on future employment are charged to the Consolidated Income Statement. All acquisition costs are expensed as incurred.

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 judgments 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 judgment involves matters which
are highly uncertain, or because different estimation methods or assumptions could reasonably have been used.

Notes to the Group accounts continuedYear ended 31 March 2015Norcros plc Annual report and accounts 2015

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

— impairment of property, plant and equipment – the Group considers whether any triggers for impairment of property, plant and equipment
are evident periodically, and tests for impairment of such assets should indicators of potential impairment arise. Consideration has been
given during the year to property, plant and equipment in connection with Johnson Tiles South Africa, and it was concluded that
no impairment triggers were present;

— 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 principally
include the discount rate and rate of inflation. Any changes in these assumptions can impact the carrying amount of retirement
benefit obligations (see note 23);

— 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 judgment in relation to the recognition of deferred tax assets, management considers the regulations applicable
to taxation and whether there are likely to be sufficient future taxable profits. Future taxable profits may be higher or lower than estimates
made when determining whether it is appropriate 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

— customer rebate, incentive and promotional support accruals – a number of the Group’s customers are offered rebates, incentives
and promotional support in order to encourage trade and cement strong relationships. Accounting for such arrangements involves
judgment as agreement periods typically run for a number of months or years, and may involve assumptions around volumes of
product purchased or sold into the future. However, where applicable, accrual calculations are underpinned by signed contracts
and there has historically been a strong correlation between the amounts accrued in respect of a particular period and the
amounts subsequently paid.

Revenue recognition
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 rebates, incentives,
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.

Customer rebates, incentives, discounts and promotional support
Accrual is made at each balance sheet date to reflect management’s best estimate of amounts to be paid in respect of arrangements
in place with customers regarding rebates, incentives, discounts and promotional support. The cost of rebates, incentives, discounts
and promotional support which have been paid or are accrued at the Balance Sheet date is shown as a deduction from revenue.

Segmental reporting
The Group operates in two main geographical areas: the UK and South Africa. All inter-segment transactions are made on an arm’s length
basis. The chief operating decision maker (being the Board) assesses performance and allocates resources based on geography and
accordingly segments have been determined on this basis. Corporate costs are allocated to segments on the basis of external turnover.

Goodwill
Goodwill is recognised as an asset and reviewed for impairment at least annually or whenever there is an indicator of impairment. Goodwill
is carried at cost less amortisation charged prior to the Group’s transition to IFRS on 1 April 2004 less accumulated impairment losses.
Any impairment is recognised in the period in which it is identified.

Intangible assets
Acquired intangible fixed assets comprise the Vado trade name recognised as a separately identifiable asset on acquisition and are valued at
cost less accumulated amortisation. The estimated useful life of the asset is 15 years, with amortisation being charged on a straight-line basis.

Group accountsNorcros plc Annual report and accounts 2015

1. Group accounting policies continued
Impairment of long-life assets
Property, plant and equipment, investment properties 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 and equipment

3–15 years

The assets’ residual values and useful lives are reviewed and adjusted if appropriate at each Balance Sheet date.

Investment property
Investment property comprises mainly land and relates to property which is either sub-let to a third party or is not being utilised in the
Group’s core operations. Investment property is held at cost less depreciation on buildings (land is not depreciated). Investment property
is depreciated over 50 years.

Assets held-for-sale
Assets and disposal groups classified as held-for-sale are measured at the lower of carrying value and fair value less costs to dispose of.

Assets and disposal groups are only classified as held-for-sale if their carrying value will be recovered through a sale transaction as opposed
to continuing use, and only when such a sale transaction is deemed highly probable. Such a sale transaction should be expected to complete
within one year and accordingly assets and disposal groups held-for-sale are included within current assets in the Consolidated Balance Sheet,
with the associated liabilities included within current liabilities.

Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials, and, where applicable, labour and overheads
that have been incurred in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price
in the ordinary course of business, less applicable variable selling expenses. Provisions are made for slow-moving and obsolete items.

Taxation
Current tax, which comprises UK and overseas corporation tax, is provided at amounts expected to be paid (or recovered) using the tax
rates and laws that have been enacted or substantively enacted by the Balance Sheet date.

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 to the Consolidated Income Statement 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.

Notes to the Group accounts continuedYear ended 31 March 2015Norcros plc Annual report and accounts 2015

1. Group accounting policies continued
Employee benefits
The Group operates various post-employment schemes, including both defined benefit and defined contribution pension plans
and post-employment medical plans.

(a) Pension obligations
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal
or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating
to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan.

Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent
on one or more factors such as age, years of service and compensation.

The liability recognised in the Consolidated Balance Sheet in respect of defined benefit pension plans is the present value of the defined
benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated every three
years by independent actuaries using the projected unit credit method, and is subject to interim reviews in intervening years. The present
value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality
corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating
to the terms of the related pension obligation.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity
in other comprehensive income in the period in which they arise, net of the related deferred tax.

Past-service costs are recognised immediately in income.

For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory,
contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions
are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash
refund or a reduction in the future payments is available.

(b) Other post-employment obligations
Some Group companies provide post-retirement healthcare benefits to their retirees. The entitlement to these benefits is usually conditional
on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these
benefits are accrued over the period of employment using the same accounting methodology as used for defined benefit pension plans.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in
other comprehensive income in the period in which they arise. These obligations are valued annually by independent qualified actuaries.

(c) Termination benefits
Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee
accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits at the earlier of the following dates:
(a) when the Group can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for a restructuring that is
within the scope of IAS 37 and involves the payment of termination benefits. In the case of an offer made to encourage voluntary redundancy,
the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than
twelve months after the end of the reporting period are discounted to their present value.

(d) Profit sharing and bonus plans
The Group recognises a liability and an expense for bonuses and profit sharing, based on a formula that takes into consideration the profit
attributable to the Company’s shareholders after certain adjustments. The Group recognises a provision where contractually obliged or
where there is a past practice that has created a constructive obligation.

Exceptional items
Exceptional items are disclosed separately in accordance with the requirements of IAS 1, ‘Presentation of financial statements’.
They include profits and losses on disposal of non-current assets outside the normal course of business, restructuring costs and large
or significant one-off items which in management’s judgment need to be disclosed to enable the user to obtain a proper understanding
of the Group’s financial performance.

IAS 19R administrative expenses
As a result of the implementation of IAS 19R, the administrative expenses incurred by the Trustee in connection with managing the Group’s
pension schemes are recognised in the Consolidated Income Statement.

Acquisition related costs
Acquisition related costs includes deferred remuneration, amortisation of acquired intangibles, the costs of maintaining an internal
acquisitions department and professional advisory fees connected with business combination activity.

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.

Group accountsNorcros plc Annual report and accounts 2015

1. Group accounting policies continued
Financial assets and liabilities continued
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 within finance cost/income in the Income Statement.

Cash and cash equivalents – cash and cash equivalents include cash in hand, 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. Development costs are capitalised once the technical
feasibility of a project has been established and a business plan, which demonstrates how the project will generate future economic benefits,
has been approved.

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
Monetary assets and liabilities expressed in currencies other than functional currency are translated at rates applicable at the year end and
trading results of overseas subsidiaries at average rates for the year. Exchange gains and losses of a trading nature are dealt with in arriving
at operating profit.

Translation of overseas net assets
Exchange gains and losses arising on the retranslation of overseas net assets and results are taken directly to reserves.

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

Treasury shares
The cost of the purchase of own shares is taken directly to reserves and is included in the treasury reserve.

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.

Notes to the Group accounts continuedYear ended 31 March 2015Norcros plc Annual report and accounts 2015

2. Segmental reporting
The Group operates in two main geographical areas: the UK and South Africa. All inter-segment transactions are made on an arm’s length
basis. The chief operating decision maker (being the Board) assesses performance and allocates resources based on geography and
accordingly segments have been determined on this basis. Corporate costs are allocated to segments on the basis of external turnover.

Continuing operations — year ended 31 March 2015

Revenue

Underlying operating profit
IAS 19R administrative expenses
Acquisition related costs
Exceptional operating items

Operating profit

Finance income (net)

Profit before taxation
Taxation

Profit for the year from continuing operations

Net debt

Segmental assets
Segmental liabilities
Additions to property, plant and equipment
Proceeds from disposals of property, plant and equipment
Proceeds from disposals of investment property (net)
Loss on disposal of property, plant and equipment
Depreciation

UK
£m

149.1

13.8
(1.7)
(2.2)
(2.3)

7.6

124.3
(110.8)
3.8
0.4
6.1
(0.1)
4.0

South
Africa
£m

73.0

3.2
—
—
(0.2)

3.0

54.4
(15.2)
3.1
—
—
—
2.0

Revenues of £34.2m (2014: £35.9m) are derived from a single customer. These revenues are attributable to the UK segment.

Continuing operations — year ended 31 March 2014*

Revenue

Underlying operating profit
IAS 19R administrative expenses
Acquisition related costs
Exceptional operating items

Operating profit

Finance costs (net)

Profit before taxation
Taxation

Profit for the year from continuing operations

Net debt

Segmental assets
Segmental liabilities
Additions to property, plant and equipment
Proceeds from disposals of property, plant and equipment
Loss on disposal of property, plant and equipment
Depreciation

* The prior year comparatives have been restated to reflect the revised presentation of acquisition related costs (see note 29).

UK
£m

148.0

14.2
(1.4)
(0.7)
(1.6)

10.5

125.3
(100.9)
2.5
—
—
4.0

South
Africa
£m

70.7

1.9
—
—
0.4

2.3

50.7
(13.9)
1.8
1.4
(0.1)
1.9

Group
£m

222.1

17.0
(1.7)
(2.2)
(2.5)

10.6

0.4

11.0
(2.9)

8.1

(14.2)

178.7
(126.0)
6.9
0.4
6.1
(0.1)
6.0

Group
£m

218.7

16.1
(1.4)
(0.7)
(1.2)

12.8

(7.0)

5.8
4.3

10.1

(26.9)

176.0
(114.8)
4.3
1.4
(0.1)
5.9

Group accountsNorcros plc Annual report and accounts 2015

3. Operating profit
The following items have been included in arriving at operating profit other than those related to discontinued operations:

Staff costs (see note 4)
Depreciation of property, plant and equipment (all owned assets) – continuing operations
Depreciation of property, plant and equipment (all owned assets) – discontinued operations
Depreciation of investment properties
Amortisation of intangible assets
Other operating lease rentals payable – continuing operations:
– plant and machinery
– other
Other operating lease rentals payable – discontinued operations:
– plant and machinery
– other
Research and development expenditure
Loss on disposal of property, plant and equipment
Profit on disposal of property, plant and equipment – exceptional (see note 5)
Loss on disposal of investment property – exceptional (see note 5)

All items relate to continuing operations unless otherwise stated.

2015
£m

44.1
6.0
—
—
0.3

1.6
2.6

—
—
2.7
0.1
(0.4)
1.5

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 advice
Other services – due diligence services

4. Employees

Staff costs from continuing operations:
– wages and salaries
– social security costs
– share-based payments
– pension (credits)/costs:

– defined benefit
– defined contribution

Staff costs from discontinued operations:
– wages and salaries
– social security costs

Total staff costs

2015
£m

0.1
0.1
0.1
0.2

0.5

2015
£m

38.8
2.7
1.3

(1.7)
2.6

43.7

0.3
0.1

0.4

44.1

2014
£m

44.3
5.8
0.1
0.1
0.4

1.4
2.4

0.1
0.2
2.7
0.1
—
—

2014
£m

0.1
0.1
0.1
—

0.3

2014
£m

36.8
2.5
0.8

—
2.2

42.3

1.5
0.5

2.0

44.3

Included in wages and salaries were £0.3m (2014: £1.1m) of redundancy costs which were classified as exceptional items in the Income Statement.
Additionally, the defined benefit pension credit of £1.7m (2014: £nil) was also recognised as an exceptional item. Further details are provided in note 5.

Average monthly numbers employed in continuing operations:
– UK
– overseas

Average monthly numbers employed in discontinued operations:
– overseas

2015
Number

2014
Number

919
809

1,728

1,736

919
744

1,663

1,711

Notes to the Group accounts continuedYear ended 31 March 2015Norcros plc Annual report and accounts 2015

4. Employees continued
Directors’ emoluments

Salaries and short-term employee benefits
Share-based payments
Post-employment benefits

2015
£m

1.0
0.6
0.1

1.7

Further information about the Directors’ remuneration may be found in the Annual Report on Remuneration on pages 49 to 57.

Highest paid Director

Salaries and short-term employee benefits
Share-based payments
Post-employment benefits

Key management compensation

Salaries and short-term employee benefits
Share-based payments
Post employment benefits

2015
£m

0.5
0.3
0.1

0.9

2015
£m

2.1
0.9
0.2

3.2

2014
£m

0.9
0.4
0.1

1.4

2014
£m

0.4
0.2
0.1

0.7

2014
£m

1.9
0.7
0.2

2.8

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

5. Acquisition related costs and exceptional operating items
An analysis of acquisition related costs and exceptional operating items is shown below.

Acquisition related costs

Deferred remuneration1
Intangible asset amortisation2
Staff costs and advisory fees3

2015
£m

1.1
0.3
0.8

2.2

2014
£m

0.3
0.4
—

0.7

1. In accordance with IFRS 3R, a significant proportion of deferred consideration payable to the former shareholders of Vado is required to be treated as remuneration, and, accordingly,

is expensed to the income statement as incurred.

2. As a result of the acquisition of Vado, the Group has recognised an intangible asset which is subject to a non-cash amortisation charge (see note 12).

3. Costs of maintaining an in-house acquisitions department and professional advisory fees incurred in connection with the Group’s business combination activities.

Exceptional operating items

Profit on disposal of residual property1
Sheffield lease surrender2
Loss on disposal of property portfolio3
Legal costs4
Pension scheme settlement gain5
Restructuring costs6

2015
£m

(0.4)
2.5
1.5
0.3
(1.7)
0.3

2.5

2014
£m

(0.5)
—
—
0.2
—
1.5

1.2

1. A profit of £0.4m was generated in the year following the sale of a small parcel of land in Braintree, UK, which had a net book value of £nil. During the previous year the Group

disposed of a residual manufacturing facility in South Africa, generating a profit of £0.5m.

2. The Group acquired the freehold and exited its onerous lease in connection with the Orgreave Drive, Sheffield property in November 2014 for total consideration of £3.4m, of which
£2.5m was the cost of surrendering the lease and has been recognised as an exceptional operating item. The remaining £0.9m related to the purchase of the freehold (see note 14).

3. The Group’s remaining freehold surplus property portfolio was sold to Clowes Developments (UK) Ltd for net proceeds of £6.1m, being consideration of £6.5m net of £0.4m costs.

This transaction included the property in Sheffield, amongst others, and led to a loss on disposal of £1.5m.

4. Legal costs related to the contractual dispute with a subsidiary of Wm Morrison Supermarkets plc regarding the Highgate site in Tunstall, UK.

5. During the year the Group undertook a liability management exercise in connection with its principal UK defined benefit pension scheme. This resulted in a settlement gain of £1.7m

in the year, net of costs of £0.7m (see note 23).

6. Restructuring costs related to redundancies and asset write-downs following the implementation of a programme of restructuring initiatives throughout the Group’s business units.

Group accountsNorcros plc Annual report and accounts 2015

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
Unwind of discount on property lease provisions

Finance costs

Exceptional finance costs1

Total finance costs

Finance income
Movement on fair value of derivative financial instruments

Total finance income

Net finance (income)/costs

1. Following the refinancing of the Group’s UK banking facilities in July 2014, the unamortised costs relating to the previous facility were written off in full.

7. Taxation
Taxation comprises:

Current
UK taxation
Deferred
Origination and reversal of temporary differences

Taxation

2015
£m

1.2
0.1
—
0.1

1.4

0.4

1.8

(3.3)

(1.5)

2015
£m

0.4

2.5

2.9

2014
£m

1.5
0.3
3.7
0.2

5.7

—

5.7

—

5.7

2014
£m

1.1

(5.4)

(4.3)

The tax for the year is different from the standard rate of corporation tax in the UK of 21% (2014: 23%). The differences are explained below:

Profit before tax
Profit on ordinary activities multiplied by rate of corporation tax in the UK of 21% (2014: 23%)
Effects of:
– overprovision in prior years
– income/expenses not chargeable/deductible for tax purposes
– recognition and utilisation of overseas tax losses and other timing differences
– recognition and utilisation of UK losses and capital allowances
– effect of lower tax rates and change in rate of deferred tax
– origination and reversal of timing differences

Total tax charge/(credit)

2015
£m

11.0
2.3

(0.4)
0.9
—
—
0.1
—

2.9

2014
£m

5.8
1.3

(0.7)
0.3
(2.6)
(2.1)
(0.3)
(0.2)

(4.3)

Notes to the Group accounts continuedYear ended 31 March 2015Norcros plc Annual report and accounts 2015

8. Non-GAAP measures
Consolidated Income Statement
The Directors believe that underlying profit before taxation and underlying earnings provide shareholders with additional useful
information on the underlying performance of the Group. Underlying profit before taxation is defined as profit before taxation, IAS 19R
administrative expenses, acquisition related costs, exceptional operating items, amortisation of costs of raising finance, net movement
on fair value of derivative financial instruments, discounting of property lease provisions and finance costs relating to pension schemes.

Profit before taxation from continuing operations
Adjusted for:
– IAS 19R administrative expenses
– acquisition related costs (see note 5)
– exceptional operating items (see note 5)
– amortisation of costs of raising finance
– amortisation of costs of raising finance – exceptional
– net movement on fair value of derivative financial instruments
– discount on property lease provisions
– IAS 19R finance cost

Underlying profit before taxation

Taxation attributable to underlying profit before taxation

Underlying earnings

2015
£m

11.0

1.7
2.2
2.5
0.1
0.4
(3.3)
0.1
1.1

15.8

(2.8)

13.0

EBITDA is a measure commonly used by investors and financiers to assess business performance. Underlying EBITDA has been provided
which reflects EBITDA as adjusted for IAS 19R administrative expenses, acquisition related costs and exceptional operating items.
The Directors consider that this measure provides shareholders with additional useful information on the performance of the Group.

Operating profit from continuing operations
Adjusted for:
– depreciation
– IAS 19R administrative expenses
– acquisition related costs (see note 5)
– exceptional operating items (see note 5)

Underlying EBITDA

2015
£m

10.6

6.0
1.7
2.2
2.5

23.0

2014
£m

5.8

1.4
0.7
1.2
0.3
—
3.7
0.2
1.3

14.6

2.4

17.0

2014
£m

12.8

5.9
1.4
0.7
1.2

22.0

Consolidated Cash Flow Statement
Underlying operating cash flow is defined as cash generated from continuing operations before cash outflows from exceptional items and
acquisition related costs and pension fund deficit recovery contributions. The Directors believe that underlying operating cash flow provides
shareholders with additional useful information on the underlying cash generation of the Group.

Cash generated from continuing operations (see note 25)
Adjusted for:
– cash flows from exceptional items and acquisition related costs (see note 25)
– pension fund deficit recovery contributions (see note 25)

Underlying operating cash flow

2015
£m

16.1

4.7
2.1

22.9

2014
£m

13.9

4.4
2.0

20.3

Consolidated Balance Sheet
Underlying capital employed is used to calculate underlying return on capital employed, one of the Group’s key performance indicators,
and reflects the value of the assets used to generate underlying operating profit from continuing operations. Consequently, adjustments
are made to remove assets and liabilities that do not impact underlying operating profit from continuing operations and to remove
the average impact of exchange rate movements.

Group accountsNorcros plc Annual report and accounts 2015

8. Non-GAAP measures continued
Consolidated Balance Sheet continued

Net assets
Adjusted for:
– assets and associated liabilities classified as held-for-sale
– pension scheme liability (net of associated tax)
– cash and cash equivalents
– financial liabilities – borrowings

Capital employed

– foreign exchange adjustment

Underlying capital employed

2015
£m

52.7

—
35.4
(5.6)
19.8

102.3

0.1

102.4

2014
£m

65.5

(4.3)
17.4
(3.9)
31.3

106.0

(0.2)

105.8

9. Earnings per share
Basic and diluted 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 2015 the potential dilutive ordinary shares amounted to 23,032,985 (2014: 24,374,489) as calculated in accordance with IAS 33.

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

Profit for the year from continuing operations
Profit/(loss) for the year from discontinued operations

Profit for the year

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

Weighted average number of shares for diluted earnings per share

Basic earnings per share:
From continuing operations
From discontinued operations

From profit for the year

Diluted earnings per share:
From continuing operations
From discontinued operations

From profit for the year

Basic and diluted underlying earnings per share
Basic and diluted underlying earnings per share has also been provided which reflects underlying earnings from continuing operations
divided by the weighted average number of shares set out above.

Underlying earnings (see note 8)

Basic underlying earnings per share
Diluted underlying earnings per share

2015
£m

13.0

2015

2.2p
2.1p

In 2014 the Company recognised further deferred tax assets totalling £4.4m. Excluding the impact of this, underlying basic earnings
per share would have been 2.2p in 2014 and underlying diluted earnings per share would have been 2.1p in 2014.

2015
£m

8.1
0.1

8.2

2014
£m

10.1
(1.4)

8.7

2015
Number

2014
Number

592,231,354
23,032,985

583,950,031
24,374,489

615,264,339

608,324,520

2015

1.4p
—

1.4p

1.3p
—

1.3p

2014

1.7p
(0.2p)

1.5p

1.6p
(0.2p)

1.4p

2014
£m

17.0

2014

2.9p
2.8p

Notes to the Group accounts continuedYear ended 31 March 2015Norcros plc Annual report and accounts 2015

10. Share-based payments

Approved Performance
Share Plan 2011 (APSP)
Approved Performance
Share Plan 2012 (APSP)
Approved Performance
Share Plan 2013 (APSP)
Approved Performance
Share Plan 2014 (APSP)
Deferred Share
Bonus Plan 2013 (DSBP)
Deferred Share
Bonus Plan 2014 (DSBP)
Save As You Earn Scheme (3) (SAYE)
Save As You Earn Scheme (4) (SAYE)
Save As You Earn Scheme (5) (SAYE)
Save As You Earn Scheme (6) (SAYE)
Save As You Earn Scheme (7) (SAYE)

Price
per share

1 April
2014

Granted

Exercised

Lapsed

31 March
2015

Date from
which
exercisable

Expiry
date

0.0p

6,997,419

— (6,886,113)

—

111,306

01.09.14

01.09.21

0.0p 12,278,970

0.0p

3,040,404

—

0.0p

— 8,643,012

0.0p

518,391

—

(193,198) 12,085,772

28.07.15

28.07.22

— 3,040,404

27.09.16

27.09.23

— 8,643,012

23.07.17

23.07.24

—

518,391

26.09.16

26.09.26

0.0p
9.4p
10.1p
11.8p
19.1p
15.8p

—
80,422
2,573,778
1,025,066
1,471,072
—

—
696,794
—
(34,467)
— (2,162,341)
(12,203)
—
—
—
—
3,152,695

—
(45,955)
(177,618)
(103,727)
(357,168)

696,794
—
233,819
909,136
1,113,904
(14,126) 3,138,569

23.07.17
01.03.14
01.03.15
01.03.16
01.03.17
01.03.18

23.07.27
31.08.14
31.08.15
31.08.16
31.08.17
31.08.18

Details of the terms of the APSP and SAYE scheme are disclosed in the Directors’ Remuneration Report. A total of 27,054 shares exercised
in respect of the SAYE schemes were issued from the holding of the Norcros Employee Benefit Trust. The remaining shares exercised were
fulfilled by the issue of new shares (see note 24).

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 £1.3m
was recognised in respect of share options in the period (2014: £0.9m). 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
Number of shares granted initially
Expected volatility
Expected option life
Risk free rate
Expected dividend yield

SAYE (3)

SAYE (4)

SAYE (5)

SAYE (6)

SAYE (7)

20.12.10
9.4p
1,864,296
67.39%
3 years
2.1%
3.0%

20.12.11
10.1p
3,001,492
59.53%
3 years
2.0%
3.0%

20.12.12
11.8p
1,229,469
44.23%
3 years
2.1%
3.0%

20.12.13
19.1p
1,537,040
42.74%
3 years
1.5%
2.3%

19.12.14
15.8p
3,152,695
42.84%
3 years
2.4%
2.6%

APSP 2011

APSP 2012

APSP 2013

APSP 2014

DSBP 2013

DSBP 2014

Date of grant
Initial exercise price
Number of shares granted initially
Expected volatility
Expected option life
Risk free rate
Expected dividend yield

01.09.11
0.0p
7,045,037
65.67%
3 years
2.0%
3.0%

28.07.12
0.0p
12,520,560
44.23%
3 years
2.1%
3.0%

27.09.13
0.0p
3,040,404
42.74%
3 years
1.5%
2.3%

23.07.14
0.0p
8,643,012
42.84%
3 years
2.4%
2.6%

26.09.13
0.0p
518,391
56.11%
3 years
2.0%
3.0%

23.07.14
0.0p
696,794
43.29%
3 years
3.2%
2.3%

The share price at 31 March 2015 was 16.5p. The average price during the year was 17.68p. 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 of the Company.

Group accountsNorcros plc Annual report and accounts 2015

11. Goodwill

At beginning of the year
Additions
Reclassification to assets held-for-sale
Exchange differences

2015
£m

22.1
0.2
—
(0.1)

22.2

2014
£m

23.0
—
(0.1)
(0.8)

22.1

During the year the Group’s Tile Africa business acquired a store in Port Elizabeth which had previously operated as a franchise for consideration
of £0.3m, of which £0.2m was paid during the year. Net assets of £0.1m were acquired and consequently goodwill of £0.2m was recognised
in connection with the transaction.

Goodwill is allocated to the Group’s cash-generating units (CGUs). A summary of the goodwill allocation is presented below:

Triton Showers
Tile Africa Group

2015
£m

19.1
3.1

22.2

2014
£m

19.1
3.0

22.1

The recoverable amount of a CGU is determined by a value-in-use calculation. These calculations use cash flow projections derived from
data and metrics used on an ongoing basis, with the key assumptions being those regarding discount rates, growth rates, future gross
margin improvements and cash flows.

The key assumptions for the value-in-use calculations are:

— Cash flows before income taxes are based on approved budgets and detailed forecasts for the first five years.

— Pre-tax discount rates of 9.0% (2014: 9.0%) in the UK and 16.25% (2014: 16.25%) in South Africa based upon the risk free rate
for Government bonds adjusted for a risk premium to reflect the increased risk of investing in equities and investing in the Group’s
specific sectors and regions.

Having applied sensitivities to the anticipated future cash flows, management believes that there are no reasonably possible changes
in key assumptions which would result in an impairment of goodwill.

12. Intangible assets

Cost
At 1 April 2013, 31 March 2014 and 31 March 2015

Accumulated amortisation
At 1 April 2013
Charge for the year

At 31 March 2014
Charge for the year

At 31 March 2015

Net book amount at 31 March 2014

Net book amount at 31 March 2015

The intangible asset in respect of the Vado trade name was acquired as part of the acquisition of Vado on 31 March 2013.

Vado trade
name
£m

5.4

—
0.4

0.4
0.3

0.7

5.0

4.7

Notes to the Group accounts continuedYear ended 31 March 2015
13. Property, plant and equipment

Cost
At 1 April 2013
Exchange differences
Additions
Reclassification to assets held-for-sale
Transfers from investment properties (see note 14)
Disposals

At 31 March 2014
Exchange differences
Additions
Transfers to investment properties (see note 14)
Disposals

At 31 March 2015

Accumulated depreciation
At 1 April 2013
Exchange differences
Charge for the year
Reclassification to assets held-for-sale
Disposals

At 31 March 2014
Exchange differences
Charge for the year
Disposals

At 31 March 2015

Net book amount at 31 March 2014

Net book amount at 31 March 2015

Norcros plc Annual report and accounts 2015

Land and
buildings
£m

Plant and
equipment
£m

33.8
(2.6)
0.4
(2.1)
0.9
(0.2)

30.2
(0.1)
0.3
(0.1)
—

30.3

11.6
(0.5)
1.0
(0.5)
—

11.6
(0.1)
1.1
—

12.6

18.6

17.7

80.5
(5.3)
3.9
(1.1)
—
(0.5)

77.5
(0.2)
6.6
—
(3.2)

80.7

59.2
(3.6)
4.9
(0.9)
(0.4)

59.2
(0.2)
4.9
(3.1)

60.8

18.3

19.9

Total
£m

114.3
(7.9)
4.3
(3.2)
0.9
(0.7)

107.7
(0.3)
6.9
(0.1)
(3.2)

111.0

70.8
(4.1)
5.9
(1.4)
(0.4)

70.8
(0.3)
6.0
(3.1)

73.4

36.9

37.6

Plant and equipment includes motor vehicles, computer equipment and plant and machinery. Within plant and equipment are assets held
under finance leases of £nil (2014: £0.1m).

During the year the Group disposed of a small parcel of land in Braintree, UK, generating a profit of £0.4m (see note 5). The land had
no cost or accumulated depreciation.

14. Investment properties

Cost
At 1 April 2013
Transfers to property, plant and equipment

At 31 March 2014
Additions
Transfers from property, plant and equipment
Transfers from other receivables
Disposals

At 31 March 2015

Accumulated depreciation
At 1 April 2013
Charge for the year

At 31 March 2014
Disposals

At 31 March 2015

Net book amount at 31 March 2014

Net book amount at 31 March 2015

Investment
property
£m

6.3
(0.9)

5.4
0.9
0.1
2.6
(9.0)

—

0.9
0.1

1.0
(1.0)

—

4.4

—

Group accountsNorcros plc Annual report and accounts 2015

14. Investment properties continued
Investment properties were held at cost and depreciated over 50 years with the exception of land which was not depreciated.
Rental income receivable in the year was £0.5m (2014: £0.5m).

During the year the Company completed the exit of its legacy lease and acquired the freehold interest in a property in Orgreave Drive,
Sheffield. This property was vacated by the Company in 2008 as it was surplus to requirements and consequently was treated as an onerous
lease. The total consideration relating to the transaction was £3.4m, of which £2.5m was in relation to the lease surrender (see note 5)
and the balance of £0.9m relating to the property.

In December 2014 the Company reached an agreement with Clowes Developments (UK) Ltd to dispose of its entire investment property
portfolio for consideration of £6.5m cash. Completion occurred on 2 March 2015 resulting in a loss on disposal of £1.5m which has been
recognised as an exceptional operating item (see note 5). As part of the agreement, the Company sold a small parcel of land with a value
of £0.1m which had previously been included within property, plant and equipment. The Company had also incurred planning and
development costs of £2.6m which had been reported within other receivables. Accordingly, both of these items were reclassified
as investment property prior to the disposal taking place.

15. Inventories

Raw materials and consumables
Work in progress
Finished goods

2015
£m

9.8
0.7
41.7

52.2

Provisions held against inventories totalled £2.7m (2014: £2.5m).

The cost of inventories recognised as an expense within cost of sales in the income statement amounted to £106.7m (2014: £107.3m).

During the year the Group charged £0.9m (2014: £0.4m) of inventory write-downs to the income statement within cost of sales.

16. Trade and other receivables

Trade receivables
Less: provision for impairment of trade receivables

Trade receivables – net
Other receivables
Prepayments and accrued income

2015
£m

37.8
(0.3)

37.5
0.6
2.4

40.5

2014
£m

10.0
0.9
39.3

50.2

2014
£m

35.8
(0.3)

35.5
3.6
2.8

41.9

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 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

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

At beginning of year
Provision for receivables impairment
Receivables written off during the year as uncollectable
Exchange differences

At end of year

2015
£m

31.8
8.7

40.5

2015
£m

0.3
0.1
(0.1)
—

0.3

2014
£m

34.0
7.9

41.9

2014
£m

0.4
0.1
(0.1)
(0.1)

0.3

As at 31 March 2015, trade receivables of £30.9m (2014: £31.3m) 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.

Notes to the Group accounts continuedYear ended 31 March 2015Norcros plc Annual report and accounts 2015

16. Trade and other receivables continued
As of 31 March 2015, trade receivables of £0.3m (2014: £0.3m) were impaired and provided for. The individually impaired receivables
were impaired at 100% of their gross value (2014: 100%). The ageing of these receivables is as follows:

Less than three months
Greater than three months

2015
£m

0.1
0.2

0.3

At 31 March 2015 trade receivables of £6.6m (2014: £4.2m) were past due but not impaired. These relate to a number of independent
customers for whom there is no recent history of default. The ageing analysis of these receivables is as follows:

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

2015
£m

5.3
0.5
0.5
0.3

6.6

2014
£m

0.1
0.2

0.3

2014
£m

3.1
0.7
0.2
0.2

4.2

As noted above, 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.

17. Cash and cash equivalents

Cash at bank and in hand

Cash and cash equivalents includes the following for the purposes of the Consolidated Cash Flow Statement:

Cash at bank and in hand
Less: bank overdrafts (see note 19)

2015
£m

5.6

2015
£m

5.6
(1.4)

4.2

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

18. Trade and other payables

Trade payables
Other tax and social security payables
Other payables
Accruals and deferred income

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

2015
£m

33.9
3.2
1.8
16.0

54.9

2014
£m

3.9

2014
£m

3.9
(0.7)

3.2

2014
£m

30.6
3.1
1.9
16.7

52.3

Group accountsNorcros plc Annual report and accounts 2015

19. Borrowings

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

Total non-current

Current
Bank borrowings (secured):
– bank overdrafts (see note 17)
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

2015
£m

19.0
(0.6)

18.4

1.4
—

1.4

19.8

2015
£m

1.4

—
19.0
(0.6)

18.4

19.8

2014
£m

31.0
(0.5)

30.5

0.7
0.1

0.8

31.3

2014
£m

0.8

31.0
—
(0.5)

30.5

31.3

Capital risk management
In July 2014 the Group agreed a new unsecured £70m revolving credit facility with a £30m accordion facility with Lloyds Bank plc,
Barclays Bank plc and HSBC Bank plc. The facility has a five year tenure and consequently expires in July 2019.

The facility provides the Group with a sound financial structure for the medium term with £44.1m of headroom being available
at 31 March 2015 (2014: £34.1m), after taking into account net debt and ancillary facilities in use of £5.5m (2014: £4.2m). 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

2015
%

1.7
1.7

2014
%

2.5
2.5

At 31 March 2015 the bank loans carried interest based on LIBOR plus a margin of 1.2% (2014: 2.0%). Overdrafts carry interest at base rate
plus a margin of 1.2% (2014: 2.0%).

Net debt
The Group’s net debt is calculated as follows:

Cash and cash equivalents
Cash and cash equivalents included within assets classified as held-for-sale
Total borrowings

2015
£m

(5.6)
—
19.8

14.2

2014
£m

(3.9)
(0.5)
31.3

26.9

Notes to the Group accounts continuedYear ended 31 March 2015Norcros plc Annual report and accounts 2015

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

Sterling
Euro
US Dollar
South African Rand
Australian Dollar

2015
£m

21.3
(0.3)
(1.6)
(5.2)
—

14.2

2014
£m

35.3
(1.4)
(3.3)
(3.2)
(0.5)

26.9

20. 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 financial risks to which the Group is exposed are those of interest rate risk, credit risk, liquidity risk and exchange rate risk. An explanation
of these risks and how the Group manages them is set out in the Directors’ Report on page 59.

The Group’s financial instruments comprise borrowings, cash, trade receivables and payables and forward exchange contracts. Based
on the hierarchy defined in IFRS 7, the Group’s financial instruments are classified as level 2 instruments. Consequently, fair value
measurements are derived from inputs other than quoted prices included within level 1 that are observable for the assets or liabilities,
either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Derivative financial instruments carried at fair value through profit and loss

Forward foreign exchange contracts:
– current
– non-current

2015
Assets
£m

2.1
—

2.1

2015
Liabilities
£m

1.0
—

1.0

2014
Assets
£m

—
—

—

2014
Liabilities
£m

1.8
0.3

2.1

Forward foreign exchange contracts
The notional principal amounts of outstanding forward foreign exchange contracts at 31 March 2015 were €19.1m and US$32.4m
(2014: €13.2m and US$53.1m).

The hedged forecast transactions denominated in foreign currency are expected to occur at various dates during the next twelve months.
Gains and losses recognised on forward exchange contracts to date have been taken to the 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 £14.8m (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 £0.1m 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 £1.5m devaluation in net assets. Likewise a 5% weakening in Sterling
would lead to a £1.6m increase in net assets.

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

21. 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 23% to 21% with effect from 1 April 2014. In the 2013 Annual Budget Statement it
was announced that the rate would reduce to 20% with effect from 1 April 2015. This rate reduction was substantively enacted on 2 July 2013
and the deferred tax asset at 31 March 2015 reflects this.

Group accountsNorcros plc Annual report and accounts 2015

21. 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
(Charged)/credited to the Consolidated Income Statement
Credited/(charged) to the Consolidated 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
Tax losses
Other timing differences
Deferred tax asset relating to pension deficit

2015
£m

11.6
(2.5)
4.7

13.8

2015
£m

2.7
3.3
(1.1)
8.9

13.8

2015
£m

2.7
11.2
(1.1)
8.9

21.7

2014
£m

8.7
5.4
(2.5)

11.6

2014
£m

3.0
4.5
(0.3)
4.4

11.6

2014
£m

3.0
12.4
(0.3)
4.4

19.5

No deferred tax asset has been recognised in respect of £7.9m (2014: £7.9m) of tax losses as the Company does not believe that utilisation
of these losses is probable.

22. Provisions

At 1 April 2013
Charged to the Income Statement
Amortisation of discount
Utilisation

At 31 March 2014
Charged to the Income Statement
Amortisation of discount
Utilisation

At 31 March 2015

Warranty
provision
£m

Restructuring
provision
£m

UK property
provision
£m

1.4
1.2
—
(1.2)

1.4

0.3
1.5
—
(1.5)

0.3
0.3
—
(0.6)

—

4.8
—
0.2
(2.3)

2.7
—
0.1
(0.9)

1.9

Total
£m

6.5
2.7
0.2
(5.0)

4.4
1.5
0.1
(2.7)

3.3

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 reorganisations.

The UK property provision relates to the expected liability arising from lease shortfall on the remaining surplus Group property.

23. Retirement benefit obligations
(a) Pension costs
Norcros Security Plan
The Norcros Security Plan (the “Plan”), the principal UK pension scheme of Norcros plc subsidiaries, is funded by a separate trust fund which
operates under UK trust law and is a separate legal entity from the Company. The Plan is governed by a Trustee board which is required by
law to act in the best interests of the Plan members and is responsible for setting policies together with the Company. The Plan exposes
the Company to actuarial risks such as longevity risk, interest rate risk, market (investment) risk and currency risk.

Notes to the Group accounts continuedYear ended 31 March 2015Norcros plc Annual report and accounts 2015

23. Retirement benefit obligations continued
(a) Pension costs continued
Norcros Security Plan continued
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, though active members retain a salary link. As a result of the closure a new defined contribution pension scheme was
implemented to replace the Plan from the same date.

The weighted average duration of the defined benefit obligation is approximately 16 years and can be attributed to the scheme members
as follows:

Employee members
Deferred members
Pensioner members

Total

2015

10%
29%
61%

100%

The Plan assets do not include any investments in the Company or any property or other assets utilised by the Company. The Trustee holds
insurance policies with various insurance companies that secure the pensions payable to specified beneficiaries. These policies remain
assets of the Trustee but are not valued in the Plan assets or liabilities.

The Plan is funded by the Company with funding based on a separate actuarial valuation for funding purposes for which the assumptions
may differ from the assumptions above. Funding requirements are formally set out in the Statement of Funding Principles, Schedule
of Contributions and Recovery Plan agreed between the Trustee and the Company. Employer deficit recovery contributions in the year
to 31 March 2016 are expected to be £2.1m.

The Plan has undertaken a number of liability management exercises during the year which have resulted in a number of benefits being
settled and some changes to pension increases in payment. The net impact of these exercises was to reduce the net deficit by £1.7m
which has been reflected in the Consolidated Income Statement as an exceptional operating item as follows:

Liabilities extinguished on settlements
Assets distributed on settlements
IAS 19R pension administration expenses – liability management exercises

Total

2015
£m

6.8
(4.4)
(0.7)

1.7

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 ended 31 March 2008
and replaced by defined contribution schemes.

Defined contribution pension schemes
Contributions made to these schemes amounted to £2.6m (2014: £2.2m), which includes £0.4m (2014: £0.3m) for the provision of life
insurance cover.

(b) IAS 19R, ‘Employee benefits’
Norcros Security Plan
The valuation used for IAS 19R disclosures has been based on the most recent actuarial valuation at 31 March 2012 and updated by KPMG,
a firm of qualified actuaries, to take account of the requirements of IAS 19R in order to assess the liabilities of the scheme at 31 March 2015.
Scheme assets are stated at their market value at 31 March 2015.

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

2015
Projected
unit

3.30%
2.90%
1.90%
2.83%
2.83%
2.15%

2014
Projected
unit

4.30%
3.20%
2.20%
3.05%
3.05%
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 2015 at age 65 will on average live for a further 21.4 years (2014: 21.3 years) after retirement if they are male and
23.7 years (2014: 23.6 years) if they are female. Members are assumed to take a 25% (2014: 25%) cash commutation sum on retirement.

Group accountsNorcros plc Annual report and accounts 2015

23. Retirement benefit obligations continued
(b) IAS 19R, ‘Employee benefits’ continued
Norcros Security Plan continued
(ii) The amounts recognised in the Income Statement are as follows:

Included in operating profit:
IAS 19R pension administration expenses

Included in exceptional operating items:
Settlement gain

IAS 19R finance cost

Total amounts recognised in the Income Statement

(iii) The amounts recognised in the Balance Sheet are determined as follows:

Equities
Absolute return funds
Bonds
Cash and gilts

Total market value of scheme assets
Present value of scheme liabilities

Pension deficit

Each class of plan assets is considered to have a quoted market price in an active market.

(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

Settlement gain
IAS 19R pension administration expenses
IAS 19R finance cost
Actuarial (losses)/gains

Deficit at the end of the year

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

Opening fair value of scheme assets
Employer contributions – normal contributions
– deficit recovery plan

Employee contributions
Interest income
Benefits paid
Actuarial gains on scheme assets
Assets distributed on settlements
IAS 19R pension administration expenses – liability management exercises
IAS 19R pension administration expenses – routine

Closing fair value of scheme assets

2015
£m

1.7

(1.7)

1.1

Value at
31 March
2015
£m

78.9
158.3
157.2
2.6

397.0
(441.3)

(44.3)

2015
£m

(21.8)
—
2.1
1.7
(1.7)
(1.1)
(23.5)

(44.3)

2015
£m

383.8
—
2.1
—
16.0
(23.1)
25.0
(4.4)
(0.7)
(1.7)

397.0

2014
£m

1.4

—

1.3

2.7

Value at
31 March
2014
£m

76.4
153.5
151.8
2.1

383.8
(405.6)

(21.8)

2014
£m

(29.9)
0.1
2.0
—
(1.4)
(1.3)
8.7

(21.8)

2014
£m

389.6
0.1
2.0
0.1
15.8
(23.6)
1.2
—
—
(1.4)

383.8

Notes to the Group accounts continuedYear ended 31 March 2015
Norcros plc Annual report and accounts 2015

23. Retirement benefit obligations continued
(b) IAS 19R, ‘Employee benefits’ continued
Norcros Security Plan continued
(vi) The reconciliation of scheme liabilities is as follows:

Opening scheme liabilities
Employee contributions
Interest cost
Actuarial gains arising from changes in demographic assumptions
Actuarial (losses)/gains arising from changes in financial assumptions
Experience losses on liabilities
Liabilities extinguished on settlements
Benefits paid

Closing fair value of scheme liabilities

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

Actuarial (losses)/gains
Deferred tax

(viii) Sensitivities
The sensitivities regarding the principal assumptions used to measure the Plan’s liabilities are as follows:

Assumption

Discount rate – 0.1% decrease
Inflation – 0.1% increase
Increase in life expectancy by one year

2015
£m

(405.6)
—
(17.1)
—
(42.4)
(6.1)
6.8
23.1

(441.3)

2015
£m

(23.5)
4.7

(18.8)

Impact on scheme deficit

2015
£m

6.4
5.3
12.6

2014
£m

(419.5)
(0.1)
(17.1)
2.2
5.3
—
—
23.6

(405.6)

2014
£m

8.7
(2.5)

6.2

2014
£m

5.2
3.4
11.6

The above sensitivities are applied to adjust the defined benefit obligation at the end of the year. Whilst the analysis does not take account of
the full distribution of cash flows expected under the scheme, it does provide an approximation as to the sensitivity of the assumptions shown.

No changes have been made to the method and assumptions used in this analysis from those used in the previous year.

24. Called up share capital

Issued and fully paid
597,064,867 (2014: 587,885,491) ordinary shares of 1p each

2015
£m

6.0

2014
£m

5.8

During the year the Company issued 6,997,419 ordinary shares to the Norcros Employee Benefit Trust in order to satisfy vestings of options
under the Company’s Approved Performance Share Plan. A further 2,181,957 1p ordinary shares were issued to members of an SAYE scheme
whose options became exercisable during the year.

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.

Taking into account the capital raising in 2009 the remaining warrants now represent 3,368,852 ordinary shares (0.56% of the issued
ordinary share capital) at 31 March 2015. The warrants are exercisable at 8.97p per share at any time up to July 2017.

Group accountsNorcros plc Annual report and accounts 2015

25. Consolidated Cash Flow Statement
(a) Cash generated from operations
The analysis of cash generated from operations split by continuing and discontinued operations is given below.

Continuing operations

Profit before taxation
Adjustments for:
– IAS 19R administrative expenses included in the Income Statement
– acquisition related costs included in the Income Statement
– exceptional items included in the Income Statement
– cash flows from exceptional items and acquisition related costs
– depreciation
– difference between current service costs and normal cash contributions
– pension fund deficit recovery contributions
– loss on disposal of property, plant and equipment
– finance costs
– finance income
– IAS 19R finance cost
– share-based payments

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

Cash generated from continuing operations

Discontinued operations

Profit before taxation (see note 28)
Adjustments for:
– depreciation

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

Cash generated from/(used in) discontinued operations

Cash generated from operations

2015
£m

11.0

1.7
2.2
2.5
(4.7)
6.0
—
(2.1)
0.1
1.8
(3.3)
1.1
1.3

17.6

(2.0)
(1.4)
1.9

16.1

2015
£m

—

0.4
(0.1)
(0.2)

0.1

16.2

2014
£m

5.8

1.4
0.7
1.2
(4.4)
5.9
(0.1)
(2.0)
0.1
5.7
—
1.3
0.9

16.5

(5.7)
(1.9)
5.0

13.9

2014
£m

0.2

0.1

0.3

(0.4)
(0.2)
—

(0.3)

13.6

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

At 1 April 2013
Cash flow
Reclassification to assets held-for-sale
Other non-cash movements
Exchange movement

At 31 March 2014
Cash flow
Other non-cash movements
Exchange movement

At 31 March 2015

Cash included
within assets
held-for-sale
£m

Net cash
£m

Borrowings
£m

Net debt
£m

—
(0.3)
1.0
—
(0.2)

0.5
(0.5)
—
—

—

6.4
(1.6)
(1.0)
—
(0.6)

3.2
1.1
—
(0.1)

4.2

(37.1)
6.9
—
(0.4)
—

(30.6)
12.1
0.1
—

(18.4)

(30.7)
5.0
—
(0.4)
(0.8)

(26.9)
12.7
0.1
(0.1)

(14.2)

Other non-cash movements principally relate to the movement in the costs of raising debt finance in the year.

Notes to the Group accounts continuedYear ended 31 March 2015Norcros plc Annual report and accounts 2015

26. Dividends
A final dividend in respect of the year ended 31 March 2014 of £2.0m (0.34p per share) was paid on 30 July 2014 and an interim
dividend of £1.1m (0.185p per share) was paid on 7 January 2015. A final dividend in respect of the year ended 31 March 2015 of
£2.2m (0.375p per share) is to be proposed at the Annual General Meeting on 23 July 2015. These financial statements do not
reflect this final dividend.

27. 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 £2.1m (2014: £2.9m).

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

2015
£m

1.2

2015
£m

4.9
12.9
2.1

19.9

2015
£m

1.6
2.9
—

3.3
10.0
2.1

19.9

2014
£m

0.7

2014
£m

4.8
12.7
16.6

34.1

2014
£m

1.1
2.2
0.2

3.7
10.5
16.4

34.1

(c) Operating leases receivable
Prior to the disposal of its surplus property portfolio, the Group leased certain of its investment properties to third parties. The total future
minimum lease payments receivable were as follows:

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

2015
£m

—
—
—

—

2014
£m

0.6
1.7
—

2.3

Group accountsNorcros plc Annual report and accounts 2015

28. Discontinued operations and assets held-for-sale
On 25 March 2014, the Company entered into a conditional agreement to dispose of 100% of the issued share capital of Norcros Industry
(Pty) Limited (NIPL), which owned its Australian tiles business, to Kim Hin Industries Berhad (KHIB). As KHIB is listed on the Malaysian Bursa,
it required shareholder approval to allow the transaction to take place, and this was duly received allowing the disposal to be completed
on 30 May 2014. Consequently, NIPL was classified as held-for-sale in the consolidated balance sheet at 31 March 2014 and an analysis
of the assets held-for-sale and liabilities associated with assets held-for-sale is given in the table below.

Property, plant and equipment
Inventories
Trade and other receivables
Cash

Assets held-for-sale

Trade and other payables
Current tax liabilities

Liabilities associated with assets held-for-sale

Net assets held-for-sale

2014
£m

1.7
2.8
1.2
0.5

6.2

(1.8)
(0.1)

(1.9)

4.3

In accordance with IFRS 5, an impairment loss of £1.5m to remeasure the carrying value of the assets to fair value less costs to sell was
recognised following the reclassification of the net assets of NIPL as held-for-sale in the year ended 31 March 2014. Including an estimated
tax charge arising from the transaction of £0.1m, a total loss on disposal of £1.6m was anticipated. Following the completion of the transaction
the Company made an actual loss on disposal of £1.5m. Taking into account the loss of £1.6m reflected in the Consolidated Income Statement
in the year ended 31 March 2014, this means that a profit of £0.1m has been recognised in the current year. The actual loss on disposal
is calculated as follows:

Property, plant and equipment
Inventories
Trade and other receivables
Cash
Trade and other payables

Net assets disposed of

Disposal proceeds:
Cash
Less: directly attributable costs

Net proceeds

Loss on disposal before tax and recycling of foreign exchange

Tax charge on loss on disposal

Loss on disposal before recycling of foreign exchange

Recycling of foreign exchange

Loss on disposal

2015
£m

1.8
3.1
1.4
0.6
(1.2)

5.7

4.7
(0.3)

4.4

(1.3)

(0.1)

(1.4)

(0.1)

(1.5)

Notes to the Group accounts continuedYear ended 31 March 201528. Discontinued operations and assets held-for-sale continued
The net cash inflow from the disposal, reported in investing activities, was as follows:

Disposal proceeds
Directly attributable costs
Cash divested

Net cash inflow

Norcros plc Annual report and accounts 2015

2015
£m

4.7
(0.3)
(0.6)

3.8

As NIPL represented a major line of business for the Group and was classified as held-for-sale in the year ended 31 March 2014, its operations
have been treated as discontinued with a single amount shown on the face of the Consolidated Income Statement. The table below
provides further detail of the amount presented in the Consolidated Income Statement.

Revenue

Expenses

Profit before tax and loss recognised on remeasurement to fair value less costs to sell

Loss recognised on remeasurement to fair value less costs to sell
Tax charge on loss recognised on remeasurement to fair value less costs to sell
Loss on disposal
Reversal of loss recognised on remeasurement to fair value (including associated tax charge)

Profit/(loss) for the period from discontinued operations

The net cash flows of NIPL reported in the Consolidated Cash Flow Statement are as follows:

Operating activities (note 25(a))
Investing activities

Net cash inflow/(outflow)

2015
£m

1.8

(1.8)

—

—
—
(1.5)
1.6

0.1

2015
£m

0.1
3.8

3.9

2014
£m

10.6

(10.4)

0.2

(1.5)
(0.1)
—
—

(1.4)

2014
£m

(0.3)
—

(0.3)

The total comprehensive income and expense of NIPL reported in the Consolidated Statement of Comprehensive Income are as follows:

Profit/(loss) for the year from discontinued operations
Foreign currency translation adjustments

Total comprehensive income/(expense) from discontinued operations

2015
£m

0.1
0.1

0.2

2014
£m

(1.4)
(0.9)

(2.3)

29. Restatement of prior year comparatives
The Group has reclassified certain costs related to business combination activities in line with emerging market practice such that they
are now presented as a separate line entitled “Acquisition related costs” in the Consolidated Income Statement. In order to effect fair
comparison, the results for the year ended 31 March 2014 have been restated to conform to this style of presentation.

Underlying operating profit
Non-underlying operating items
IAS 19R administrative expenses
Acquisition related costs
Exceptional operating items

Operating profit

2014 as
previously
reported
£m

IAS 19R
administrative
expenses
£m

Deferred
remuneration
£m

Amortisation
of intangibles
£m

16.1
(1.8)
—
—
(1.5)

12.8

—
1.4
(1.4)
—
—

—

—
—
—
(0.3)
0.3

—

—
0.4
—
(0.4)
—

—

2014 as
restated
£m

16.1
—
(1.4)
(0.7)
(1.2)

12.8

The restatement has no impact on the Consolidated Balance Sheet or Consolidated Cash Flow Statement.

Group accountsNorcros plc Annual report and accounts 2015

Notes to the Group accounts continued
Year ended 31 March 2015

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

(a) Purchases of goods and services

Purchases of goods:
– Prism Cement Limited

2015
£m

—

2014
£m

0.6

Goods are purchased from related parties on normal commercial terms and conditions.

Prism Cement Limited was classed as a related party due to the fact that one of its directors, Vijay Aggarwal, was also a Director of the
Company, and one of its subsidiaries, Lifestyle Investments PVT Limited, owned 29.6% of the Company’s issued share capital as of 1 April 2013.
On 11 April 2013, Lifestyle Investments PVT Limited sold 27,000,000 ordinary shares to reduce its holding in the Company to 24.97%, and
on 18 September 2013, sold the remainder of its holding in the Company and consequently ceased to be a related party from that date.
Additionally, Mr Aggarwal ceased to be a Director of the Company from 20 September 2013.

Prior to the divestment, dividends of £0.4m were paid to Lifestyle Investments PVT Limited.

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

31. Post balance sheet events
On 15 May 2015 the Group announced that the contractual dispute with Optimisation Developments Limited, a subsidiary of Wm Morrison
Supermarkets plc, regarding the conditional sale of part of its surplus land holding at Highgate, Tunstall, had been settled. The terms of the
settlement are confidential for legal reasons, but the amount (net of costs) will be reflected in the accounts for the year to 31 March 2016
as an exceptional operating item.

The site at Highgate, Tunstall, which had been the subject of this dispute, has subsequently been disposed of, forming part of the portfolio
freehold property sale described in note 14.

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

UK
— Norcros Group (Holdings) Limited

Overseas
— Norcros SA (Pty) Limited* (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.

The Company has taken advantage of the exemption under Section 410 (2) of the Companies Act 2006 by providing information only
in relation to subsidiary undertakings whose results or financial position, in the opinion of the Directors, principally affected the financial
statements. A full list of subsidiaries is included on the Company’s annual return.

Norcros plc Annual report and accounts 2015

Independent auditor’s report
To the members of Norcros plc

Report on the parent company financial statements
Our opinion
In our opinion, Norcros plc’s parent company financial statements (the “financial statements”):

— give a true and fair view of the state of the parent company’s affairs as at 31 March 2015;

— 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.

What we have audited
Norcros plc’s financial statements comprise:

— the parent company balance sheet as at 31 March 2015; and

— the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.

The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and United
Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

ISAs (UK & Ireland) reporting
Under International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”) we are required to report to you if, in our opinion,
information in the Annual Report is:

— materially inconsistent with the information in the audited financial statements; or

— apparently materially incorrect based on, or materially inconsistent with, our knowledge of the company acquired in the course

of performing our audit; or

— otherwise misleading.

We have no exceptions to report arising from this responsibility.

Adequacy of accounting records and information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion:

— we have not received all the information and explanations we require for our audit; or

— 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 financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting

records and returns.

We have no exceptions to report arising from this responsibility.

Directors’ remuneration
Directors’ remuneration report - Companies Act 2006 opinion
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance
with the Companies Act 2006.

Other Companies Act 2006 reporting
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. We have no exceptions to report arising from this responsibility.

Parent Company accountsNorcros plc Annual report and accounts 2015

100

Independent auditor’s report continued
To the members of Norcros plc

Responsibilities for the financial statements and the audit
Our responsibilities and those of the directors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 60, the directors are responsible
for the preparation of the 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 financial statements in accordance with applicable law and ISAs
(UK & 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.

What an audit of financial statements involves
We conducted our audit in accordance with ISAs (UK & Ireland). 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.

We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our own
judgements, and evaluating the disclosures in the financial statements.

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide
a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive
procedures or a combination of both.

In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the
audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements
or inconsistencies we consider the implications for our report.

Other matter
We have reported separately on the group financial statements of Norcros plc for the year ended 31 March 2015.

M. A. Heath (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Manchester
18 June 2015

Norcros plc Annual report and accounts 2015

Parent Company balance sheet
At 31 March 2015

101

Fixed assets

Investments

Deferred tax asset

Creditors: amounts falling due within one year

Other

Net current liabilities

Total assets less current liabilities

Creditors: amounts falling due after more than one year

Borrowings – bank and other loans

Net assets

Financed by:

Share capital

Share premium account

Treasury reserve

Profit and loss account

Total shareholders’ funds

Notes

2015
£m

177.3

0.5

177.8

(19.9)

157.9

(18.4)

139.5

6.0

1.0

(0.1)

132.6

139.5

2014
£m

177.3

0.6

177.9

(3.2)

174.7

(30.5)

144.2

5.8

0.9

—

137.5

144.2

The financial statements of Norcros plc, registered number 3691883, were approved on 18 June 2015 and signed on behalf of the Board by:

N. P. Kelsall
Group Chief Executive

M. K. Payne
Group Finance Director

Parent Company accountsNorcros plc Annual report and accounts 2015

102 Notes to the Parent Company accounts

Year ended 31 March 2015

1. Statement of accounting policies
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 and cash flow projections derived from detailed budgets and forecasts. 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 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 30.

In accordance with FRS 8, the Company has taken advantage of the exemption not to disclose transactions with wholly owned subsidiaries.

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 (2014: £3,000) is borne by the Company’s subsidiary, without recharge.

3. Investments

At 1 April 2014 and 31 March 2015

Norcros plc Annual report and accounts 2015

103

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,
taps, tiles and adhesives.

The Directors believe that the carrying value of investments is supported by their underlying net assets.

Details of the principal operating subsidiaries indirectly owned by the Company are shown in note 32 of the Group accounts.

4. 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
(Charged)/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

2015
£m

0.6
(0.1)

0.5

2015
£m

0.5

2015
£m

0.5
5.2

5.7

2014
£m

0.2
0.4

0.6

2014
£m

0.6

2014
£m

0.6
5.2

5.8

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.

5. Creditors – amounts falling due within one year

Amounts owed to Group undertakings
Accruals

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

6. Borrowings

Loans and bank overdrafts
Costs of raising finance

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

2015
£m

19.4
0.5

19.9

2015
£m

19.0
(0.6)

18.4

—
19.0
(0.6)

18.4

2014
£m

2.8
0.4

3.2

2014
£m

31.0
(0.5)

30.5

31.0
—
(0.5)

30.5

In July 2014 the Company agreed a new unsecured £70m revolving credit facility with a £30m accordion facility with Lloyds Bank plc,
Barclays Bank plc and HSBC Bank plc. The facility has a five year tenure and consequently expires in July 2019.

Parent Company accountsNorcros plc Annual report and accounts 2015

104

Notes to the Parent Company accounts continued
Year ended 31 March 2015

7. Called up share capital

Issued and fully paid
597,064,867 (2014: 587,885,491) ordinary shares of 1p each

2015
£m

6.0

2014
£m

5.8

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.

8. 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
0.2
—
—
—

6.0

Share
premium
account
£m

0.9
0.1
—
—
—

1.0

Treasury
reserve
£m

—
(0.1)
—
—
—

(0.1)

Profit
and loss
account
£m

137.5
—
(3.1)
1.3
(3.1)

132.6

Total
£m

144.2
0.2
(3.1)
1.3
(3.1)

139.5

9. Dividends
A final dividend in respect of the year ended 31 March 2014 of £2.0m (0.34p per share) was paid on 30 July 2014 and an interim dividend
of £1.1m (0.185p per share) was paid on 7 January 2015. A final dividend in respect of the year ended 31 March 2015 of £2.2m (0.375p per share)
is to be proposed at the Annual General Meeting on 22 July 2015. These financial statements do not reflect this final dividend.

10. Contingent liabilities
The Company is party to an omnibus set-off agreement between Lloyds Bank plc and the Group’s UK subsidiaries.

11. Financial risk management objectives and policies
A description of the Group’s financial risk management policies are provided in the Directors’ Report on page 59. These objectives
and policies also apply to the Company.

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

Norcros plc Annual report and accounts 2015

Notice of Annual General Meeting

105

Notice is given that the 2015 Annual General Meeting of Norcros plc will be held at 11.00am on 22 July 2015 at Mottram Hall, Wilmslow Road,
Mottram St Andrew, Cheshire SK10 4QT for the purpose of considering and, if thought fit, passing the resolutions set out below. Resolutions
1 to 12 (inclusive) below will be proposed as ordinary resolutions and resolutions 13 to 15 (inclusive) below will be proposed as special resolutions.

To receive the audited accounts and the auditor’s and Directors’ reports for the year ended 31 March 2015.

2. To approve the directors’ remuneration report for the year ended 31 March 2015.

3. To declare a final dividend of 0.375 pence per ordinary share for the year ended 31 March 2015.

4. To re-elect Jo Hallas as a Director.

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

6. To re-elect David McKeith as a Director.

To re-elect Nick Kelsall as a Director.

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

To re-appoint PricewaterhouseCoopers LLP as auditor to hold office from the conclusion of this Annual General Meeting until
the conclusion of the next general meeting at which accounts are laid before the Company.

10. To authorise the Directors to determine the auditor’s remuneration.

11. That, subject to and conditional upon admission of the New Ordinary Shares (as defined in this resolution) to the Official List of the

United Kingdom Listing Authority and to trading on the London Stock Exchange’s Main Market for listed securities becoming effective,
every ten ordinary shares of £0.01 each in the capital of the Company (each an Existing Ordinary Share) be consolidated into one ordinary
share of £0.10 each (each a New Ordinary Share), at such time and date (if any) as the Board of Directors of the Company (Board) may,
in its absolute discretion, determine (such time and date being no later than the first anniversary of the date on which this resolution 11
is passed), with such New Ordinary Shares having the same rights as the Existing Ordinary Shares, provided that if, as a result of such
consolidation of shares, fractions of shares become attributable to members, the Board may on behalf of those members deal with
the fractions as it thinks fit, including (without limitation) in either (or both) of the ways prescribed in the Articles of Association
of the Company (Articles) as set out below:

(a)

the Board may sell shares representing the fractions, through a member of the London Stock Exchange or other appropriate
intermediary acting (in any case) on a “best execution” (or equivalent) basis or in such other manner (whether or not through an
intermediary) that provides a price which the Board considers to be reasonable in the circumstances, to any person (including,
subject to the statutes (as defined in the Articles) and, without limitation, the Company) and distribute the net proceeds of sale
(after deducting the expenses of sale) in due proportion amongst the persons to whom such fractions are attributable (except
that if the amount due to a person is less than £1.00, or such other sum as the Board may decide, the Company may retain
such sum for its own benefit). To give effect to such sale the Board may:

(i)

(ii)

in the case of certificated shares, authorise a person to execute an instrument of transfer of shares to the purchaser
or as the purchaser may direct, or

in the case of uncertificated shares, exercise any power conferred on it by article 15.9 of the Articles to effect a transfer
of the shares;

The purchaser will not be bound to see to the application of the purchase monies in respect of any such sale. The title of the
transferee to the shares will not be affected by any irregularity in or invalidity of the proceedings connected with the sale or
transfer. Any instrument or exercise referred to in this resolution 11 shall be effective as if it had been executed or exercised
by the holder of the shares to which it relates; and/or

(b)

in relation to the fractions the Board may issue, subject to the statutes (as defined in the Articles), to a member credited as fully
paid by way of capitalisation the minimum number of shares required to round up his holding of shares to a number which, following
the consolidation, leaves a whole number of shares (such issue being deemed to have been effected immediately before the
consolidation). The amount required to pay up those shares may be capitalised as the Board thinks fit out of amounts standing
to the credit of any reserve or fund of the Company (including any share premium account, capital redemption reserve and profit
and loss account), whether or not available for distribution, and applied in paying up in full the appropriate number of shares.

12.

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 £3,981,159 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;

Parent Company accounts

Norcros plc Annual report and accounts 2015

106 Notice of Annual General Meeting continued

(b)

(c)

(d)

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

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

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

13.

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 12 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 £597,174,

and shall expire when the authority conferred on the Directors by resolution 12 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.

14.

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 (i) ordinary shares of £0.10 in its capital where resolution 11 is passed and
the consolidation of shares authorised thereby occurs; or otherwise (ii) ordinary shares of £0.01 each in its capital provided that:

(a)

the maximum aggregate number of such shares that may be acquired under this authority is 5,971,740 £0.10 shares where
resolution 11 is passed and the consolidation of shares authorised thereby occurs; or otherwise 59,717,400 £0.01 shares;

(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.

15.

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

By order of the Board

Richard H. Collins
Company Secretary
18 June 2015

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

Registered in
England and Wales
Company number
3691883

Adoption of Financial Reporting Standard (FRS) 101 ‘Reduced disclosure framework’
Following the publication of FRS100 Application of Financial Reporting Requirements by the Financial Reporting Council, the Company
is required to change its accounting framework for its Parent Company financial statements, which is currently UK GAAP, for its financial
year commencing 1 April 2015. The Company intends to adopt Financial Reporting Standard 101 ‘Reduced disclosure framework’ for
its Parent Company financial statements unless it receives objections in writing from shareholders holding in aggregate 5% or more
of the total allotted shares in the Company before 30 September 2015.

Norcros plc Annual report and accounts 2015

107

Notes
1.

A member who is entitled to attend and vote at the meeting is entitled to appoint another person, or two or more persons in respect
of different shares held by him, as his proxy to exercise all or any of his rights to attend and to speak and vote at the meeting.

The right of a member of the Company to vote at the meeting will be determined by reference to the register of members.
A member must be registered on that register as the holder of ordinary shares of 1p each (“ordinary shares”) by 6.00pm on 20 July 2015
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 Asset Services (“Capita”), PXS at The Registry, 34 Beckenham Road,
Beckenham, Kent BR3 4TU so as to be received by 11.00am on 20 July 2015. Alternatively, a member may appoint a proxy online by
following the instructions for the electronic appointment of a proxy at www.capitashareportal.com. If you have not previously registered to
use this facility you will require your investor code which can be located on the enclosed proxy form. In order to be a valid proxy
appointment, the member’s electronic message confirming the details of the appointment completed in accordance with those
instructions must be transmitted so as to be received by the same time. Members who hold their shares in uncertificated form may
also use the CREST voting service to appoint a proxy electronically, as explained below. Appointing a proxy will not prevent a member
from attending and voting in person at the meeting should he so wish.

Any person to whom this notice is sent who is currently nominated by a member of the Company to enjoy information rights under
Section 146 of the Companies Act 2006, as amended, (a “nominated person”) may have a right under an agreement between him and
that member to be appointed, or to have someone else appointed, as a proxy for the meeting. If a nominated person has no such right
or does not wish to exercise it, he may have a right under such an agreement to give instructions to the member concerned as to the
exercise of voting rights. The statement in note 1 above of the rights of a member in relation to the appointment of proxies does not
apply to a nominated person. Such rights can only be exercised by the member concerned.

Voting on all resolutions will be conducted by way of a poll, rather than a show of hands. This is a more transparent method of voting
as members’ votes are counted according to the number of ordinary shares held. As soon as practicable following the meeting, the
results of the voting at the meeting and the numbers of proxy votes cast for and against, together with the number of votes actively
withheld in respect of, each of the resolutions will be announced via a Regulatory Information Service and will also be placed on the
Company’s website: www.norcros.com.

As at 17 June 2015 (being the latest practicable date prior to the printing of this document), (i) the Company’s issued share capital
consisted of 597,173,935 ordinary shares carrying one vote each and (ii) the total voting rights in the Company were 597,173,935.

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 auditor by the time it makes the statement available on the website. The business that may
be dealt with at the meeting includes any such statement.

Parent Company accountsNorcros plc Annual report and accounts 2015

108

Notice of Annual General Meeting continued

Notes continued
9.

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 (ID: RA10), as the Company’s “issuer’s agent”, by 11.00am on 20 July 2015. 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 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 (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.

Explanatory notes

109

Norcros plc Annual report and accounts 2015

The Annual General Meeting of the Company will take place at 11.00am on 22 July 2015 at Mottram Hall, Wilmslow Road, Mottram St Andrew,
Cheshire SK10 4QT. The Notice convening that meeting, together with the resolutions to be proposed, appears on pages 105 to 108 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 auditor’s 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 Annual Report on Remuneration for the year ended 31 March 2015 is set out in full on pages 49 to 57 of this document. Any shareholder
who would like a copy of the Annual Report and Accounts 2015 can obtain one by contacting our registrar on 0871 664 0300.
Alternatively, the Annual Report and Accounts 2015 can be viewed on our website at www.norcros.com.

Included in the text of the Remuneration Report is the directors’ remuneration policy statement. This policy was approved by shareholders
at the Company’s 2014 AGM and there have been no changes to the policy since that date.

Resolution 3
Dividend
The payment of the final dividend requires the approval of shareholders in general meeting. If the meeting approves resolution 3,
the final dividend of 0.375 pence per ordinary share will be paid on 29 July 2015 to ordinary shareholders who are on the register of members
on 26 June 2015 in respect of each ordinary share.

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

Brief biographical details of Jo can be found on page 31. The chairman confirms that, following performance evaluation, Jo’s performance
continues to be effective, she demonstrates commitment to the role and possesses the necessary experience and knowledge. The Board
therefore unanimously recommends that Jo be re-elected as a Director.

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

Brief biographical details of Martin can be found on page 30. The Board confirms that, following performance evaluation,
Martin’s performance continues to be effective, he demonstrates commitment to the role and that he possesses the necessary
experience and knowledge. The Board unanimously recommends that Martin be re-elected as a Director.

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

Brief biographical details of David can be found on page 31. The Chairman confirms that, following performance evaluation,
David’s performance continues to be effective, he demonstrates commitment to the role and that he possesses the necessary
experience and knowledge. The Board unanimously recommends that David be re-elected as a Director.

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

Brief biographical details of Nick can be found on page 30. The Chairman confirms that, following performance evaluation,
Nick’s performance continues to be effective, he demonstrates commitment to the role and that he possesses the necessary
experience and knowledge. The Board unanimously recommends that Nick be re-elected as a Director.

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

Brief biographical details of Martin can be found on page 31. The Chairman confirms that, following performance evaluation,
Martin’s performance continues to be effective, he demonstrates commitment to the role and that he possesses the necessary
experience and knowledge. The Board unanimously recommends that Martin be re-elected as a Director.

Parent Company accountsNorcros plc Annual report and accounts 2015

110 Explanatory notes continued

Resolution 9
Re-appointment of auditor
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 auditor
The resolution follows best practice in giving authority to the Directors to determine the remuneration of the Company’s auditor.

Resolution 11
Share consolidation
Background
The Company has a large number of ordinary shares in issue. The share consolidation is based on every ten existing ordinary shares of
£0.01 each (Existing Ordinary Shares) being consolidated into an ordinary share of £0.10 (a New Ordinary Share) with the intention that,
following the share consolidation, the number of shares in issue will be more appropriate for a company of Norcros’s size in the UK market.
The share consolidation may also help to make the Company’s shares more attractive to investors and may result in a narrowing
of the bid/offer spread, thereby improving liquidity.

Effect of the Share Consolidation
Following the share consolidation, shareholders will still hold the same proportion of the Company’s ordinary share capital as before the
share consolidation (save in respect of fractional entitlements). Other than a change in nominal value, the New Ordinary Shares will carry
equivalent rights under the Articles of Association of the Company to the Existing Ordinary Shares.

Application will be made to the UK Listing Authority for the New Ordinary Shares to be admitted to the Official List and to trading
on London Stock Exchange plc’s main market.

If an individual shareholding is not exactly divisible by 10, the share consolidation will generate an entitlement to a fraction of a New Ordinary
Share. Fractions of New Ordinary Shares will be aggregated and sold for the best price reasonably obtainable on behalf of the shareholders
entitled to the fractions. The net proceeds of the sale, after the deduction of the expenses of the sale, will be distributed in due proportion
among the relevant shareholders, except that any individual entitlement of £1.00 or less may be retained by the Company for its benefit.
Only shareholders with a holding of Existing Ordinary Shares that are not exactly divisible by 10 will be left with an entitlement to a fraction
of a New Ordinary Share.

Shareholders who hold fewer than 10 Existing Ordinary Shares will still have their shareholding consolidated and their shareholding
will be dealt with in accordance with the procedure for fractional entitlements to New Ordinary Shares.

For purely illustrative purposes, examples of the likely effect of the share consolidation are set out below:

Number of Existing Ordinary Shares

Number of New Ordinary Shares

6
10
15
20
28
30
79
100

0
1
1
2
2
3
7
10

Following the share consolidation and assuming no further shares are issued between the date of this document and the share consolidation
becoming effective, the Company’s issued ordinary share capital will comprise of 59,717,393 New Ordinary Shares. No change in the total
nominal value of the Company’s issued ordinary share capital will occur; it will still be approximately £5,971,739.

If the share consolidation is approved, it is proposed that it will become effective on such future date (if any) as the Directors may in their
sole discretion, determine. It is expected that if the Directors exercise this power in the future, dealings in the New Ordinary Shares will
commence at 8.00am on the first business day after that exercise and that new share certificates, replacing those relating to Existing
Ordinary Shares, will be dispatched to Shareholders who hold their Existing Ordinary Shares in certificated form shortly thereafter. The new
share certificates would be sent by pre-paid first class post, at the risk of the relevant holder of ordinary shares, to the registered address
of that holder or, in the case of joint holders, to the one whose name appears first in the register of members.

Share certificates for Existing Ordinary Shares would no longer be valid and would need to be destroyed once the new documentation
is received. Until a holder of certificated ordinary shares receives a new share certificate, transfers of certificated ordinary shares will be
certified against the register of members.

Norcros plc Annual report and accounts 2015

111

Resolution 11 continued
Share consolidation continued
Effect of the Share Consolidation continued
Shareholders who hold their entitlement to New Ordinary Shares in uncertificated form through CREST would have their New Ordinary Shares
arising as a result of the share consolidation credited to their CREST accounts in respect of Existing Ordinary Shares held in uncertificated form.

SHAREHOLDERS SHOULD NOT DESTROY THEIR SHARE CERTIFICATES FOR THEIR EXISTING ORDINARY SHARES UNTIL THEY HAVE
RECEIVED NEW SHARE CERTIFICATES FOR THE NEW ORDINARY SHARES.

Share schemes
As a result of the share consolidation, existing awards granted under the Norcros plc 2011 Deferred Bonus Plan, the Norcros plc 2011
Performance Share Plan and the Norcros plc SAYE Scheme will need to be adjusted to account for the change to the share capital.
These adjustments will not have an adverse impact on the participants in any of these plans and it is anticipated that the adjustments
will be made by the Company shortly after the share consolidation takes effect.

Taxation
The following summary is intended as a general guide only and is based on current UK tax law and HM Revenue and Customs (HMRC)
practice as at the date of this document. It relates only to certain limited aspects of the UK taxation treatment of the share consolidation
for shareholders who are individual residents in the UK for tax purposes, who are the absolute beneficial owners of their ordinary shares
and who hold them as investments. Shareholders who are in any doubt about their tax position, or who are subject to tax in any
jurisdictions other than the UK, should take appropriate independent advice without delay.

It is expected that for the purposes of UK taxation on chargeable gains the share consolidation will be treated as follows:

(a)

(b)

The New Ordinary Shares arising from the share consolidation will result from a reorganisation of the share capital of the Company.
Accordingly, to the extent that a shareholder receives New Ordinary Shares, the shareholder will not generally be treated as making a
disposal of all or part of his or her holding of Existing Ordinary Shares by reason of the share consolidation being implemented, and the
New Ordinary Shares which replace a shareholder’s Existing Ordinary Shares as a result of the share consolidation (the new holding)
will be treated as the same asset acquired at the same time as the shareholder’s holding of Existing Ordinary Shares was acquired;

To the extent that a shareholder receives cash by virtue of a sale on his or her behalf of any New Ordinary Shares to which he or she has
a fractional entitlement, the shareholder will not, in practice, normally be treated as making a part disposal of his or her holding of Existing
Ordinary Shares, the proceeds instead being deducted from the base cost of the shareholder’s new holding. This treatment applies where
the cash received is ‘small’ as compared with the value of the shares in respect of which it is made. For this purpose HMRC regard
‘small’ as meaning 5% or less and additionally regard an amount of £3,000 or less as ‘small’, regardless of whether or not it would
pass the 5% test. In addition, if those proceeds exceed that base cost, however, the shareholder will be treated as disposing of part
or all of his or her holding of Existing Ordinary Shares and will be subject to tax in respect of any chargeable gains thereby realised; and

(c)

On a subsequent disposal of the whole or part of the New Ordinary Shares comprised in the holding, a shareholder may, depending
on his or her circumstances, have a tax liability on the amount of chargeable gain realised.

Resolution 12
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 23 January 2016 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 12, if passed, will renew the Directors’ authority to allot shares in the capital of the Company up to a maximum aggregate nominal
value of £3,981,159 (representing 39,811,590 ordinary shares of £0.10 if resolution 11 is passed and put into effect or 398,115,900 ordinary shares
if £0.01 if it is not). This represents the Association of British Insurers’ guideline limit of approximately two thirds of the Company’s issued
ordinary share capital as at 17 June 2015 (being the latest practicable date prior to the publication of this document). Of this amount,
ordinary shares to an aggregate nominal value of £1,990,579.50 (representing 19,905,795 ordinary shares of £0.10 if resolution 11 is passed
and put into effect or 199,057,950 ordinary shares of £0.01 if it is not) which is approximately one third of the Company’s issued ordinary share
capital as at 17 June 2015 (being the latest practicable date prior to the publication of this document)), can only be allotted pursuant
to a rights issue.

As at 17 June 2015 (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 2016.

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

Parent Company accountsNorcros plc Annual report and accounts 2015

112

Explanatory notes continued

Resolution 13
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 23 January 2016 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 £597,174. This aggregate nominal amount equates to approximately 10% of the issued ordinary share capital of the Company as at 17 June 2015
(being the latest practicable date prior to the publication of this notice of Annual General Meeting). This resolution follows guidance from the
Pre-Emption Group’s revised Statement of Principles, published on 12 March 2015. Such principles provide the Company with greater flexibility
to undertake non pre-emptive issuances in connection with acquisitions and specified investments. In line with the revised Statement of Principles,
the Company is seeking authority to issue up to 10% of its issued ordinary share capital for cash without pre-emption rights applying. The Company
confirms that it will only allot shares with a nominal value in excess of £298,587 (representing 5% of issued ordinary share capital) pursuant to
this resolution where that allotment is in connection with an acquisition or specified capital investment (within the meaning given in the
Statement of Principles) which is announced contemporaneously with the allotment, or which has taken place in the preceding six-month
period and is disclosed in the announcement of the allotment. 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 2016.

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

Resolution 14
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 5,971,740
ordinary shares of £0.10 if resolution 11 is passed and implemented or 59,717,400 ordinary shares of £0.01 if it is not, which, in each case,
have an aggregate nominal value of £597,174 (representing approximately 10% of the aggregate nominal value of the issued ordinary share
capital of the Company as at 17 June 2015 (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 2016.

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 17 June 2015 (being the latest practicable date prior to the publication of this document), there were warrants and options over
33,585,444 ordinary shares in the capital of the Company, which represent, in aggregate, approximately 5.62% 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 6.25% of the Company’s issued ordinary share capital. As at 17 June 2015 (being the latest practicable date prior
to the publication of this document), the Company did not hold any shares in treasury.

Resolution 15
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 15 seeks such approval.

The shorter notice period would not be used as a matter of routine for general meetings, but only where the flexibility is merited
by the business of the meeting and is thought to be to the advantage of the shareholders as a whole.

The approval will be effective until the Company’s next Annual General Meeting, when it is intended that a similar resolution
will be proposed. 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 2015

Norcros plc
Ladyfield House
Station Road
Wilmslow
Cheshire SK9 1BU