In Focus: Norcros continues to pick up Pilkington’s business

THE chief executive of Wilmslow-based showers and tiles maker Norcros said that its tile making business was continuing to pick up market share following the demise of Swinton-based tilemaker Pilkington’s.

Norcros chief executive Nick Kelsall told TheBusinessDesk.com that the demise of Pilkington’s had been a factor in the much-improved performance of the company’s Johnson Tiles business, which increased sales by 12.4% overall and by 16.7% in the UK market.

“It had some benefit in these numbers but I would expect to see additional benefit in 2011/12,” he said.

He argued that the company’s investment in its product range had helped it to win a greater share of a market which overall remains fairly weak – aiside from the collapse of Pilkington’s, its other major competitor British Ceramic Tile this week announced plans to cut 86 jobs at its factory in the Devon town of Newton Abbott.

He said the investment in inkjet printing technology had paid dividends as architects and interior designers are specifying its tiles for more high-end projects. The technology allows Johnson tiles to produces ranges that closely mimic both the appearance and texture of marble and natural stone materials.

It has also invested £2.5m in a new kiln and £1m in a new batch mixing faccility for its adhesive business on adjacent sites in Stoke-on-Trent – both of which will help to boost capacity.

“We’ve got the capacity to significanty increase the scale of that business,” he said.
The other major contributor to a strong set of results which saw the firm reverse a pre-tax loss of £10m into a profit of £7.5m was a significant reduction in its gearing.

Kelsall said the firm was now in “very good shape”, finishing the year with net debt of £12.4m – down 34.4% on the start of the year. Two years ago, prior to a £30m rights issue, the company had debts of £48m.

“Our net debt is now less than 1.x ebitda,” said Kelsall.

He also hailed the improved performance of its South African business, which owns the Tile City retail business, a tile manufacturing arm and an adhesives company known as TAL.

“We’ve turned around a £3.1m loss slast year into a £200,000 operating profit while managing to retain the profits in the UK at the same time.”

The firm closed four Tile City stores last year and another since the start of this year, which it said was more reflective of current levels of demand.

“Those markets are just as challenging as the UK but we see opportunities for expansion, particularly into Sub-saharan Africa”.

“But we haven’t been afraid to invest either and we will continue to do so whether that’s in people or in products.”

The company’s shares fell back slightly yesterday to 13.5p, but in-house broker Numis Securities maintained its Buy reccommendation on the stock, setting a target price of 20p.

Analyst Howard Seymour said: “Full-year figures were slightly ahead of our expectations, but a key feature of the results was the excellent like-for-like sales progress in UK operations, especially against a difficult market backdrop.

“In overseas activities, progress was also made predominantly as a result of management actions. With the group expected to continue to benefit from these actions in 2011 (notably in UK tiles where the competition base has been significantly weakened), we believe that Norcros will demonstrate another year of material operational outperformance.”