Norcros is a leading supplier of showers, enclosures and trays, tiles, taps and related fittings and accessories for bathrooms, kitchens, washrooms and other commercial environments. It has operations in the UK and South Africa, with some export activity from both countries.
FY21 started in the teeth of the pandemic but ended with a third estimates upgrade in six weeks, resulting in earnings expected to be ahead of FY20. Both the UK and South African divisions had strong H2 trading periods with like-to-like CER revenue growth of 115% and 123% respectively and the improved mix (including strong trading at Triton and Merlyn) is probably the key driver behind the required uplift to our FY21 EBIT estimate. Norcros ended FY21 with net cash (pre-IFRS 16 leases) of c £10m, a remarkable c £46m net cash inflow from the end-FY20 net debt position. Following the year-end update, we upgraded our EPS estimates by c 8% for FY21 and 5–6% for the following two years and made a sharper increase to our expected FY21 DPS. FY21 results are due on 10 June.
RMI has been a stronger sub-sector during/exiting the UK COVID-19 lockdown phase while new residential new-build gathered momentum more gradually. The South African economy has faced a number of challenges; wider distribution of wealth and an emerging middle class should benefit consumer spending over time. Management’s (pre COVID-19) 2023 financial targets targeted £600m revenue with a balanced UK/overseas split with sustained ROCE of 15%+.