Adapting to changing markets

Norcros 3 July 2020 Update
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Norcros

Adapting to changing markets

FY20 results

Construction & materials

3 July 2020

Price

153p

Market cap

£125m

ZAR21.3/£

Net debt (£m) at 7 June 2020

38.6

Shares in issue

81.6m

Free float

98%

Code

NXR

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

4.8

27.5

(31.1)

Rel (local)

4.5

10.8

(17.7)

52-week high/low

305.0p

120.0p

Business description

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.

Next event

AGM

30 July

Analyst

Toby Thorrington

+44 (0)20 3077 5721

Norcros is a research client of Edison Investment Research Limited

The Norcros operating companies largely performed relatively well in challenging market conditions (in both the UK and South Africa) in FY20 though year end trading was affected by COVID-19 lockdowns, as flagged previously. The group’s financial position appears robust following management actions (including foregoing an FY20 final dividend) and well-placed to both contend with weaker near-term markets and the pursuit of market share gains from a position of relative competitive strength. Our estimates remain suspended at this time.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

03/18

300.1

24.4

26.8

7.8

5.7

5.1

03/19

331.0

30.9

29.6

8.4

5.2

5.5

03/20

342.0

27.1

26.1

3.1

5.9

2.0

Note: *PBT and EPS (fully diluted) are normalised, excluding amortisation of acquired intangibles, exceptionals, pension net finance costs and change in fair value of derivatives.

FY20 outturn dented by COVID-19 effects at year end

A pre close trading statement trailed the likely year-end impact of COVID-19 on FY20 results, but in the event both reported EBIT and core net debt were slightly better than guidance. Company reported EBIT was down just over £2.1m after a c £4.6m trading hit from coronavirus/lockdown effects. (We estimate that constant FX like-for-like EBIT was c 12% lower year-on-year.) In the UK, retail channel sales generally outperformed the other subsectors, while in South Africa, a maiden contribution from House of Plumbing (acquired in April for c £9m) served to push territory sales ahead while maintaining local profitability overall. Including the acquisition consideration, net cash flow was effectively neutral with the small increase in core net debt to £36.4m attributable to FX translation effects.

Prepared for lower near term activity levels

Prompt action at the year-end led to the closure of facilities (with c 80% of staff furloughed at the peak) together with other cost reduction/cash preservation steps. While operations have mostly resumed (the exception being Johnson Tiles UK) and trading levels in June (to 25th) have recovered to c 75% of prior year levels, near-term trading is likely to be in recessionary economic conditions. Some likely restructuring activity has been flagged in both the UK and South Africa. At the end of FY20, Norcros had pre-emptively drawn down c £84m of gross debt for business liquidity purposes and also has agreed covenant waivers in place for the next 12 months. Given that net debt had risen only to c £39m by 7 June, the funding position appears to be under control with capacity to accommodate weaker trading.

Valuation: Low FY20 rating; lower earnings prospect

The trailing P/E and EV/EBITDA (adjusted for pensions cash) for Norcros are 5.9x and 4.6x respectively. Geographic and local subsector differences make it difficult to generalise on the trading outlook at specific operating company level. Forward guidance and our estimates for FY21 remain suspended for the time being, though a lower outturn than FY20 is clearly the likely scenario.

FY20 results overview

Reported FY20 EBIT was lower year-on-year but ahead of year-end guidance (of c £31m) and both the UK and South African operations did slightly better than we had expected. In the year, the adoption of IFRS 16 benefited EBIT by £0.5m with a £1.4m negative PBT impact.1 Year-end net debt of £36.4m came in lower than guidance (of £40m) also with neutral overall net cash flow performance after the c £9m acquisition of House of Plumbing in South Africa.

  This effect evens out to be neutral over the whole lease life of the asset.

Exhibit 1: Norcros interim and divisional splits

Year end March, £m

H119

H219

2019

H120

H220

2020

Reported % chg

CER % chg

CER l-f-l % chg

H120

FY20

H120

FY20

H120

FY20

Group revenue

162.6

168.4

331.0

181.2

160.8

342.0

11.4%

3.3%

12.8%

5.0%

0.9%

-2.3%

UK

109.9

118.2

228.1

115.6

109.8

225.4

5.2%

-1.2%

5.2%

-1.2%

1.3%

-1.2%

South Africa

52.7

50.2

102.9

65.6

51.0

116.6

24.5%

13.3%

29.4%

19.3%

---

-4.9%

Group EBIT*

15.2

19.2

34.4

17.4

14.9

32.3

12.5%

-7.6%

14%

-5%

3%

-12%

UK*

11.4

15.1

26.5

12.5

11.9

24.4

8.8%

-8.3%

8.8%

-8.3%

5%

-8%

South Africa

3.8

4.1

7.9

4.9

3.0

7.9

24.5%

-5.5%

29%

0%

2%

-25%

£/ZAR

17.64

17.95

18.35

18.97

-3.9%

-5.4%

Source: Norcros, Edison Investment Research. Note: *After share based payments. All EBIT changes are on an IAS 17 basis. CER = constant exchange rate, CER l-f-l = constant exchange rate, like-for-like adjusts for a 27-week trading period (vs 26 in H119) and excluded the House of Plumbing acquisition in South Africa. NB Rounded percentages (no decimal places) are Edison estimates.

UK: Retail channel progress stands out

Reported revenues declined slightly, being the net result of modest UK progress and weaker export sales. The UK outturn was commendable in a generally challenging market that weakened over the course of the year, as did this division’s like-for-like performance. In summary, the retail channels (incorporating independents, specialists and big box retailers) performed better than the trade segment in the UK for most operating companies – partly due to share gains at the expense of failed competitors – while export sales were generally weaker. Management estimated the year-end coronavirus impact to be £9.4m in revenue terms and £3.0m to EBIT and adverse mix development contributed to an 80bp EBIT margin drop to 10.8% for the division as a whole. The broad base of seven operating companies served to provide some resilience against individual revenue hits taken. We understand that UK manufacturing operations – save for Johnson Tiles – are all operational again now as are distribution facilities, albeit with reduced staffing levels currently.

Norcros has four substantial UK-based businesses that each generated in excess of £40m annual revenues in FY20; three of these grew, while one (Triton) declined.

Exhibit 1: Norcros UK companies’ revenue performance (I)

Company

Product

FY19

FY2020 % change

FY20

£m

UK retail

UK trade

Export

Total

£m

Triton

Showers

56.6

-10.9%

-23.0%

-8.7%

-14.1%

48.6

Johnson Tiles

Ceramic tile manufacture and sourcing

41.4

+10.5%

---

-30.4%

+0.7%

41.7

Vado

Taps, mixer showers, valves, bathroom accessories

41.4

+11.8%

+1.7%

-10.0%

+2.2%

42.3

Merlyn

Shower enclosures

39.5

+15.6%

-0.7%

+2.0%

+7.6%

42.5

Source: Norcros

Triton was most affected by COVID disruption (ie £4.3m of management’s estimated £9.4m UK revenue hit), which we believe was a UK lockdown demand effect rather than a pre-lockdown China supply chain issue, exacerbated by trade sector de-stocking seen in H1. UK retail and export sales were also down, though slightly less so at the full year versus interim stage indicating some stability in H2. As one of the higher margin generators, we assume then that Triton also accounted for at least half of the UK EBIT gap of £3.0m attributed to coronavirus effects. That said operating margins were still said to be strong by management. Triton’s flexible cell assembly production lends itself to a gradual re-building of output and, with reduced inventory levels being carried by customers any end market demand pick-up should register reasonably quickly.

Johnson Tiles secured additional listings and new product volume in the retail sub sector, making good year-on-year progress in both half-year periods. Trade channel revenues were ahead (by 2.8%) at the interim stage but flat for the full year; while H2 was implicitly lower, the number of specification wins cited by management suggests that a return to work by the construction sector (including new housebuilders) will soon translate to shipped revenues. Exports (now less than 10% of sales) were very weak throughout the year at least partly attributed to withdrawal from low-margin project work. Tile kilns require continuous operation to run efficiently and at the date of reporting they had not resumed production. Demand is being met from a combination of inventory and imported products. The indicative restart is in July, but a £9m impairment charge taken against tangible fixed assets suggests that management is planning for lower volume throughput.

Vado put in a pretty stable revenue performance across FY20 with comparable H1/FY gains (perhaps slightly better in H2 in fact) in its UK sectors with retail being particularly strong. Middle East exports have trended lower in the last couple of years – though can be influenced by individual project activity – though sales through sister company Tile Africa are increasing. As elsewhere, Vado’s China-centric supply chain does not appear to have experienced any discernible disruption.

Similar comments apply to Merlyn, which also has a significant China supply chain. It also achieved double-digit revenue progress in the retail channel driven by an enhanced product range, while trade sales contracted modestly with merchant de-stocking again a feature. Exports were more robust for Merlyn than any of the other operating companies; 2% sales growth in the year was due to stronger H2 volume shipments.

As far as we can see, the smaller companies in the Norcros UK portfolio also experienced impressive progress through retail sales channels, while trade demand appeared to be firmer than for the larger ones. Exports were also very weak.

Exhibit 2: Norcros UK companies’ revenue performance (II)

Company

Product

FY19

FY20 % change

FY20

£m

UK retail

UK trade

Export

Total

£m

Croydex

High-quality bathroom furnishings & accessories

21.7

+10.1%

+13.8%

---

+9.2%

23.7

Abode

High-quality (kitchen/bathroom) taps & kitchen sinks

16.2

N/A

N/A

-50.0%

-8.6%

14.8

N. Adhesives

Tile/stone adhesives, grouts & related products

11.3

+24.5%

+5.0%

-37.5%

+4.4%

11.8

Source: Norcros

Croydex had a very good year with UK revenues ahead by 10.9% overall with trade channel progress slightly ahead of that in retail but both performances were commendable in flat at best markets. We note that the year-on-year run rates actually picked up in H2 – notwithstanding coronavirus effects – consistent with momentum gained from securing new listings/category extensions, we feel. This company probably has the most diverse retail channel customer list enabling it to reach into more consumer market segments and it appears that efforts to expand the commercial offer are gaining traction though this was not specifically mentioned by management.

In contrast, we are slightly puzzled by the FY20 trading performance by Abode. UK sales grew by double-digits (actually 13.9%) in H1 but ended FY20 with a near 9% decline, indicating sharply reduced activity levels in H2. We accept that the prior year benefited from a very strong comparable H219 and some pre Brexit de-stocking is flagged, but even allowing for this and management’s estimated COVID-19 sales impact the underlying run rate seems much softer. No loss of customer listings/market share loss was referenced but we will continue to monitor trading closely in FY21.

Repeating a now familiar pattern, Norcros Adhesives grew UK revenues with a strong retail sub sector performance that strengthened in H2 after a good H1. The trade segment also grew in the year albeit at a reduced rate (possibly flat year-on-year) in H2. Responding to soft H1 trading in the Middle East, management change and restructuring the local office occurred in H2.

South Africa: Trading competitively in tough markets

The maiden revenue contribution from House of Plumbing (acquired 1 April 2019) more than compensated for year-on-year declines in all three existing portfolio companies. The like-for-like figures shown in Exhibit 4 indicate a more austere H2 trading environment with sales down in the 5–10% range year-on-year, though this included COVID-19 effects at the year-end (estimated by management to have been £3.8m as well as £1.6m on EBIT). Reported profitability was flat in sterling terms including the offsetting effects of a 5.7% £/ZAR translation headwind and an EBIT boost to reported results from adopting IFRS 16 in FY20 (both £0.4m effects), while EBIT margins overall declined by c 100bp to 6.7%, noting a significant COVID-19 operational gearing impact here also. All of the company commentary below is on a local currency basis.

Exhibit 3: Norcros South Africa companies’ revenue performance

Company

Product

FY19

FY20

H120

FY20

FY19

FY20

ZARm**

ZARm**

l-f-l

l-f-l

£m

£m

Tile Africa

Retailer of tiles, adhesives and bathroom products

1,147

1,075

-1.3%

-6.4%

63.9

56.8

TAL Adhesives

Tile/stone adhesives, grouts & related products

432

419

0.0%

-3.1%

24.0

22.1

Johnson Tiles SA

Ceramic tile manufacture & sourcing

269

265

5.3%

-1.4%

15.0

14.0

House of Plumbing*

Specialist commercial sector plumbing materials supplier

N/A

451

1.0%

1.0%

N/A

23.7

SA revenue

1,848

2,209

---

-4.9%

102.9

116.6

SA EBIT

143

149

+5%

-25%

7.9

7.9

EBIT margin %

7.7%

6.7%

Source: Norcros. Note: *House of Plumbing l-f-l is versus a pre-ownership period. L-f-l also adjusts for one extra trading week in H120 and excludes the IFRS 16 benefit to EBIT. **Figures are inferred from average £/ZAR rates. Note that the revenue figures shown are those generated externally from third-party customers; TAL and JTSA both supply products into Tile Africa and these sales are eliminated on consolidation.

Tile Africa (TAF) was said to have outperformed its market segment in H1, with revenue declining only modestly versus a more marked overall reduction. This was perhaps supported by contract wins to supply the smaller end commercial construction specification market. We assume then that such activity was much reduced in H2 giving rise to a full year revenue fall for TAF overall. Management attributes this to market rather than share loss. With a soft retail environment also, some self-help store improvement actions (both format and ranges) have taken place though it is unclear to what extent this was beneficial in FY20. Similarly, inventory management and import issues were both flagged previously but it is not stated whether they are now resolved.

TAL Adhesives is more commercial project oriented than TAF and probably experienced similar market conditions including deteriorating H2 conditions despite end market breadth covering offices, newbuild residential and retail malls. At the same time, domestic competition is said to have intensified so there may well have been some H2 impact from keener pricing and/or lower tendering for more marginal projects. With raw material costs rising also, it becomes particularly important to pursue contract profits rather than simply volumes. Export sales to Zimbabwe were constrained throughout the year.

Johnson Tiles South Africa’s (JTSA) revenues were comparable to the prior year and again were implicitly weaker in H2 after progress in H1. Bearing in mind that JTSA also supplies sister company TAF as well as third parties, it is unsurprising that broadly similar trading conditions prevailed. As well as contending with competitive markets, regional load shedding power supply issues around the company’s manufacturing facility in Olifantsfontein (north-east of Johannesburg) have been an ongoing challenge addressed through the use of in-house stand-by generators.

New addition House of Plumbing exhibited trading stability versus its pre-acquisition comparators with like-for-like revenues up 1% at both the half and full year stages. It represents an entry point into commercial/specification plumbing and is likely to be the platform for expansion in this segment. This business made a good profit contribution in the year at above divisional average margins (and also non-dilutive compared to the prior year).

Neutral cash flow after acquisition and cash dividend payments

Net debt at the end of March stood at £36.4m; an adverse translation effect on South African cash balances (£1.6m) effectively explained the year-on-year increase.

Excluding IFRS 16 effects, operating cash flow of c £30m was c £5m lower than the prior year, substantially reflecting the relative EBIT reduction over the same periods, leaving underlying EBITDA for the year of c £38m. Working capital outflows rose in FY20 and totalled c £5m, compared to c £2m a year earlier. To us, this looks like a reversal effect of an advantageous payables position at the beginning of FY20/end of FY19. Otherwise, inventory absorption (c £2m) was exceeded by receivables collection and the latter would have been a key focus in the final month of the year as COVID-19 related business disruption increased. Pension deficit recovery cash payments nudged up in FY20 (to £3.3m) although non-trading cash outflows (also including M&A costs) were slightly down versus FY19.

In aggregate, cash interest and tax payments were broadly in line with FY19 and totalled £6m, while capex was reined back to c £5m. This represented 0.7x depreciation and although spending was only slightly lower than the preceding year, we had previously expected a figure of around £10m. The difference is likely to be down to a combination of challenging trading conditions in H2 exacerbated by the coronavirus pandemic during the final quarter of the financial year. That said, we do not believe that investment in new product development – which is typically captured together as capex and opex items – was affected to any material extent. Lower FY20 free cash flow then of c £18m mirrored the year-on-year EBIT reduction referenced above.

Just over £16m was applied to the acquisition of House of Plumbing at the beginning of the financial year (c £9m) and the payment of cash dividends (being the FY19 final and H120 interims, totalling £7m). After the purchase of treasury shares there was a modest net cash inflow for the year.

For comparability purposes, the above commentary has stripped out the effects of lease liability cash flows following the adoption of IFRS 16. This standard does not alter group cash flows but requires lease cash flows to be presented differently. For the record, net cash outflows of c £0.6m were associated with leased assets, narrowing the overall group FY20 cash movement to a marginal inflow.

Cash flow outlook: The company’s c £36m core net debt position at the end of March – including c £84m gross debt drawn down – represented just c 0.9x EBITDA generated in FY20. No cash receipts from staff furlough schemes would have been received at this point and while there may have been some permitted deferral of tax payments, this should be reflected as payables within current liabilities. Management stated that the net debt position as at 7 June had risen slightly to £38.6m. Actions taken – including passing the FY20 final dividend – together with some recovery of trading activity in June (see below) means that the implied cash outflow run rate is somewhat less than the £5m scenario modelled by management for banking purposes. Existing facilities (ie a £120m RCF and £30m accordion, both to November 2022 and local unsecured overdraft facilities in South Africa) remain in place. To accommodate a potentially protracted recovery phase, covenant limits for the next two reporting periods have been waived and a maximum £95m net debt limit (measured quarterly) is in place until June 2021.

Responding to business challenges in the recovery phase

FY21 to date: The first two months of the new financial year together saw revenue generation c 60% lower than the prior year. In the first three weeks of June, the year-on-year run rate deficit had reduced to c 25% as lockdown conditions in primary markets started to ease. In the UK, certain customers – especially with click and collect business models (such as Screwfix, Toolstation and B&Q) – were relatively advantaged and were able to continue to trade, albeit with some business disruption particularly in the initial lockdown phases. That said, social distancing measures would clearly have affected the ability of tradespeople to install many Norcros portfolio products in domestic settings. Commercial building activity was less constrained and while new housebuilding sites were also closed down initially, they began to resume activity levels during May. South Africa went into lockdown in March at around the same time as the UK and began to ease restrictions from 1 May going further on 1 June including a re-starting of live construction sites.

Business challenges: Each of these main markets for Norcros was experiencing tougher H2 trading conditions before the coronavirus impact. It appeared that a decisive UK general election result in early December would increase business confidence, though more deep-seated concerns with South African government finances remained at the start of calendar 2020. As countries re-emerge from lockdown, recessionary environments and rising unemployment seem to be a given. Consequently, tight management of costs and cash flows, matching them against prevailing/developing demand levels, will be a key near-term business focus. In Norcros’s favour, it has a strong and experienced management team that has taken appropriate financial steps to retain good competitive positions with both suppliers and customers. In the past this approach has enabled portfolio operating companies to gain market share over time. In the FY20 results presentation, management explicitly commented that targeting financially weak competitors is a strategic aim in the current trading environment. Clearly, if successful, this will serve to soften weak underlying market effects. The objective of course is to do so by adding good-quality customers and sustainable market share without impinging on generally very respectable operating margins.

We hope to resume the publication of estimates at some point; as true underlying current monthly revenue run rates are not yet clearly established, the scope for gaining market share is indeterminate at this point and the rate of general economic recovery is unclear so the suspension of our estimates is ongoing.


Exhibit 5: Financial summary

£m

2015

2016

2017

2018

2019

2020

Year end 31 March

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

 

Cont.

Cont.

Cont.

Cont.

Cont.

Cont.

Revenue

 

 

222.1

235.9

271.2

300.1

331.0

342.0

Cost of Sales

 

 

N/A

N/A

(171.7)

(190.4)

(206.8)

N/A

Gross Profit

 

 

N/A

N/A

99.5

109.7

124.2

N/A

EBITDA IFRS16

 

 

24.3

28.0

31.6

34.7

42.2

38.8

Op Profit (before SBP)

 

 

18.3

22.5

25.2

28.3

35.6

32.2

Net Interest

 

 

(1.2)

(0.9)

(0.9)

(1.1)

(1.8)

(1.6)

Other financial – norm

 

 

(3.1)

(3.1)

(3.6)

(2.8)

(2.9)

(3.5)

Other financial

 

 

2.1

(0.2)

(4.2)

(4.5)

2.3

0.9

Intangible Amortisation

 

 

(0.3)

(0.9)

(1.2)

(2.2)

(3.5)

(3.7)

Exceptionals

 

 

(4.8)

(2.0)

(3.8)

(4.2)

(4.3)

(9.3)

Profit Before Tax (norm)

 

 

14.0

18.5

20.7

24.4

30.9

27.1

Profit Before Tax (company norm)

 

15.8

20.4

22.9

26.3

32.6

28.8

Profit Before Tax (statutory)

 

 

11.0

15.4

11.5

13.5

25.4

15.0

Tax

 

 

(3.0)

(2.4)

(3.0)

(3.6)

(6.0)

(4.1)

Other

 

 

0.1

0.0

0.0

0.0

0.0

0.0

Profit After Tax (norm)

 

 

11.1

16.1

17.7

20.8

24.9

23.0

Profit After Tax (statutory)

 

 

8.1

13.0

8.5

9.9

19.4

10.9

 

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding (m)

 

59.2

60.6

61.1

68.0

80.2

80.3

Average number of Shares Outstanding FD (m)

 

61.5

62.2

63.1

69.8

81.1

81.0

EPS FD - norm (p)

 

 

18.0

24.7

24.4

26.8

29.6

26.1

EPS FD - co norm (p)

 

 

21.1

27.7

27.8

29.5

31.7

28.2

EPS - statutory (p)

 

 

13.2

20.8

13.4

14.1

23.9

13.5

Dividend per share (p)

 

 

5.6

6.6

7.2

7.8

8.4

3.1

 

 

 

 

 

 

 

 

 

Gross Margin (%)

 

 

N/A

N/A

36.7

36.5

37.5

N/A

EBITDA Margin (%)

 

 

10.9

11.9

11.7

11.6

12.8

11.3

Op Margin (before GW and except.) (%)

 

8.2

9.5

9.3

9.4

10.8

9.4

 

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

 

Fixed Assets

 

 

78.3

93.4

98.8

147.9

138.0

150.8

Intangible Assets

 

 

26.9

44.7

44.8

98.9

94.9

96.5

Tangible Assets

 

 

37.6

38.2

43.0

45.0

42.3

49.6

Investments

 

 

13.8

10.5

11.0

4.0

0.8

4.7

Current Assets

 

 

100.4

119.4

165.3

165.1

169.5

188.7

Stocks

 

 

52.2

60.1

70.3

74.9

79.5

78.9

Debtors

 

 

42.6

53.4

57.5

64.4

62.8

62.5

Cash

 

 

5.6

5.9

37.5

25.8

27.2

47.3

Current Liabilities

 

 

(60.0)

(67.6)

(105.7)

(89.8)

(85.1)

(79.2)

Creditors

 

 

(58.6)

(64.8)

(74.8)

(81.3)

(81.3)

(79.1)

Short term borrowings

 

 

(1.4)

(2.8)

(30.9)

(8.5)

(3.8)

(0.1)

Long Term Liabilities

 

 

(67.4)

(97.6)

(101.8)

(118.6)

(96.7)

(155.9)

Long term borrowings

 

 

(18.4)

(35.6)

(29.8)

(64.4)

(58.4)

(83.6)

Other long term liabilities

 

 

(49.0)

(62.0)

(72.0)

(54.2)

(38.3)

(72.3)

Net Assets

 

 

51.3

47.6

56.6

104.6

125.7

104.4

 

 

 

 

 

 

 

 

 

CASH FLOW

 

 

 

 

 

 

 

 

Operating Cash Flow

 

 

16.2

18.5

25.5

23.5

35.3

34.8

Net Interest

 

 

(1.3)

(0.9)

(0.9)

(1.1)

(1.8)

(3.5)

Tax

 

 

(0.5)

(1.0)

(1.9)

(4.9)

(4.6)

(5.3)

Capex

 

 

(1.4)

(6.6)

(8.0)

(7.7)

(5.5)

(4.8)

Acquisitions/disposals

 

 

3.3

(23.6)

(2.7)

(59.1)

(2.1)

(9.2)

Financing

 

 

0.2

0.1

0.0

30.1

(0.9)

(0.8)

Dividends

 

 

(3.1)

(3.6)

(4.2)

(5.0)

(6.4)

(7.0)

Net Cash Flow

 

 

13.4

(17.1)

7.9

(24.2)

14.0

4.2

Opening net debt/(cash)

 

 

27.4

14.2

32.5

23.2

47.1

35.0

IFRS 16 finance leases

 

 

0.0

0.0

0.0

0.0

0.0

(3.8)

Other

 

 

(0.2)

(1.2)

1.4

0.3

(1.9)

(1.8)

Closing net debt/(cash)

 

 

14.2

32.5

23.2

47.1

35.0

36.4

IFRS 16 lease liabilities

 

 

 

 

 

 

 

(25.1)

Source: Company, Edison Investment Research

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New Zealand

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United Kingdom

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Frankfurt +49 (0)69 78 8076 960

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This report has been commissioned by Norcros and prepared and issued by Edison, in consideration of a fee payable by Norcros. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2020. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

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