On track for expected progress in FY20

Norcros 9 August 2019 Update
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Norcros

On track for expected progress in FY20

FY19 results

and AGM update

Construction & materials

9 August 2019

Price

213p

Market cap

£174m

ZAR18.0/£

Net debt (£m) at end March 2019

35

Shares in issue

80.2m

Free float

98%

Code

NXR

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(6.6)

4.8

(1.9)

Rel (local)

(3.5)

5.1

5.1

52-week high/low

228p

186p

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

H120 trading update

17 October

H120 results

14 November

Analyst

Toby Thorrington

+44 (0)20 3077 5721

Norcros is a research client of Edison Investment Research Limited

The Norcros management team is delivering against expectations and maintaining a stable outlook even though certain underlying markets have their challenges. In contrast to its market positions, the company’s rating is anything but premium as the building materials and, perhaps, buy and build strategies appear to be out of favour with investors. The track record is very good – as is the prospective dividend yield – and greater recognition of this is warranted in our view.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

03/18

300.1

24.4

26.8

7.8

8.0

3.7

03/19

331.0

30.9

29.6

8.4

7.2

3.9

03/20e

359.9

34.0

32.0

9.0

6.7

4.2

03/21e

368.4

35.9

33.5

9.8

6.4

4.6

Note: *PBT and EPS (fully diluted) are normalised, excluding amortisation of acquired intangibles, exceptional items and change in fair value of derivatives.

Relative strength in flat markets

Norcros has followed a very creditable FY19 financial performance with a Q120 trading update containing flat underlying revenues enhanced by a maiden contribution from the newly acquired RAP/House of Plumbing business in South Africa. Domestic sales are ahead year-on-year in both main markets, but UK exports are providing a degree of drag on underlying top-line progress. The FY19 results themselves showed good growth (Edison norm PBT c +27% y-o-y, EPS c +8% and DPS c +8%) derived from new and existing businesses. There were variable company performances across the portfolio but exposure to trade channels was generally more advantageous (especially in the UK, where the DIY shed sector struggled). The group’s market share positions, channel breadth and relative strengths in new product development and marketing together with a strong balance sheet all represent virtues in underlying markets that are flat at best. We make no material changes to estimates following the full FY19 results and AGM.

Valuation: Steady growth, low rating

Norcros’s share price has rallied by c 20% year-to-date, but currently stands at similar levels to a year ago. Over this time period, management has delivered FY19 earnings slightly ahead of our expectations while our FY20 and FY21 estimates have nudged up slightly. So, there has been a small rating compression from already modest levels and, for the current year, the P/E is now just 6.7x with an EV/EBITDA (adjusted for pensions cash) of 4.9x and we anticipate a rising prospective dividend yield of 4.2% well covered by earnings. Our three-year EPS CAGR (to FY22) of 5.3% is steady rather than strong, but appropriate given current market conditions. Further earnings enhancing acquisitions during our estimate horizon are highly likely in our view.

Expectations unchanged following AGM update

The latest trading update pointed to flat underlying UK trading and modest South African progress supplemented by the newly acquired House of Plumbing in the Q1 period to end June. As ever, the detail is more illuminating as management notes share gains in these leading territories, which both remain fairly challenging markets to operate in. In overall terms, group revenue was ahead by 4.9% on a reported basis in Q1 and the company’s expectations for the full year are unchanged.

Exhibit 1: Norcros Q120 revenue progression

March year-end

Reported

CER

CER LFL

Q1 % chg y-o-y

Q1 % chg y-o-y

Q1 % chg y-o-y

Group revenue

4.9%

N/A

---

UK

-0.4%

-0.4%

-0.4%

South Africa

15.6%

25.4%

0.8%

Source: Norcros

UK: Domestic sales ahead, exports trailing

Market conditions in the UK remain subdued but the seven Norcros operating companies collectively delivered a 3.0% like-for-like (LFL) increase in domestic UK revenue compared to Q119. We believe this to be a genuine read on progress; the step down in Johnson Tiles’ B&Q supply had already occurred in Q119 and there has been no discernible recovery in business in this channel. In fact, without highlighting any specific names the AGM update referenced ‘some UK customer de-stocking’ suggesting a slightly stronger headwind. Triton, Merlyn and Abode had the best trading momentum in the second half of FY19 and we would expect these companies to be the main contributors to the reported year-to-date progress.

Domestic sales accounted for c 80% of UK revenues in FY19, which implies that export sales were down in the 10–15% range y-o-y in Q120 to achieve a flat overall UK position for this period. Exports rose in the corresponding period in FY19 so tougher comparators may be part of the reason for this, but export sales can also be lumpier and often project-specific. Vado is probably the portfolio company most exposed to this and a weaker export performance was noted here in the FY19 results. Triton’s export exposure to the Republic of Ireland is also significant and it is seen as a leading consumer brand more than a commercial project one, so performance here may have been relatively robust. It appears that sterling weakness is yet to have had any meaningful impact on overseas sales but this may change if rates persist at recent lower levels.

South Africa: Progress against strong comparator

The Q1 update contained no direct comment on House of Plumbing trading (acquired 1 April) but it has made a meaningful contribution to South African rand sales in the year to date. It will take a while to align systems, common supply chain, map the customer landscape and develop expansion plans from the current three-branch footprint, but first impressions appear to be positive. For the record, our model incorporates a c 24% South African rand revenue uplift in FY20, with House of Plumbing accounting for c 17% of total sales for the year.

The existing three operating companies in South Africa delivered good like-for-like progress in aggregate across FY19, so the comparative Q1 period was likely to have been strong. Moreover, local market conditions are again described by management as challenging. Hence, a positive like-for-like start to FY20 is encouraging; we would expect the primary drivers to have been Tile Africa carrying over end FY19 momentum and possibly Johnson Tiles South Africa, though the effect here may be more at the EBIT level arising from improved manufacturing performance.

FY19 results overview

Norcros delivered group revenue growth and enhanced operating margins in FY19 (on reported, constant currency and like for like bases) resulting in uplifts in Edison normalised PBT (c 27%), EPS (c 8%) and DPS (c 8%). Behind the headline numbers, underlying UK profitability clearly improved despite some mixed market trends, while South Africa’s contribution was constrained by returns from its tile manufacturing and supply activities. A strong cash flow performance especially in H2 drove a meaningful reduction in net debt; on a pro forma basis – including the post year-end c £10m acquisition of House of Plumbing in South Africa – net debt of c £45m was still below the end FY18 level.

Exhibit 2: Norcros interim and divisional splits

March year end, £m

H1

H2

2018

H1

H2

2019

Reported

CER

CER LFL*

H119

FY19

H119

FY19

H119

FY19

% chg y-o-y

% chg y-o-y

% chg y-o-y

Group revenue

145.0

155.1

300.1

162.6

168.4

331.0

12.1%

10.3%

13.3%

11.6%

-0.3%

2.3%

UK

94.3

106.3

200.6

109.9

118.2

228.1

16.5%

13.7%

16.5%

13.7%

-4.1%

-0.5%

South Africa

50.7

48.8

99.5

52.7

50.2

102.9

3.9%

3.4%

7.1%

7.2%

7.1%

7.2%

Group op profit (post SBP)

11.7

15.7

27.4

15.2

19.1

34.4

30.3%

25.5%

31.6%

27.4%

3.6%

7.3%

UK (inc SBP)

7.4

11.2

18.6

11.4

15.1

26.5

54.5%

42.5%

54.5%

42.5%

11.1%

13.3%

South Africa

4.3

4.5

8.8

3.8

4.1

7.9

-11.0%

-10.0%

-8.3%

-4.1%

-8.3%

-4.1%

£/ZAR

17.11

17.32

17.64

17.95

-3.0%

-3.5%

Source: Norcros, Edison Investment Research. Note: *CER LFL operating profit y-o-y changes are Edison estimates.

UK: Winning with the winners

Headline revenue progress in the year was chiefly due to the first full year of ownership of Merlyn (acquired November 2017), while movements in the other six operating companies more or less offset each other in aggregate. As a general comment, progress was seen in the leading UK segments (ie trade and specialist/independent retail, which together accounted for 70% of revenue), but channel exposure to the DIY sheds was a negative influence, while export performance was mixed. At the EBIT level, the Merlyn effect was supplemented by a stronger Triton contribution and a turnaround at Johnson Tiles. Of particular note, the rate of underlying profit growth increased in H2 (as the year-on-year revenue shortfall narrowed) and operating margins improved in both half years. Also bear in mind that the UK divisional result is reported after share-based payments, which rose, and internal M&A staff costs (treated as exceptional in prior years) were absorbed above the line in FY19.

Triton, Merlyn, Vado and Johnson Tiles are the four largest operating companies in the UK accounting for almost 80% of revenue generated in FY19. The first two of these – shower and shower enclosure suppliers, respectively – increased sales in both domestic and export markets (where both have good exposure to the Republic of Ireland). Implicitly, in a subdued consumer spending environment, both companies gained market share in the UK and Merlyn (which itself increased underlying revenues by 13.8% y-o-y) may also have seen early benefits from being part of a wider group and referral network. Vado (taps, mixers and valves supply) also grew UK sales but this was offset by a weaker export performance leading to a small overall top-line decline. These three companies have limited exposure to the UK DIY sheds, but this sector has historically been more significant for Johnson Tiles. As previously announced, this company lost business during Kingfisher’s supply chain consolidation programme (‘One Kingfisher’, which included B&Q) and undertook a series of cost reduction measures at the start of the financial year. After a fall in H119, revenue was flat year-on-year in H2 and the business moved from a prior year loss into profitability. Triton and Merlyn also increased their profit contribution in FY19, although Vado saw a small decline (given the export sales performance and some P&L investment in new products).

Among the smaller UK companies, Abode, Norcros Adhesives and Croydex saw contrasting FY19 performances, with the former two companies increasing revenues by over 20%, while Croydex declined by 10%. Historically, retail has been the largest segment for Croydex’s bathroom accessories lines and weak trading by Homebase/Bunnings affected the company’s UK sales. Export revenue actually declined by a larger percentage with a number of contributory factors, not least a challenging prior year comparator, and the underlying trend is still considered to be upwards here. In an interesting development, Metlex, a sister brand from elsewhere in the group, is now the commercial sub-sector brand managed by Croydex, which addresses the washroom and leisure sectors, which naturally have more of a trade bias. Abode’s sales kicked on following significant new tap and brassware product launch activity at the beginning of the year including extended ranges, which facilitated some new retail listings and strengthened others in the trade sector. Lastly, Norcros Adhesives perversely saw a stronger retail sector performance including new product listing effects and softer overall trade demand, while export became a more material contributor to revenue following multiple Middle East project wins. In aggregate, we believe that the profitability of these three companies declined year-on-year with growing pains (and a small loss) at Adhesives and a small decline at Croydex being partly offset by an uplift at Abode.

We estimate that underlying (ie excluding Merlyn), UK domestic revenue grew by a creditable 1.0–1.5% in challenging overall market conditions. Indeed, the rate of progress in the second half, once the Johnson Tiles/B&Q effect had annualised out, is likely to have been somewhat firmer. We have already discussed DIY shed travails (where there has also been management change at Kingfisher, an ownership change at Homebase and weak Q4 calendar 2018 trading at Wickes), but other newsflow also illustrates the point. Specifically, competitors BCT (the only other scale UK tile manufacturer) and Astracast (sinks & taps) both went into administration in the final quarter of the financial year, while Bathstore (not previously a significant Norcros customer also briefly went the same way before being acquired by Homebase in July. It should be noted that the retail channel in its wider sense was actually a source of growth for Triton, Adhesives and Abode. Meanwhile, the reported results of UK quoted companies such as Travis Perkins, Grafton and Howden bear out the relative strength of the trade segment, while the housebuilders (and we acknowledge some overlap here) are also reporting growth albeit at slower rates than in recent years. So, Norcros group companies’ positioning across these segments with good supply chain disciplines has stood the company in good stead. It has not been immune to problems seen in DIY/retail though it has countered weaker demand with share gains in some areas.

UK outlook: With the range of products and sector positions that the Norcros UK companies occupy, it is difficult to generalise across the whole portfolio. However, notwithstanding subdued consumer demand, we suggest that new product/new listing momentum, further group integration benefits and opportunities arising from competitor problems all provide grounds to expect further progress in UK divisional performance in FY20. As ever, it will be for the individual companies to capitalise on their specific market attributes.

South Africa: Good revenue progress, profit lower

As seen at the interim stage, divisional revenues in local currency rose by just over 7% for the year (pared back to sub 4% growth in sterling terms following small adverse FX translation effects). All three operating companies again contributed to this outturn though lower rand profitability year-on-year in this division was chiefly due to manufacturing constraints at Johnson Tiles South Africa. As the acquisition of RAP Plumbing Supplies (trading as House of Plumbing) occurred after the year end, the underlying local currency changes shown in Exhibit 1 above are all organic.

A fairly even rate of headline revenue progress for the division across the year was not also mirrored at the individual operating company level. Tile Africa (bathroom products retail outlets and smaller commercial projects) actually accelerated top-line growth in H2 to over 9% yo-y. It appears that B2B activity contributed meaningfully to this growth, including a larger share of project value through the supply of multiple rather than single product lines. Joint product and supply chain development work with Vado has also benefited in store sales we believe. These two drivers of FY19 progress represent benefits of being part of a larger group, building on the existing supply of tiles and adhesives manufactured by sister companies in South Africa. Though still positive, TAL (adhesives) made more modest progress in H2 with export weakness (Zimbabwe) mostly offsetting further growth in the local South African market. The revenue performance of Johnson Tiles South Africa (JTSA) was somewhat counterintuitive with a two-week shutdown to improve plant efficiency/capacity in H1 and grid power supply issues in H2 not preventing year-on-year sales increases of c 39% and c 10%, respectively, in FY19. While H2 progress was more in line with that for Tile Africa, we suggest that the pass through of third-party imported tiles saw a significant increase in the year, boosting headline growth.

In terms of profitability, the inferred tile manufacturing disruption at JTSA referred to above resulted in an estimated halving of EBIT at this company and was substantially seen in H1. This was JTSA’s first earnings decline for a number of years; given capacity constraints, the planned efficiency upgrade investment was warranted in our view, albeit at a short-term cost, while the power supply variability was obviously outside JTSA’s control. We believe that Tile Africa and TAL broadly maintained their operating margins and so registered small local currency EBIT increases over the course of the year.

South Africa outlook: The recent general election, which returned the ANC to power with a reduced majority, may have been an unhelpful trading backdrop in the second half of FY19. While it should hence be less of a distraction now, a contraction in Q1 GDP (which straddled the election) suggests a stagnating economy in the near term. At face value, this could have an impact on project activity levels. However, the post year end acquisition of RAP Plumbing Supplies (a specialist plumbing products distributor; see Edison’s April update note) increases local exposure to the trade channel and also represents an additional potential outlet for other group products. The integration of this business and building further linkages with other group companies with Tile Africa are leading agenda items for management. In the absence of further unplanned business interruption, we believe that it is reasonable to expect some bounce back in JTSA profitability in FY20.

Record FY19 free cash flow, RAP funded from cash inflows

At the end of March 2019, group net debt of £35m was just over £12m lower than the level a year earlier, after a c £2m adverse cash balance translation.

Seasonally stronger profitability in H2 – enhanced by a full six-month Merlyn contribution – and a working capital inflow in the period led to a very strong operating cash inflow in the second half of the year. For the year as a whole, EBITDA rose by over £7m to just over £42m overall and, although the H1/H2 pattern was different, the c £2m working capital outflow was at a comparable level to the prior year. Non-trading cash outflows (ie £2.6m pension deficit recovery payments and just over £2m on acquisition-related spend) were as expected and netted operating cash flow generated in the year down to c £35m.

Consistent with higher average net debt (following the acquisition of Merlyn in November 2017), interest payments increased though cash tax was slightly lower compared to the prior year despite rising group profitability, presumably due to timing effects only. In aggregate, these items accounted for just over £6m of cash outflow. Capex was over £2m lower than both our expectations and the prior year at £5.5m. We understand that this was also largely a timing effect and there has been no reduction in commitment to new product development (NPD) and associated equipment spend. We consider that NPD has been a core business growth driver and a common discipline across the operating companies so spend in this area is a useful metric to monitor. (Expensed R&D costs were just under £4m, in line with the prior year.)

After these items, group free cash flow came in at c £23m, which we believe to be a record level. Save for the H119 dividend payment (£2.3m), outflows relating to deferred consideration and treasury share purchases were largely as reported at the interim stage. These items totalled £9.4m, leaving cash generated for the year overall at c £14m.

Cash outlook: The acquisition of RAP Plumbing Supplies for £9.7m from existing South African cash balances took place after year end; on a simple pro forma basis (adding end FY19 net debt and the RAP consideration) the start FY20 net debt of c £46m is equivalent to our expected EBITDA in the year.

We expect FY20 to be characterised by increases in all the main cash flow categories and also in pension cash contributions following the latest triennial review, working capital and capex. The post-acquisition phase for RAP obviously contributes to this in a number of areas. With a less favourable expected working capital outturn, our free cash flow projection for this year is lower year-on-year at c £17m. After a dividend uplift and c £1m treasury share purchases, this net inflow is in the order of £9m (pre RAP). In other words, group net cash generated in FY20 is expected to be broadly equivalent to the RAP consideration, so we only expect a small year-on-year increase in net debt at the year end. Beyond this, we currently project free cash inflow to exceed £20m again in FY21 and FY22, which is sufficient to fund a rising dividend, and – in the absence of further acquisitions – substantially reduced balance sheet net debt on hand. Management’s aspiration is of course to track towards £600m revenue by 2023 so further M&A is clearly on the agenda though not currently factored into our estimates.

Subdued consumer markets, maintained estimates

Shortly after the end of FY19, we increased our earnings estimates for the following two years by 3–4% following the completion of the RAP Plumbing Supplies acquisition. FY19 results themselves were pretty much in line with our expectations and save for a small revenue uplift on the back of the pre-close trading statement, we make no changes to existing headline estimates, while adding FY22 for the first time. Consumer demand in the two leading markets looks set to remain subdued overall, though some of the addressed segments may continue to do relatively well. In underlying terms, our model incorporates UK revenue growth of 3.7% – boosted by expected Merlyn progress – and c 2% UK revenue growth thereafter and modest operating margin improvements. We believe that sterling weakness is likely to result in input price rises feeding through into higher selling prices. In South Africa, similar underlying and margin improvement comments apply save for some anticipated bounce back in JTSA EBIT margins in FY20 and, of course, the maiden contribution from RAP.

Exhibit 3: Norcros estimate revisions

EPS FD normalised (p)

PBT normalised (£m)

EBITDA (£m)

Old

New

% chg.

Old

New

% chg.

Old

New

% chg.

FY19

29.5

29.6

+0.3

31.1

30.9

-0.6

42.1

42.2

+0.2

FY20e

32.0

32.0

---

34.0

34.0

---

45.9

46.3

+0.9

FY21e

33.5

33.5

---

35.9

35.9

---

47.9

48.3

+0.8

FY22e

N/A

34.6

N/A

N/A

37.4

N/A

N/A

49.9

N/A

Source: Edison Investment Research. Note: FY19 old = Edison estimate, new = actual. Edison normalised = company normalised less IAS 19R administrative expenses and amortisation of finance costs.


Exhibit 4: Financial summary

£m

2012

2013

2014

2015

2016

2017

2018

2019

2020e

2021e

2022e

Year end March

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

 

 

 

 

Cont.

Cont.

Cont.

Cont.

Cont.

Cont.

Cont.

Cont.

Revenue

 

 

200.3

210.7

218.7

222.1

235.9

271.2

300.1

331.0

359.9

368.4

377.4

Cost of Sales

 

 

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

Gross Profit

 

 

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

EBITDA

 

 

18.6

19.9

22.9

24.3

28.0

31.6

34.7

42.2

46.3

48.3

49.9

Operating Profit (pre SBP)

 

 

12.3

13.7

17.0

18.3

22.5

25.2

28.3

35.6

39.3

41.1

42.7

Net Interest

 

 

(1.4)

(1.3)

(1.5)

(1.2)

(0.9)

(0.9)

(1.1)

(1.8)

(2.3)

(2.2)

(2.3)

Other financial - norm

 

 

(0.9)

(2.4)

(2.6)

(3.1)

(3.1)

(3.6)

(2.8)

(2.9)

(3.0)

(3.0)

(3.0)

Other financial

 

 

0.6

(0.2)

(5.2)

2.1

(0.2)

(4.2)

(4.5)

2.3

(1.3)

(1.3)

(1.3)

Intangible Amortisation

 

 

0.0

0.0

(0.4)

(0.3)

(0.9)

(1.2)

(2.2)

(3.5)

(4.0)

(4.0)

(4.0)

Exceptionals

 

 

(1.2)

(4.4)

(1.5)

(4.8)

(2.0)

(3.8)

(4.2)

(4.3)

(1.0)

0.0

0.0

Profit Before Tax (norm)

 

 

10.0

10.0

12.9

14.0

18.5

20.7

24.4

30.9

34.0

35.9

37.4

Profit Before Tax (co norm)

 

10.7

11.7

14.6

15.8

20.4

22.9

26.3

32.6

35.7

37.6

39.1

Profit Before Tax (statutory)

 

 

9.4

5.4

5.8

11.0

15.4

11.5

13.5

25.4

27.7

30.6

32.1

Tax

 

 

0.0

0.2

4.3

(3.0)

(2.4)

(3.0)

(3.6)

(6.0)

(6.8)

(7.2)

(7.5)

Other

 

 

0.0

0.0

(1.4)

0.1

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Profit After Tax (norm)

 

 

10.4

9.3

13.9

11.1

16.1

17.7

20.8

24.9

27.2

28.7

29.9

Profit After Tax (statutory)

 

 

9.4

5.6

8.7

8.1

13.0

8.5

9.9

19.4

20.9

23.4

24.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average number of shares outstanding (m) 

57.7

58.0

58.4

59.2

60.6

61.1

68.0

80.2

81.2

81.9

82.6

Average number of shares outstanding FD (m)

58.0

58.9

60.8

61.5

62.2

63.1

69.8

81.1

82.9

83.6

84.3

EPS FD - normalised (p)

 

 

17.9

15.8

22.8

18.0

24.7

24.4

26.8

29.6

32.0

33.5

34.6

EPS FD - co normalised (p)

 

 

19.2

18.7

27.9

21.1

27.7

27.8

29.5

31.7

34.1

35.6

36.6

EPS - statutory (p)

 

 

16.2

9.5

14.3

13.2

19.7

9.8

11.2

22.9

24.4

27.2

28.3

Dividend per share (p)

 

 

4.2

4.6

5.1

5.6

6.6

7.2

7.8

8.4

9.0

9.8

10.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Margin (%)

 

 

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

EBITDA Margin (%)

 

 

9.3

9.4

10.5

10.9

11.9

11.7

11.6

12.8

12.9

13.1

13.2

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

6.1

6.5

7.8

8.2

9.5

9.3

9.4

10.8

10.9

11.2

11.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed Assets

 

 

80.0

86.7

80.0

78.3

93.4

98.8

147.9

138.0

145.0

146.2

145.0

Intangible Assets

 

 

23.4

27.6

27.1

26.9

44.7

44.8

98.9

94.9

96.9

95.3

91.3

Tangible Assets

 

 

44.8

43.5

36.9

37.6

38.2

43.0

45.0

42.3

47.3

50.1

52.9

Investments

 

 

11.8

15.6

16.0

13.8

10.5

11.0

4.0

0.8

0.8

0.8

0.8

Current Assets

 

 

89.7

104.6

102.2

100.4

119.4

165.3

165.1

169.5

185.4

194.8

213.5

Stocks

 

 

45.5

52.8

50.2

52.2

60.1

70.3

74.9

79.5

92.4

88.6

90.8

Debtors

 

 

34.5

36.3

48.1

42.6

53.4

57.5

64.4

62.8

70.8

69.5

71.2

Cash

 

 

2.9

6.8

3.9

5.6

5.9

37.5

25.8

27.2

22.2

36.7

51.5

Current Liabilities

 

 

(52.5)

(54.0)

(58.1)

(60.0)

(67.6)

(105.7)

(89.8)

(85.1)

(96.6)

(94.1)

(97.6)

Creditors

 

 

(52.1)

(53.5)

(57.3)

(58.6)

(64.8)

(74.8)

(81.3)

(81.3)

(96.6)

(94.1)

(97.6)

Short term borrowings

 

 

(0.4)

(0.5)

(0.8)

(1.4)

(2.8)

(30.9)

(8.5)

(3.8)

0.0

0.0

0.0

Long Term Liabilities

 

 

(46.1)

(75.7)

(58.6)

(67.4)

(97.6)

(101.8)

(118.6)

(96.7)

(94.8)

(92.7)

(90.7)

Long term borrowings

 

 

(20.3)

(37.0)

(30.5)

(18.4)

(35.6)

(29.8)

(64.4)

(58.4)

(58.4)

(58.4)

(58.4)

Other long term liabilities

 

 

(25.8)

(38.7)

(28.1)

(49.0)

(62.0)

(72.0)

(54.2)

(38.3)

(36.4)

(34.3)

(32.3)

Net Assets

 

 

71.1

61.6

65.5

51.3

47.6

56.6

104.6

125.7

139.0

154.2

170.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOW

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Cash Flow

 

 

6.0

6.6

13.6

16.2

18.5

25.5

23.5

35.3

34.8

44.6

43.0

Net Interest

 

 

(1.6)

(1.3)

(1.6)

(1.3)

(0.9)

(0.9)

(1.1)

(1.8)

(2.3)

(2.2)

(2.1)

Tax

 

 

(0.6)

(1.0)

(1.7)

(0.5)

(1.0)

(1.9)

(4.9)

(4.6)

(6.0)

(6.8)

(7.2)

Capex

 

 

(6.7)

(4.2)

(2.8)

(1.4)

(6.6)

(8.0)

(7.7)

(5.5)

(10.0)

(10.0)

(10.0)

Acquisitions/disposals

 

 

0.0

(10.6)

0.1

3.3

(23.6)

(2.7)

(59.1)

(2.1)

(9.7)

(2.4)

0.0

Financing

 

 

0.2

0.3

0.4

0.2

0.1

0.0

30.1

(0.9)

(1.0)

(1.0)

(1.0)

Dividends

 

 

(2.2)

(2.5)

(2.8)

(3.1)

(3.6)

(4.2)

(5.0)

(6.4)

(7.0)

(7.7)

(7.9)

Net Cash Flow

 

 

(4.9)

(12.7)

5.2

13.4

(17.1)

7.9

(24.2)

14.0

(1.2)

14.6

14.8

Opening net debt/(cash)

10.6

17.8

30.7

27.4

14.2

32.5

23.2

47.1

35.0

36.2

21.7

Finance leases initiated

 

 

(0.8)

(0.1)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other

 

 

(1.5)

(0.1)

(1.9)

(0.2)

(1.2)

1.4

0.3

(1.9)

0.0

0.0

0.0

Closing net debt/(cash)

 

 

17.8

30.7

27.4

14.2

32.5

23.2

47.1

35.0

36.2

21.7

6.9

Source: Company accounts, Edison Investment Research


General disclaimer and copyright

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.

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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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “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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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

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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.

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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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “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.

Australia

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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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