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Last close As at 26/05/2023
GBP1.75
▲ −1.75 (−0.99%)
Market capitalisation
GBP156m
Research: Industrials
The developing coronavirus pandemic has affected year-end trading for Norcros, with an indicated c £4m impact on EBIT. Operational shutdowns mirroring those of its customers have been undertaken and, as elsewhere, actions to preserve cash are being taken. The company has up to c £110m headroom under existing banking facilities representing a strong year end liquidity position. Forward guidance and our estimates for FY21 onwards have been withdrawn pending greater clarity on the scale and duration of the lockdown conditions being widely enacted currently.
Written by
Toby Thorrington
Norcros |
FY20 outturn affected by COVID-19 |
Further COVID-19 update |
Construction & materials |
2 April 2020 |
Share price performance
Business description
Next event
Analyst
Norcros is a research client of Edison Investment Research Limited |
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The developing coronavirus pandemic has affected year-end trading for Norcros, with an indicated c £4m impact on EBIT. Operational shutdowns mirroring those of its customers have been undertaken and, as elsewhere, actions to preserve cash are being taken. The company has up to c £110m headroom under existing banking facilities representing a strong year end liquidity position. Forward guidance and our estimates for FY21 onwards have been withdrawn pending greater clarity on the scale and duration of the lockdown conditions being widely enacted currently.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/18 |
300.1 |
24.4 |
26.8 |
7.8 |
4.8 |
6.0 |
03/19 |
331.0 |
30.9 |
29.6 |
8.4 |
4.4 |
6.5 |
03/20e |
344.2 |
26.0 |
25.3 |
9.3 |
5.1 |
7.2 |
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.
Building and materials sector dialled down
Widespread customer shutdowns in the wake of the coronavirus spread have been the catalyst for similar actions from Norcros operations in the UK, Eire and South Africa. Manufacturing activities have ceased for the time being with significantly scaled down distribution-related capacity remaining in place for now. It is anticipated that announced government support measures will be accessed as appropriate.
Financial impact, headroom and guidance
As a consequence of the impact on March trading, pre-IFRS 16 EBIT guidance for FY20 has been revised to c £31m (IFRS 16 lifts reported EBIT by c £0.6m on an annual basis) versus market consensus of £35m previously. To reflect this, we have reduced our group revenue and EBIT estimates by £10m and £4m. This EBIT adjustment effectively bridges the difference between our previous year-end core (pre-IFRS 16) net debt expectation and the c £40m now flagged by management. This is well within c £150m existing banking facilities (ie £120m RCF and £30m accordion, both to November 2022). At this stage, the company has not ruled out a final dividend payment (though many others have) but implicitly flags that it is under active review, along with other cash preservation actions.
Management has suspended forward guidance and we have withdrawn our previous estimates for FY21 onwards pending greater clarity on the duration and shape of business recovery from the COVID-19 pandemic. Under normal conditions, gross profit margins are understood to be similar for the UK and SA divisions (in the 35–40% range). Individual companies operate under a range of business models and therefore the way in which they are affected will vary through their ability to flex costs and manage their supply chains effectively. The sub-sectors served (including housebuilders, trade/merchants, specialist and DIY retail) will also have differing supplier requirements once the business recovery phase begins. Operating companies need to be well positioned to facilitate a currently indeterminate return path to normal trading.
Exhibit 1: Financial summary
£m |
2015 |
2016 |
2017 |
2018 |
2019 |
2020e |
||
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 |
344.2 |
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 IFRS 16 |
|
|
24.3 |
28.0 |
31.6 |
34.7 |
42.2 |
39.9 |
Op Profit (before SBP) |
|
|
18.3 |
22.5 |
25.2 |
28.3 |
35.6 |
32.9 |
Net Interest |
|
|
(1.2) |
(0.9) |
(0.9) |
(1.1) |
(1.8) |
(1.8) |
Other financial - norm |
|
|
(3.1) |
(3.1) |
(3.6) |
(2.8) |
(2.9) |
(5.1) |
Other financial |
|
|
2.1 |
(0.2) |
(4.2) |
(4.5) |
2.3 |
(0.8) |
Intangible Amortisation |
|
|
(0.3) |
(0.9) |
(1.2) |
(2.2) |
(3.5) |
(4.0) |
Exceptionals |
|
|
(4.8) |
(2.0) |
(3.8) |
(4.2) |
(4.3) |
(1.0) |
Profit Before Tax (norm) |
|
|
14.0 |
18.5 |
20.7 |
24.4 |
30.9 |
26.0 |
Profit Before Tax (company norm) |
|
15.8 |
20.4 |
22.9 |
26.3 |
32.6 |
28.0 |
|
Profit Before Tax (statutory) |
|
|
11.0 |
15.4 |
11.5 |
13.5 |
25.4 |
20.2 |
Tax |
|
|
(3.0) |
(2.4) |
(3.0) |
(3.6) |
(6.0) |
(4.8) |
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 |
21.3 |
Profit After Tax (statutory) |
|
|
8.1 |
13.0 |
8.5 |
9.9 |
19.4 |
15.5 |
|
|
|
|
|
|
|
|
|
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 |
81.3 |
|
EPS FD - norm (p) |
|
|
18.0 |
24.7 |
24.4 |
26.8 |
29.6 |
25.3 |
EPS FD - co norm (p) |
|
|
21.1 |
27.7 |
27.8 |
29.5 |
31.7 |
27.8 |
EPS - statutory (p) |
|
|
13.2 |
20.8 |
13.4 |
14.1 |
23.9 |
19.0 |
Dividend per share (p) |
|
|
5.6 |
6.6 |
7.2 |
7.8 |
8.4 |
9.3 |
|
|
|
|
|
|
|
|
|
Gross Margin (%) |
|
|
N/A |
N/A |
36.7 |
36.6 |
37.5 |
N/A |
EBITDA Margin (%) |
|
|
10.9 |
11.9 |
11.7 |
11.6 |
12.8 |
11.6 |
Op Margin (before GW and except.) (%) |
|
8.2 |
9.5 |
9.3 |
9.4 |
10.8 |
9.6 |
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET |
|
|
|
|
|
|
|
|
Fixed Assets |
|
|
78.3 |
93.4 |
98.8 |
147.9 |
138.0 |
168.1 |
Intangible Assets |
|
|
26.9 |
44.7 |
44.8 |
98.9 |
94.9 |
98.3 |
Tangible Assets |
|
|
37.6 |
38.2 |
43.0 |
45.0 |
42.3 |
69.0 |
Investments |
|
|
13.8 |
10.5 |
11.0 |
4.0 |
0.8 |
0.8 |
Current Assets |
|
|
100.4 |
119.4 |
165.3 |
165.1 |
169.5 |
174.1 |
Stocks |
|
|
52.2 |
60.1 |
70.3 |
74.9 |
79.5 |
82.7 |
Debtors |
|
|
42.6 |
53.4 |
57.5 |
64.4 |
62.8 |
67.5 |
Cash |
|
|
5.6 |
5.9 |
37.5 |
25.8 |
27.2 |
23.9 |
Current Liabilities |
|
|
(60.0) |
(67.6) |
(105.7) |
(89.8) |
(85.1) |
(87.0) |
Creditors |
|
|
(58.6) |
(64.8) |
(74.8) |
(81.3) |
(81.3) |
(87.0) |
Short term borrowings |
|
|
(1.4) |
(2.8) |
(30.9) |
(8.5) |
(3.8) |
0.0 |
Long Term Liabilities |
|
|
(67.4) |
(97.6) |
(101.8) |
(118.6) |
(96.7) |
(118.5) |
Long term borrowings |
|
|
(18.4) |
(35.6) |
(29.8) |
(64.4) |
(58.4) |
(63.5) |
Other long term liabilities |
|
|
(49.0) |
(62.0) |
(72.0) |
(54.2) |
(38.3) |
(55.0) |
Net Assets |
|
|
51.3 |
47.6 |
56.6 |
104.6 |
125.7 |
136.7 |
|
|
|
|
|
|
|
|
|
CASH FLOW |
|
|
|
|
|
|
|
|
Operating Cash Flow |
|
|
16.2 |
18.5 |
25.5 |
23.5 |
35.3 |
36.2 |
Net Interest |
|
|
(1.3) |
(0.9) |
(0.9) |
(1.1) |
(1.8) |
(3.6) |
Tax |
|
|
(0.5) |
(1.0) |
(1.9) |
(4.9) |
(4.6) |
(6.0) |
Capex |
|
|
(1.4) |
(6.6) |
(8.0) |
(7.7) |
(5.5) |
(10.0) |
Acquisitions/disposals |
|
|
3.3 |
(23.6) |
(2.7) |
(59.1) |
(2.1) |
(9.7) |
Financing |
|
|
0.2 |
0.1 |
0.0 |
30.1 |
(0.9) |
(1.0) |
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 |
(1.1) |
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 |
(4.0) |
Other |
|
|
(0.2) |
(1.2) |
1.4 |
0.3 |
(1.9) |
0.5 |
Closing net debt/(cash) |
|
|
14.2 |
32.5 |
23.2 |
47.1 |
35.0 |
39.6 |
IFRS 16 lease liabilities |
|
|
|
|
|
|
|
(27.7) |
Source: Company accounts, Edison Investment Research
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Research: Industrials
Helma Eigenheimbau closed FY19 with improved revenues and new order intake, coupled with a lower cost of materials and third-party services ratio. It maintains a satisfactory equity ratio of 28.6%, assisted by its conservative dividend policy (which is aligned with its debt covenants). While Helma is well-positioned to continue to expand in the next few years with a strong order book and attractive land bank secured on relatively cheap prices, near-term growth remains uncertain given the likely recession triggered by COVID-19. Consequently, management has withdrawn its FY20 guidance.
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