Currency in GBP
Last close As at 26/05/2023
GBP1.75
▲ −1.75 (−0.99%)
Market capitalisation
GBP156m
Research: Industrials
Sustained UK progress is the headline message from the H120 update in our view. Low single-digit growth here is not eye-catching but is certainly better than underlying markets. Management expectations and our own estimates are unchanged and consistent delivery against these benchmarks should be reflected in an improved rating in our view.
Written by
Toby Thorrington
Norcros |
Maintaining forward progress |
H120 pre-close update |
Construction & materials |
18 October 2019 |
Share price performance
Business description
Next event
Analyst
Norcros is a research client of Edison Investment Research Limited |
Sustained UK progress is the headline message from the H120 update in our view. Low single-digit growth here is not eye-catching but is certainly better than underlying markets. Management expectations and our own estimates are unchanged and consistent delivery against these benchmarks should be reflected in an improved rating in our view.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/18 |
300.1 |
24.4 |
26.8 |
7.8 |
8.3 |
3.5 |
03/19 |
331.0 |
30.9 |
29.6 |
8.4 |
7.5 |
3.8 |
03/20e |
359.9 |
34.0 |
32.0 |
9.0 |
7.0 |
4.0 |
03/21e |
368.4 |
35.9 |
33.5 |
9.8 |
6.7 |
4.4 |
Note: *PBT and EPS (fully diluted) are normalised, excluding amortisation of acquired intangibles, exceptional items and change in fair value of derivatives.
Outperforming challenging markets
In underlying terms, H1 revenues grew by 1.3% y-o-y in the UK operations and were flat in South Africa (compared with -0.4% and +0.8%, respectively, at the end of Q1). The progress in the UK was all organic and comprised domestic growth of 3.4%, including market share gains arising from both new products and existing listings, together with some benefit from wider supply chain challenges. While the general UK market tone is soft, the Norcros multi-channel proposition (leading brands, breadth of product portfolio, service and financial strength) continues to outperform. After a relatively weak start to the year, UK export performance improved in Q2 although it still currently lags prior year levels. In South Africa, domestic conditions remain challenging, especially in commercial and export markets. Hence, at face value, comparable underlying revenue to H119 looks creditable. House of Plumbing was acquired at the beginning of the year for c £10m; initial integration steps have now been completed and its revenue contribution in the first six months was in the order of ZAR225m/£12m. Business development planning is underway here and future aspirations may become more apparent as the year progresses. Lastly, the flagged period end net debt position of c £42m implies a small underlying cash inflow in H1 (prior to the acquisition), compared to a small outflow in H119.
Valuation: Credit due for relative performance
The shares having hit a year high of 243p earlier this month, recent gains have subsequently retraced; the stock is currently c 17% ahead ytd and up c 4% on a one-year view, slightly ahead of the FTSE All-Share Index over the same period. Norcros is navigating its markets carefully and gaining share in the process, although it is receiving little credit for doing so in our view, measured by its rating. The P/E and EV/EBITDA (adjusted for pensions cash) are slightly improved from our last note but still sit at just 7.0x and 5.1x, respectively, for the current year and with a prospective 4% dividend yield.
Exhibit 1: 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
|
|
Research: Investment Companies
Murray Income Trust (MUT) has significantly outperformed its FTSE All-Share Index benchmark and the majority of peers over the past year, in large part due to its focus on high-quality companies with strong balance sheets, which have held up better than others in recent bouts of market volatility. Manager Charles Luke takes a long-term approach, giving time for company fundamentals to win through and reducing trading costs. The trust has an increased focus on mid-cap and smaller companies (now c 30% of the portfolio) and also has the ability to invest up to 20% (currently c 11%) overseas. The manager highlights MUT’s attractive income characteristics, with a 4.0% yield, above-average dividend growth and dividend security, and a 46-year record of increasing its annual payouts.
Get access to the very latest content matched to your personal investment style.