Currency in GBP
Last close As at 28/03/2023
GBP1.87
▲ 7.50 (4.18%)
Market capitalisation
GBP160m
Research: Industrials
Following the latest trading update, we have increased our earnings estimates again. Trading momentum is expected to continue beyond the year end and we now expect dividends to normalise more quickly. Although there are still some market issues to contend with (most obviously easing COVID-19 restrictions and a tight freight industry), recent updates suggest the company is meeting the challenges well.
Written by
Toby Thorrington
Norcros |
Momentum maintained |
Trading update |
Construction & materials |
7 April 2021 |
Share price performance
Business description
Next event
Analyst
Norcros is a research client of Edison Investment Research Limited |
Following the latest trading update, we have increased our earnings estimates again. Trading momentum is expected to continue beyond the year end and we now expect dividends to normalise more quickly. Although there are still some market issues to contend with (most obviously easing COVID-19 restrictions and a tight freight industry), recent updates suggest the company is meeting the challenges well.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/19 |
331.0 |
30.9 |
29.6 |
8.4 |
9.0 |
3.1 |
03/20 |
342.0 |
27.1 |
26.1 |
3.1 |
10.3 |
1.2 |
03/21e |
324.7 |
25.9 |
25.0 |
4.0 |
10.7 |
1.5 |
03/22e |
335.8 |
29.4 |
28.2 |
7.8 |
9.5 |
2.9 |
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.
Powering through to year end
Norcros has updated its guidance for the second time in the final month of its trading year. Management is guiding to an uplift in expected group EBIT to ‘not less than £31m’ (previously £28m) and an ungeared balance sheet (ie no core net debt, pre IFRS 16 finance), which is c £8m better than we were anticipating. In context, FY20 EBIT was £32.3m; although this outturn was also COVID-19 affected (noted as a c £4m year-end hit) to get within touching distance in FY21 is a very creditable result, in our view. We understand that trading in recent weeks has seen a continuation of trends into the early part of February rather than a change in trajectory and this update reflects management’s natural caution at that time, including supply chain challenges, which have been successfully navigated so far. It should also be noted that FY21 performance is all organic.
Estimates raised again
We have adjusted our FY21 model in line with guidance (including a raised revenue run rate and cash inflow). As things stand, the momentum and upward pressure on FY21 estimates should follow through into subsequent years; our PBT estimate for the closing year is now c 15% higher, with increases in the following two years of around 10%. We have assumed a faster normalisation of dividend payments. Over and above these changes, the balance sheet position does provide plenty of headroom for the company to make acquisitions again subject to appropriate opportunities arising. A fuller year-end update is scheduled for 15 April.
Valuation: FY22 P/E below 10x
The latest trading update should serve to consolidate share price gains made after the one made at the beginning of March, which partly retraced in the last week. The ytd increase of c 34% is well ahead of the c 3% achieved by the FTSE All Share Index over the same period. Following our earnings upgrades, Nocros is now trading on a P/E and EV/EBITDA (adjusted for pensions cash) of 9.5x and 6.0x respectively for FY22.
Exhibit 1: Financial summary
£'ms |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021e |
2022e |
2023e |
|||||
March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
|||||
PROFIT & LOSS |
|
|
Cont. |
Cont. |
Cont. |
Cont. |
Cont. |
Cont. |
Cont. |
Cont. |
Cont. |
|||
Revenue |
|
|
222.1 |
235.9 |
271.2 |
300.1 |
331.0 |
342.0 |
324.7 |
335.8 |
344.7 |
|||
Cost of Sales |
|
|
N/A |
N/A |
(171.7) |
(190.4) |
(206.8) |
(217.5) |
N/A |
N/A |
N/A |
|||
Gross Profit |
|
|
N/A |
N/A |
99.5 |
109.7 |
124.2 |
124.5 |
N/A |
N/A |
N/A |
|||
EBITDA IFRS16 |
|
|
24.3 |
28.0 |
31.6 |
34.7 |
42.2 |
38.8 |
36.9 |
39.9 |
41.7 |
|||
Op Profit (before SBP) |
|
|
18.3 |
22.5 |
25.2 |
28.3 |
35.6 |
32.2 |
31.6 |
34.4 |
35.9 |
|||
Net Interest |
|
|
(1.2) |
(0.9) |
(0.9) |
(1.1) |
(1.8) |
(1.6) |
(1.7) |
(1.0) |
(0.9) |
|||
Other financial - norm |
|
|
(3.1) |
(3.1) |
(3.6) |
(2.8) |
(2.9) |
(3.5) |
(4.0) |
(4.0) |
(4.0) |
|||
Other financial |
|
|
2.1 |
(0.2) |
(4.2) |
(4.5) |
2.3 |
0.9 |
(2.3) |
(1.0) |
(1.0) |
|||
Intangible Amortisation |
|
|
(0.3) |
(0.9) |
(1.2) |
(2.2) |
(3.5) |
(3.7) |
(4.2) |
(4.2) |
(4.2) |
|||
Exceptionals |
|
|
(4.8) |
(2.0) |
(3.8) |
(4.2) |
(4.3) |
(9.3) |
(3.0) |
0.0 |
0.0 |
|||
Profit Before Tax (norm) |
|
|
14.0 |
18.5 |
20.7 |
24.4 |
30.9 |
27.1 |
25.9 |
29.4 |
31.0 |
|||
Profit Before Tax (company norm) |
|
|
15.8 |
20.4 |
22.9 |
26.3 |
32.6 |
28.8 |
27.6 |
31.1 |
32.7 |
|||
Profit Before Tax (statutory) |
|
|
11.0 |
15.4 |
11.5 |
13.5 |
25.4 |
15.0 |
16.4 |
24.2 |
25.8 |
|||
Tax |
|
|
(3.0) |
(2.4) |
(3.0) |
(3.6) |
(6.0) |
(4.1) |
(4.5) |
(5.8) |
(6.1) |
|||
Other |
|
|
0.1 |
0.0 |
0.0 |
0.0 |
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 |
21.5 |
23.6 |
24.9 |
|||
Profit After Tax (statutory) |
|
|
8.1 |
13.0 |
8.5 |
9.9 |
19.4 |
10.9 |
12.0 |
18.4 |
19.7 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Avge Number of Shares O/standing (m) |
|
59.2 |
60.6 |
61.1 |
68.0 |
80.2 |
80.3 |
80.7 |
80.8 |
80.8 |
||||
Avge Number of Shares O/standing FD (m) |
|
61.5 |
62.2 |
63.1 |
69.8 |
81.1 |
81.0 |
81.0 |
81.1 |
81.1 |
||||
EPS FD - norm (p) |
|
|
18.0 |
24.7 |
24.4 |
26.8 |
29.6 |
26.1 |
25.0 |
28.2 |
29.8 |
|||
EPS FD - co norm (p) |
|
|
21.1 |
27.7 |
27.8 |
29.5 |
31.7 |
28.2 |
27.1 |
30.3 |
31.9 |
|||
EPS - statutory (p) |
|
|
13.2 |
20.8 |
13.4 |
14.1 |
23.9 |
13.5 |
14.8 |
22.7 |
24.3 |
|||
Dividend per share (p) |
|
|
5.6 |
6.6 |
7.2 |
7.8 |
8.4 |
3.1 |
4.0 |
7.8 |
8.4 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Gross Margin (%) |
|
|
N/A |
N/A |
36.7 |
36.5 |
37.5 |
36.4 |
N/A |
N/A |
N/A |
|||
EBITDA Margin (%) |
|
|
10.9 |
11.9 |
11.7 |
11.6 |
12.8 |
11.3 |
11.4 |
11.9 |
12.1 |
|||
Op Margin (before GW and except.) (%) |
|
8.2 |
9.5 |
9.3 |
9.4 |
10.8 |
9.4 |
9.7 |
10.2 |
10.4 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|||
BALANCE SHEET |
|
|
|
|
|
|
|
|
|
|
|
|||
Fixed Assets |
|
|
78.3 |
93.4 |
98.8 |
147.9 |
138.0 |
150.8 |
148.9 |
147.7 |
145.2 |
|||
Intangible Assets |
|
|
26.9 |
44.7 |
44.8 |
98.9 |
94.9 |
96.5 |
93.0 |
89.8 |
85.6 |
|||
Tangible Assets |
|
|
37.6 |
38.2 |
43.0 |
45.0 |
42.3 |
49.6 |
51.2 |
53.2 |
54.9 |
|||
Other Fixed Assets |
|
|
13.8 |
10.5 |
11.0 |
4.0 |
0.8 |
4.7 |
4.7 |
4.7 |
4.7 |
|||
Current Assets |
|
|
100.4 |
119.4 |
165.3 |
165.1 |
169.5 |
188.7 |
166.5 |
175.4 |
191.3 |
|||
Stocks |
|
|
52.2 |
60.1 |
70.3 |
74.9 |
79.5 |
78.9 |
71.9 |
76.4 |
78.4 |
|||
Debtors |
|
|
42.6 |
53.4 |
57.5 |
64.4 |
62.8 |
62.5 |
67.1 |
69.0 |
70.6 |
|||
Cash |
|
|
5.6 |
5.9 |
37.5 |
25.8 |
27.2 |
47.3 |
27.5 |
30.0 |
42.3 |
|||
Current Liabilities |
|
|
(60.0) |
(67.6) |
(105.7) |
(89.8) |
(85.1) |
(79.2) |
(95.8) |
(93.3) |
(95.8) |
|||
Creditors |
|
|
(58.6) |
(64.8) |
(74.8) |
(81.3) |
(81.3) |
(79.1) |
(95.8) |
(93.3) |
(95.8) |
|||
Short term borrowings |
|
|
(1.4) |
(2.8) |
(30.9) |
(8.5) |
(3.8) |
(0.1) |
0.0 |
0.0 |
0.0 |
|||
Long Term Liabilities |
|
|
(67.4) |
(97.6) |
(101.8) |
(118.6) |
(96.7) |
(155.9) |
(99.6) |
(97.2) |
(94.8) |
|||
Long term borrowings |
|
|
(18.4) |
(35.6) |
(29.8) |
(64.4) |
(58.4) |
(83.6) |
(27.7) |
(27.7) |
(27.7) |
|||
Other long term liabilities |
|
|
(49.0) |
(62.0) |
(72.0) |
(54.2) |
(38.3) |
(72.3) |
(71.9) |
(69.5) |
(67.1) |
|||
Net Assets |
|
|
51.3 |
47.6 |
56.6 |
104.6 |
125.7 |
104.4 |
119.9 |
132.5 |
145.9 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
CASH FLOW |
|
|
|
|
|
|
|
|
|
|
|
|||
Operating Cash Flow |
|
|
16.2 |
18.5 |
25.5 |
23.5 |
35.3 |
34.8 |
51.9 |
32.4 |
39.6 |
|||
Net Interest |
|
|
(1.3) |
(0.9) |
(0.9) |
(1.1) |
(1.8) |
(3.5) |
(3.5) |
(2.8) |
(2.7) |
|||
Tax |
|
|
(0.5) |
(1.0) |
(1.9) |
(4.9) |
(4.6) |
(5.3) |
(3.0) |
(8.1) |
(5.9) |
|||
Capex |
|
|
(1.4) |
(6.6) |
(8.0) |
(7.7) |
(5.5) |
(4.8) |
(5.0) |
(7.5) |
(7.5) |
|||
Acquisitions/disposals |
|
|
3.3 |
(23.6) |
(2.7) |
(59.1) |
(2.1) |
(9.2) |
0.0 |
(1.0) |
0.0 |
|||
Financing |
|
|
0.2 |
0.1 |
0.0 |
30.1 |
(0.9) |
(0.8) |
(0.8) |
(0.8) |
(0.8) |
|||
Dividends |
|
|
(3.1) |
(3.6) |
(4.2) |
(5.0) |
(6.4) |
(7.0) |
0.0 |
(5.7) |
(6.4) |
|||
Net Cash Flow |
|
|
13.4 |
(17.1) |
7.9 |
(24.2) |
14.0 |
4.2 |
39.6 |
6.5 |
16.3 |
|||
Opening net debt/(cash) |
|
|
27.4 |
14.2 |
32.5 |
23.2 |
47.1 |
35.0 |
36.4 |
0.2 |
(2.3) |
|||
IFRS16 Finance leases |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
(3.8) |
(4.0) |
(4.0) |
(4.0) |
|||
Other |
|
|
(0.2) |
(1.2) |
1.4 |
0.3 |
(1.9) |
(1.8) |
0.6 |
0.0 |
0.0 |
|||
Closing net debt/(cash) |
|
|
14.2 |
32.5 |
23.2 |
47.1 |
35.0 |
36.4 |
0.2 |
(2.3) |
(14.6) |
|||
IFRS16 lease liabilities |
|
|
|
|
|
|
|
(25.1) |
(26.6) |
(26.6) |
(26.6) |
Source: Company accounts, Edison Investment Research
|
|
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