Norcros — Update 12 December 2016

Norcros (LSE: NXR)

Last close As at 16/07/2024

GBP2.36

2.00 (0.85%)

Market capitalisation

GBP212m

More on this equity

Research: Industrials

Norcros — Update 12 December 2016

Norcros

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Written by

Industrials

Norcros

Good growth delivered and anticipated

H117 results

Construction & materials

12 December 2016

Price

182.00p

Market cap

£112m

£/ZAR17.3

Net debt (£m) at end Sept 2016

27.5

Shares in issue

61.3m

Free float

98.3%

Code

NXR

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

24.4

15.2

(12.3)

Rel (local)

23.5

12.9

(21.5)

52-week high/low

208.00p

138.00p

Business description

Norcros is a leading supplier of showers, 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 events

H117 ex-dividend

15 December 2016

H117 2.4p dividend payable

12 January 2017

Analysts

Toby Thorrington

+44 (0)20 3077 5721

Roger Johnston

+44 (0)20 3077 5722

Norcros is a research client of Edison Investment Research Limited

H117 results contained a mix of individual trading performances which, in aggregate, delivered double-digit percentage y-o-y progress. Balancing business momentum, internal development actions and overall market conditions, we continue to expect good PBT growth and for this to translate to further share price strength in due course.

Year
end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

03/15

222.1

14.0

18.0

5.6

10.1

3.1

03/16

235.9

18.5

24.7

6.6

7.4

3.6

03/17e

266.3

20.2

24.0

7.2

7.6

4.0

03/18e

274.4

21.8

25.7

7.5

7.1

4.1

Note: *PBT and EPS FD are normalised, excluding intangible amortisation and exceptional items. EPS/DPS are adjusted for a one-to-10 share consolidation (30 September 2015).

First half ahead, driven by South Africa progress

H117 EBIT was 11.7% (+£1.1m) above the previous year on revenue up 8.5%, driven by a good revenue uplift and margin expansion in South Africa with progress at all three operating companies there. In the UK, acquisition contributions (ie Croydex for one additional quarter and Abode for its maiden H1) compensated for softer trading conditions at some longer-standing operations in the retail and, more latterly, trade segments. Underlying EPS and DPS both saw increases in excess of 9% in H1. Period-end net debt at £27.5m was £5m lower than at the end of FY16, with improved profitability and cash conversion flowing through and a positive translation effect on overseas cash.

Regional mix changes in estimates

Latest commentary with the results maintained group guidance for the full year. Taking into account the regional trading performance in the first half, we have adjusted our estimate mix, the net result being a modest increase in PBT expectations for FY17 with the following two years unchanged. An amended tax assumption brings down EPS estimates slightly, but we have also nudged up our FY16 DPS estimate, maintaining progress seen at the interim stage. The impact of higher inflation/slower real earnings growth on UK consumer behaviour remains to be seen. Increasing group synergies, new product launches and improving geographic reach are all active areas for Norcros by which it can increase resilience to individual sector weakness and build a broader group presence.

Valuation: Value remains after recent bounce

FY16 and H117 results have both been well-received, but adverse sector sentiment post Brexit has caused share price underperformance against the FTSE All-Share Index, even after a c 23% gain latterly. It is now back at pre-Brexit levels, but the rating is still a lowly P/E of 7.6x for the current year, with EV/EBITDA (adjusted for pensions recovery cash) of 4.8x and a prospective 4.0% yield. Norcros represents a differentiated sector play, set to deliver both growth and income.

H117 results overview

In headline terms, group revenue growth of 8.5% was driven by UK acquisitions and good South African organic growth. The latter performance effectively delivered all of the group EBIT uplift even after a slight FX headwind in the period. Increased underlying EPS (+9.3%), DPS (+9.1%) and reduced net debt (down £5m to £27.5m) were other H117 highlights. Our revised estimates are effectively in line with pre-results levels and incorporate some regional mix changes.

Exhibit 1: Norcros interim and divisional splits

£m

H1

H2

2016

H117

% change

% change

reported

CC FX

Group revenue

118.7

117.3

235.9

128.8

8.5%

9.2%

UK

79.9

83.1

163.0

86.9

8.7%

8.7%

South Africa

38.8

34.2

72.9

41.9

8.0%

10.0%

Group EBIT*

9.9

11.4

21.3

11.0

11.7%

12.5%

UK

8.0

9.2

17.2

8.0

0.1%

0.1%

South Africa

1.9

2.2

4.1

3.0

59.3%

62.3%

Source: Company, Edison Investment Research. *Norcros reported divisional EBIT. CC FX EBIT estimated

UK operations

First half trading was characterised by somewhat difficult conditions for the two largest and longest-standing UK operations, compensated for by increased profit contributions from more recently acquired companies. The channel experience has varied for individual businesses but, as a general comment, we believe that the retail segment – which progressively softened during FY16 – remained subdued while trade de-stocking was a key driver of weaker H117 performance in the larger businesses. In context, we believe that UK domestic revenues are split broadly 50:50 between these channels, while c 15% of total revenues are exported on a full year basis.

Triton (H117 revenue: £22.9m, -12.6%): the trade segment was relatively stable for Triton and grew y-o-y in FY16 but H117 saw de-stocking by merchants, which we believe had a material impact on revenue. This should be a one-off adjustment but a full rebuild of supply chain inventory looks unlikely in the near term, in our view. A small reduction in export sales was viewed as a temporary effect, with Ireland looking stronger going into H2.

Johnson Tiles (£25.4m, -9.0%): in contrast to Triton, trade channel revenues (JT’s focus being on commercial projects and housebuilders) were down only modestly, which was attributed to the social housing subsector. Conversely, weaker demand from DIY retailers, exacerbated by import substitution, led to a sharper revenue reduction in a sector that has been seeing lower activity levels for some time. Exports were unchanged overall. Subject to an adjustment period, sterling weakness may provide opportunities to regain UK share and grow exports.

Vado (£16.6m, +4.4%): having concluded the three-year earnout arrangement in March, Vado is clearly continuing to benefit from the group structure, showing double-digit percentage growth in UK revenues in H1 with increasing penetration of both trade and retail segments. Sales into Tile Africa are developing, although export revenue overall was down (also double digits) reflecting a change of distributor in the Middle East.

Croydex (£12.2m, +11.9% l-f-l): acquired in June 2016 and included for an additional three months in H117, we note that the achieved l-f-l growth rate was well above that reported for FY16 (+6.5%). Progress is understood to be broad across the range and channels served (including export), and products were also launched in Tile Africa during the period.

Norcros Adhesives (£4.2m, +2.4%): mixed channel performance here with overseas project revenue ahead and, in the UK, maintained trade channel volumes with retail lower.

Abode (£5.6m, +2.2% l-f-l): an in-line maiden contribution with modest l-f-l progress achieved. Group synergy benefits are targeted and further specialist retail customers have been added.

Overall, revenue performance has clearly varied across UK operating companies – both within and across the channels served. Having a multi-product, multi-channel portfolio does provide some resilience to individual customer and market vagaries, but not every period will also have positive y-o-y acquisition effects for Norcros. The common theme across all of its UK operating companies, with a range of different business models, is new product development. This is referenced repeatedly and allows product ranges to be updated and expanded, providing a regular stream of opportunities to grow with both new and existing customers.

South African operations

Norcros has an integrated business model in South Africa with tiles (manufactured and sourced) and related adhesive products (manufacture only) supplied to Tile Africa and to other, independent retail and commercial entities. Tile Africa sources other bathroom range products externally with increasing ties to Norcros’s UK operations. In H117, revenue grew by 10% in local currency terms – all organic, with all three companies progressing – driving a 380bp EBIT margin increase to 7.2%.

Tile Africa (H117 revenue: c ZAR522m, +12.8%/£26.5m +10.4%): the owned store profile has been relatively stable with an existing base of 30, including one opened at the end of FY16. We understand that l-f-l revenue grew by c 10% in H117. This reflected ongoing store upgrades (now 13 trading under the upgraded CX format) and range extensions, including products sourced in conjunction with UK group companies. We are now aware of a pipeline to open a further five stores over the next three years. Including the previously flagged new Southgate store effectively representing an average of two per annum. Only two franchised stores now continue to trade following the closure of two other sites in H1.

Note that the reported revenues for TAL and Johnson Tiles South Africa shown below are those made to external customers only. Intra-group sales are eliminated on consolidation.

TAL (c ZAR198m, +8.6%/£10.1m, +7.4%): another very respectable y-o-y adhesives growth performance, although the rate nudged below 10% for the first time in a couple of years. We assume this was due to moderated progress in the domestic market, which may reflect more lumpy, project-oriented commercial exposure. That said, management believes it grew ahead of the local market and gained share. Exports to neighbouring African countries were up by 10.9%. Volume growth and efficiency gains further improved margins.

Johnson Tiles South Africa (c ZAR104m, u/c/£5.3m -1.9%): we believe that the headline revenue performance reflected growth in Q1 and an offsetting decline in Q2 to be flat overall for the period y-o-y. The high utilisation rates for JTSA’s two existing kilns are effective constraints to growth now. Revenue can still move ahead – either through producing and selling higher value-added products and/or increasing the volume of externally sourced tiles sold. Clearly, the former effect would be more beneficial for margins, which improved again in H117. A decision on whether to invest in a third kiln is pending and would represent a material capital item.

As with the UK, different business characteristics have led to a range of revenue growth across the South African companies in a market that was considered to have shown moderate growth overall. Tile Africa growth clearly has pull-through benefits for its two sister product supply operations and we believe that all three companies increased their y-o-y profit contribution in H1. The product offering in tiles and adhesives is evolving, but our sense is that the biggest strides forward are currently being taken in retail through refreshed formats, range development and planned store expansion. As the size of the Norcros group increases, so do the opportunities to develop trading ties between portfolio companies. Vado is already supplying product into South Africa with further ranges to be sourced from its supply chain. Croydex has also recently introduced certain products into Tile Africa. Hence, we believe that further growth prospects are present in this market and, if taken, a decision to add a third tile kiln at Olifantsfontein would accelerate this.

Cash positive, debt reduction and conservatively financed

At the end of September, net debt stood at £27.5m, a reduction of £5m over the first six months of the year. Of this, c 80% was generated from cash flow, the remainder from a positive translation effect on South African cash balances.

Trading cash inflow in H1 was almost £1m above the prior year at £13.8m. This was similar to the EBIT uplift; on a simple basis EBITDA for the period was £14.8m or, after factoring in a slightly higher pensions cash payment (see more below), an adjusted EBITDA of £13.6m. While exceptional cash movements switched from a credit in H116 (£0.7m, a net gain resulting from a favourable property outcome) to an outflow in H117 (£1m, a number of small acquisition-related items). This was substantially offset by a £1.4m better working capital outturn across the two halves, driven by a larger positive creditor effect, which may have been partly due to being a larger group and partly timing effects.

Interest, tax and dividend payments in aggregate were slightly lower y-o-y at £3.1m. Cash interest costs rose due to prior year acquisition consideration, a cash tax credit was received following on from a South Africa-related tax benefit in FY16 and the dividend cash outflow represented the FY16 final payment.

Capex and depreciation are both naturally rising as the size of the group increases; spending rose at a faster rate in the first half to £4m (or 1.3x depreciation), although no major capital items were highlighted in these results. Lastly, deferred consideration of £2.5m representing the final Vado payment formed the majority of a £2.7m acquisition cash outflow in H1, the remainder being a deferred part of the Abode acquisition.

More on pensions: the balance sheet showed a significant uplift in retirement benefit obligations with the IAS19R gross deficit moving from £55.7m at the end of FY16 to £97.8m by the end of September. This was chiefly due to a 130bp reduction in the discount rate assumption to 2.25%. (Other companies reporting with period ends after the Brexit referendum result have also commented on the sharp drop in underlying bond yields.) This movement has partly reversed more recently and Norcros notes that a 0.1% (or 10bp) increase in bond yields reduces the scheme deficit by £6m, other things being equal. Under the current triennial valuation, Norcros has an agreed deficit recovery cash payment of £2.5m plus annual CPI per annum into the scheme. The next triennial review is due in March 2018; the scheme is very mature (comprising 66% members already of pensionable age, with an average age of 77) and annual pensioner payroll cash payments are c 10% from the expected peak level. On this basis – and subject to sensible stewardship of pension scheme assets – we would consider there to be limited upward pressure on cash recovery payments. Of course, actuarial experience, asset performance and prevailing assumptions at the time of the next review will all be important factors also.

Cash flow outlook: the split of underlying profitability normally has an H2 bias – which can be amplified by the timing of acquisitions – and we assume a c 46:54 split for EBIT in the current year. Countering this, the working capital cycle tends to decline in Q3 and builds again in Q4 of the company’s financial year, resulting in an outflow overall for H2, and we expect this to be the case again in FY17. After taking into account similar cash interest and capex in H2 versus H1, a normalised cash tax payment and the declared H117 dividend cash outflow, we expect Norcros to end FY17 with net debt of c £27m, marginally lower that at the interim stage. This represents less than 0.9x our expected underlying FY17 EBITDA, which itself is c 20x expected bank interest cover (or c 16x on a P&L/EBIT basis). Subject to available opportunities, we would expect to Norcros to be looking to add to its portfolio of operating companies, sticking to the strategy of acquiring in related business areas where synergies can be generated across the wider group. The company has a £70m RCF plus a £30m accordion facility; these banking arrangements run to July 2019.

Group guidance maintained, regional mix adjustments

There are reasons for both caution and optimism regarding the trading outlook for Norcros. UK residential RMI spend has been patchy and, in our opinion, is likely to remain that way in the near term. While UK employment levels are high, house prices firm and interest rates low, the prospects for real average earnings growth appear to have diminished and so do not suggest that a broad increase in consumer spending is likely to occur in the near term. That said, momentum with newer operating companies appears to be good and Norcros does have commercial sector exposure also (c 40% UK sales), where demand should be relatively robust and exports (c 15% UK sales) should benefit from sterling weakness. As previously noted, higher inbound component and product costs are hedged; upward pricing pressure can be expected as the hedges roll forward and we would expect mitigating actions to be taken to protect margins in UK operations. South African real GDP growth is projected to pick up over the next three years, growing by between 1-2% pa. The OECD suggests that investment – with improved electricity reliability – and consumption will support this progress. That said, a number of economic and structural challenges remain and so we would suggest the scope for sharply improving markets for Norcros in South Africa is limited. Hence, a continuation of the strategy to deepen market penetration, gain market share and improve operational efficiencies will be the key drivers of success.

As Exhibit 2 shows, we have modestly increased PBT estimates for the current year, with subsequent years unchanged. In all cases, this is the net product of lower UK profit growth expectations with estimates for South African operations raised, supplemented by more favourable FX translation (now at £/ZAR18.0 in all years). Our FY17 EBIT estimate splits roughly three quarters UK, one quarter South Africa (versus 81:29 in the prior year). Overall, we do expect to see some UK EBIT progress in all three years, albeit fairly modest in FY17, following a flat H1 outturn. Progress in South Africa should be fairly broadly based across all three operating entities there.

Exhibit 2: Norcros revised estimates

EPS (p)

PBT (£m)

EBITDA (£m)

Old

New

% chg.

Old

New

% chg.

Old

New

% chg.

2017e

24.7

24.0

-2.8

19.9

20.2

+1.5

31.1

31.4

+1.0

2018e

26.7

25.7

-3.7

21.8

21.8

---

32.9

32.9

---

2019e

28.5

27.4

-3.9

23.5

23.5

---

34.5

34.5

---

Source: Company, Edison Investment Research

Our estimates now use a 23% tax charge on PBT as defined by Norcros – in line with H117 – compared to c 20% previously. (Note that the effective rate was 15% in FY16; the step-up to more normal levels in the current year means that our expected FY17 EPS is lower than in FY16.) Although not shown in the table, note that we have also nudged up our FY17 DPS expectation by almost 3% to +9.1% for the year, in line with progress declared for H1. Subsequent years are unchanged at this stage.


Exhibit 3: Financial summary

£'ms

2011

2012

2013

2014

2015

2016

2017e

2018e

2019e

March

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

 

 

 

 

 

Cont.

Cont.

Cont.

Cont.

Cont.

Revenue

 

 

196.1

200.3

210.7

218.7

222.1

235.9

266.3

274.4

283.4

Cost of Sales

 

 

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

EBITDA

 

 

18.2

18.6

19.9

22.9

24.3

28.0

31.4

32.9

34.5

Operating Profit (before SBP)

 

 

11.6

12.3

13.7

17.0

18.3

22.5

24.8

26.3

27.9

Net Interest

 

 

(1.5)

(1.4)

(1.3)

(1.5)

(1.2)

(0.9)

(1.5)

(1.4)

(1.3)

Other financial - norm

 

 

(1.1)

(0.9)

(2.4)

(2.6)

(3.1)

(3.1)

(3.1)

(3.1)

(3.1)

Other financial

 

 

(0.4)

0.6

(0.2)

(5.2)

2.1

(0.2)

(1.5)

(2.0)

(2.0)

Intangible Amortisation

 

 

0.0

0.0

0.0

(0.4)

(0.3)

(0.9)

(1.2)

(1.2)

(1.2)

Exceptionals

 

 

(1.1)

(1.2)

(4.4)

(1.5)

(4.8)

(2.0)

(1.0)

(1.0)

(1.0)

Profit Before Tax (norm)

 

 

9.0

10.0

10.0

12.9

14.0

18.5

20.2

21.8

23.5

Profit Before Tax (company norm)

 

10.2

10.7

11.7

14.6

15.8

20.4

22.1

23.7

25.4

Profit Before Tax (FRS 3)

 

 

7.5

9.4

5.4

5.8

11.0

15.4

16.5

17.6

19.3

Tax

 

 

(0.8)

0.0

0.2

4.3

(3.0)

(2.4)

(4.1)

(4.8)

(5.2)

Other

 

 

0.0

0.0

0.0

(1.4)

0.1

0.0

0.0

0.0

0.0

Profit After Tax (norm)

 

 

8.2

10.4

9.3

13.9

11.1

16.1

16.1

17.1

18.4

Profit After Tax (FRS 3)

 

 

6.7

9.4

5.6

8.7

8.1

13.0

12.4

12.9

14.2

 

 

 

 

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding (m)

 

57.7

57.7

58.0

58.4

59.2

60.6

61.3

62.0

62.7

Average Number of Shares Outstanding FD (m)

57.7

58.0

58.9

60.8

61.5

62.2

63.0

63.7

64.4

EPS FD - normalised (p)

 

 

14.1

17.9

15.8

22.8

18.0

24.7

24.0

25.7

27.4

EPS FD - company normalised (p)

 

 

16.3

19.2

18.7

27.9

21.1

27.7

27.0

28.7

30.4

EPS - FRS 3 (p)

 

 

11.6

16.2

9.5

14.3

13.2

19.7

18.1

19.1

20.9

Dividend per share (p)

 

 

3.6

4.2

4.6

5.1

5.6

6.6

7.2

7.5

8.0

 

 

 

 

 

 

 

 

 

 

 

 

Gross Margin (%)

 

 

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

EBITDA Margin (%)

 

 

9.3

9.3

9.4

10.5

10.9

11.9

11.8

12.0

12.2

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

5.9

6.1

6.5

7.8

8.2

9.5

9.3

9.6

9.9

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

 

 

 

 

Fixed Assets

 

 

80.7

80.0

86.7

80.0

78.3

93.4

102.9

103.7

107.2

Intangible Assets

 

 

23.9

23.4

27.6

27.1

26.9

44.7

44.4

43.5

45.3

Tangible Assets

 

 

49.1

44.8

43.5

36.9

37.6

38.2

42.4

44.0

45.7

Investments

 

 

7.7

11.8

15.6

16.0

13.8

10.5

16.2

16.2

16.2

Current Assets

 

 

94.4

89.7

104.6

102.2

100.4

119.4

135.2

148.6

160.1

Stocks

 

 

42.3

45.5

52.8

50.2

52.2

60.1

69.1

71.2

73.5

Debtors

 

 

36.4

34.5

36.3

35.5

37.5

47.3

53.4

55.0

56.8

Cash

 

 

7.7

2.9

6.8

3.9

5.6

5.9

6.9

16.5

23.9

Current Liabilities

 

 

(56.4)

(52.5)

(54.0)

(58.1)

(60.0)

(67.6)

(73.1)

(79.5)

(85.8)

Creditors

 

 

(53.3)

(52.1)

(53.5)

(57.3)

(58.6)

(64.8)

(73.1)

(79.5)

(85.8)

Short term borrowings

 

 

(3.1)

(0.4)

(0.5)

(0.8)

(1.4)

(2.8)

0.0

0.0

0.0

Long Term Liabilities

 

 

(39.3)

(46.1)

(75.7)

(58.6)

(67.4)

(97.6)

(137.7)

(137.2)

(136.6)

Long term borrowings

 

 

(15.2)

(20.3)

(37.0)

(30.5)

(18.4)

(35.6)

(33.7)

(33.7)

(33.7)

Other long term liabilities

 

 

(24.1)

(25.8)

(38.7)

(28.1)

(49.0)

(62.0)

(104.0)

(103.5)

(102.9)

Net Assets

 

 

79.4

71.1

61.6

65.5

51.3

47.6

27.4

35.7

45.0

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOW

 

 

 

 

 

 

 

 

 

 

 

Operating Cash Flow

 

 

10.8

6.0

6.6

13.6

16.2

18.5

23.3

27.8

29.1

Net Interest

 

 

(1.0)

(1.6)

(1.3)

(1.6)

(1.3)

(0.9)

(1.5)

(1.4)

(1.3)

Tax

 

 

(0.6)

(0.6)

(1.0)

(1.7)

(0.5)

(1.0)

(2.0)

(3.6)

(4.3)

Capex

 

 

(6.3)

(6.7)

(4.2)

(2.8)

(1.4)

(6.6)

(8.3)

(8.3)

(8.3)

Acquisitions/disposals

 

 

4.4

0.0

(10.6)

0.1

3.3

(23.6)

(2.7)

(0.4)

(3.0)

Financing

 

 

0.0

0.2

0.3

0.4

0.2

0.1

0.0

0.0

0.0

Dividends

 

 

(0.7)

(2.2)

(2.5)

(2.8)

(3.1)

(3.6)

(4.1)

(4.6)

(4.9)

Net Cash Flow

 

 

6.6

(4.9)

(12.7)

5.2

13.4

(17.1)

4.8

9.6

7.4

Opening net debt/(cash)

 

 

15.9

10.6

17.8

30.7

27.4

14.2

32.5

26.8

17.2

HP finance leases initiated

 

 

0.0

(0.8)

(0.1)

0.0

0.0

0.0

0.0

0.0

0.0

Other

 

 

(1.3)

(1.5)

(0.1)

(1.9)

(0.2)

(1.2)

0.9

0.0

(0.0)

Closing net debt/(cash)

 

 

10.6

17.8

30.7

27.4

14.2

32.5

26.8

17.2

9.8

Source: Norcros accounts, Edison Investment Research. Note: Edison norm includes IAS19R pension administration costs and amortisation costs of raising finance (c £1.7m and £0.1m, respectively, from FY15 onwards). Exceptional items in 2015 and 2016 relate to the resolution of legacy property items and acquisition activity. Historic per share values have been restated to reflect the 10:1 share consolidation undertaken in September 2015.

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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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Norcros and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “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.

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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