“Edison’s accessible and high-quality research gives us the opportunity to communicate an independent perspective of Tyman to a wide variety of potential stakeholders.”
Currency in GBP
Last close As at 07/06/2023
GBP1.80
▲ −1.00 (−0.55%)
Market capitalisation
GBP161m
Research: Industrials
Strong H2 trading – especially in South Africa – causes us to raise our Norcros FY22 estimates to new record levels. Management anticipates further progress in FY23. We make only mix changes to our EBIT forecasts beyond FY22 at this stage. Ahead of the FY22 results, valuation multiples are already attractive in our view.
Written by
Toby Thorrington
Norcros |
Record revenue and EBIT in FY22 |
FY22 year-end update |
Construction & materials |
21 April 2022 |
Share price performance
Business description
Next event
Analyst
Norcros is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||
Strong H2 trading – especially in South Africa – causes us to raise our Norcros FY22 estimates to new record levels. Management anticipates further progress in FY23. We make only mix changes to our EBIT forecasts beyond FY22 at this stage. Ahead of the FY22 results, valuation multiples are already attractive in our view.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/20 |
342.0 |
27.1 |
26.1 |
3.1 |
10.0 |
1.2 |
03/21 |
324.2 |
29.0 |
29.1 |
8.2 |
8.9 |
3.2 |
03/22e |
396.2 |
36.0 |
34.0 |
9.0 |
7.6 |
3.5 |
03/23e |
409.8 |
36.0 |
34.1 |
9.8 |
7.6 |
3.8 |
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.
Revenue growth accelerates in South Africa in H2
Compared to FY20, group revenues rose by 20.8% in FY22 on a constant FX, like-for-like basis (an uptick vs 18.4% in H122). Very strong H2 revenue growth in South Africa (+44% and +31% for the year on the same basis) drove this acceleration. UK revenues look to have been in line with our estimates, with c 15% LFL growth in H2 (slightly below in H1) or up c 14% for the year as a whole on a reported basis. We expect these patterns to reflect market share gains in South Africa arising from relatively robust supply chain management and some normalisation of UK RMI demand. We have nudged up our FY22 group revenue and EBIT estimates by 3–4%, largely to reflect South African progress. Beyond this and for the same reason, we have raised revenue expectations by similar amounts, leaving EBIT unchanged at this stage, tweaked slightly more in favour of South Africa than previously.
Low gearing, headroom for growth
Norcros ended FY22 with c £7m (pre IFRS 16) net cash. The company has put a new £130m revolving credit facility in place to the end of 2026 (with two-year extension plus a £70m accordion options) to replace a £120m facility (and £30m accordion) due to end later this year. Norcros clearly has good long-term funding visibility and plenty of headroom to accommodate M&A activity subject to opportunities arising. In other housekeeping matters, its latest DB pension scheme triennial review (March 2021 actuarial deficit c £36m) has resulted in a slightly higher annual contribution (c £3.8m vs c £3.4m pa, both CPI linked, now capped at 5%) and an onerous lease has been exited at a cash cost just above twice the £0.6m annual charge.
Valuation: Attractive multiples
After strongly outperforming the FTSE All-Share Index in 2021, Norcros’s share price has drifted down since late January and has now underperformed its broadly flat comparator by c 17% ytd in 2022. Consumer-oriented cyclical stocks have clearly fallen out of favour during this period but, with an FY23e P/E of 7.6x, EV/EBITDA (adjusted for pensions cash) of 4.6x and prospective 3.8% dividend yield, Norcros should be screening well for several investor types. Delivering management’s expectation of progress in FY23 would further enhance the attraction of the above multiples, even before considering potential M&A activity.
Exhibit 1: Financial summary
£m |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022e |
2023e |
2024e |
||
March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|
|
Cont. |
Cont. |
Cont. |
Cont. |
Cont. |
Cont. |
Cont. |
Cont. |
Cont. |
Cont. |
Revenue |
|
|
222.1 |
235.9 |
271.2 |
300.1 |
331.0 |
342.0 |
324.2 |
396.2 |
409.8 |
421.9 |
Cost of Sales |
|
|
N/A |
N/A |
(171.7) |
(190.4) |
(206.8) |
(217.5) |
N/A |
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 |
N/A |
EBITDA IFRS 16 |
|
|
24.3 |
28.0 |
31.6 |
34.7 |
42.2 |
38.8 |
39.9 |
46.0 |
46.8 |
48.5 |
Op Profit (before SBP) |
|
|
18.3 |
22.5 |
25.2 |
28.3 |
35.6 |
32.2 |
34.7 |
41.3 |
41.3 |
42.7 |
Net Interest |
|
|
(1.2) |
(0.9) |
(0.9) |
(1.1) |
(1.8) |
(1.6) |
(1.5) |
(0.6) |
(0.7) |
(0.6) |
Other financial - norm |
|
|
(3.1) |
(3.1) |
(3.6) |
(2.8) |
(2.9) |
(3.5) |
(4.3) |
(4.7) |
(4.6) |
(4.6) |
Other financial |
|
|
2.1 |
(0.2) |
(4.2) |
(4.5) |
2.3 |
0.9 |
(3.0) |
(0.4) |
(0.4) |
(0.4) |
Intangible Amortisation |
|
|
(0.3) |
(0.9) |
(1.2) |
(2.2) |
(3.5) |
(3.7) |
(3.7) |
(3.7) |
(3.7) |
(3.7) |
Exceptionals |
|
|
(4.8) |
(2.0) |
(3.8) |
(4.2) |
(4.3) |
(9.3) |
(3.8) |
0.0 |
0.0 |
0.0 |
Profit Before Tax (norm) |
|
|
14.0 |
18.5 |
20.7 |
24.4 |
30.9 |
27.1 |
29.0 |
36.0 |
36.0 |
37.5 |
Profit Before Tax (company norm) |
|
15.8 |
20.4 |
22.9 |
26.3 |
32.6 |
28.8 |
30.6 |
37.7 |
37.6 |
39.1 |
|
Profit Before Tax (statutory) |
|
11.0 |
15.4 |
11.5 |
13.5 |
25.4 |
15.0 |
18.5 |
31.8 |
31.9 |
33.4 |
|
Tax |
|
|
(3.0) |
(2.4) |
(3.0) |
(3.6) |
(6.0) |
(4.1) |
(3.5) |
(7.9) |
(7.9) |
(8.3) |
Other |
|
|
0.1 |
0.0 |
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 |
25.5 |
28.0 |
28.1 |
29.3 |
Profit After Tax (statutory) |
|
|
8.1 |
13.0 |
8.5 |
9.9 |
19.4 |
10.9 |
15.0 |
23.9 |
24.0 |
25.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Avge Number of Shares Outstanding (m) |
59.2 |
60.6 |
61.1 |
68.0 |
80.2 |
80.3 |
80.6 |
80.9 |
81.0 |
81.0 |
||
Avge Number of Shares Outstanding FD (m) |
61.5 |
62.2 |
63.1 |
69.8 |
81.1 |
81.0 |
80.8 |
82.4 |
82.5 |
82.5 |
||
EPS FD - norm (p) |
|
|
18.0 |
24.7 |
24.4 |
26.8 |
29.6 |
26.1 |
29.1 |
34.0 |
34.1 |
35.5 |
EPS FD - co norm (p) |
|
|
21.1 |
27.7 |
27.8 |
29.5 |
31.7 |
28.2 |
31.1 |
36.1 |
36.0 |
37.4 |
EPS - statutory (p) |
|
|
13.2 |
20.8 |
13.4 |
14.1 |
23.9 |
13.5 |
18.6 |
29.0 |
29.0 |
30.5 |
Dividend per share (p) |
|
|
5.6 |
6.6 |
7.2 |
7.8 |
8.4 |
3.1 |
8.2 |
9.0 |
9.8 |
10.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin (%) |
|
|
N/A |
N/A |
36.7 |
36.5 |
37.5 |
36.4 |
N/A |
N/A |
N/A |
N/A |
EBITDA Margin (%) |
|
|
10.9 |
11.9 |
11.7 |
11.6 |
12.8 |
11.3 |
12.3 |
11.6 |
11.4 |
11.5 |
Op Margin (before GW and except.) (%) |
8.2 |
9.5 |
9.3 |
9.4 |
10.8 |
9.4 |
10.7 |
10.4 |
10.1 |
10.1 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET |
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Assets |
|
|
78.3 |
93.4 |
98.8 |
147.9 |
138.0 |
150.8 |
141.2 |
140.9 |
140.7 |
140.3 |
Intangible Assets |
|
|
26.9 |
44.7 |
44.8 |
98.9 |
94.9 |
96.5 |
93.6 |
89.9 |
86.2 |
82.5 |
Tangible Assets |
|
|
37.6 |
38.2 |
43.0 |
45.0 |
42.3 |
49.6 |
47.6 |
51.1 |
54.6 |
57.8 |
Other Fixed Assets |
|
|
13.8 |
10.5 |
11.0 |
4.0 |
0.8 |
4.7 |
0.0 |
0.0 |
0.0 |
0.0 |
Current Assets |
|
|
100.4 |
119.4 |
165.3 |
165.1 |
169.5 |
188.7 |
171.0 |
201.8 |
218.1 |
235.8 |
Stocks |
|
|
52.2 |
60.1 |
70.3 |
74.9 |
79.5 |
78.9 |
78.1 |
93.4 |
96.6 |
101.5 |
Debtors |
|
|
42.6 |
53.4 |
57.5 |
64.4 |
62.8 |
62.5 |
64.6 |
75.6 |
79.3 |
83.5 |
Cash |
|
|
5.6 |
5.9 |
37.5 |
25.8 |
27.2 |
47.3 |
28.3 |
32.8 |
42.2 |
50.8 |
Current Liabilities |
|
|
(60.0) |
(67.6) |
(105.7) |
(89.8) |
(85.1) |
(79.2) |
(104.1) |
(111.8) |
(114.7) |
(116.0) |
Creditors |
|
|
(58.6) |
(64.8) |
(74.8) |
(81.3) |
(81.3) |
(79.1) |
(104.1) |
(111.8) |
(114.7) |
(116.0) |
Short term borrowings |
|
|
(1.4) |
(2.8) |
(30.9) |
(8.5) |
(3.8) |
(0.1) |
0.0 |
0.0 |
0.0 |
0.0 |
Long Term Liabilities |
|
|
(67.4) |
(97.6) |
(101.8) |
(118.6) |
(96.7) |
(155.9) |
(59.7) |
(55.5) |
(52.2) |
(50.9) |
Long term borrowings |
|
|
(18.4) |
(35.6) |
(29.8) |
(64.4) |
(58.4) |
(83.6) |
(17.8) |
(25.8) |
(25.8) |
(25.8) |
Other long-term liabilities |
|
|
(49.0) |
(62.0) |
(72.0) |
(54.2) |
(38.3) |
(72.3) |
(41.9) |
(29.7) |
(26.4) |
(25.1) |
Net Assets |
|
|
51.3 |
47.6 |
56.6 |
104.6 |
125.7 |
104.4 |
148.4 |
175.4 |
191.9 |
209.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW |
|
|
|
|
|
|
|
|
|
|
|
|
Operating Cash Flow |
|
|
16.2 |
18.5 |
25.5 |
23.5 |
35.3 |
34.8 |
60.0 |
29.3 |
41.8 |
41.6 |
Net Interest |
|
|
(1.3) |
(0.9) |
(0.9) |
(1.1) |
(1.8) |
(3.5) |
(3.2) |
(2.4) |
(2.5) |
(2.4) |
Tax |
|
|
(0.5) |
(1.0) |
(1.9) |
(4.9) |
(4.6) |
(5.3) |
(3.5) |
(7.5) |
(8.7) |
(8.8) |
Capex |
|
|
(1.4) |
(6.6) |
(8.0) |
(7.7) |
(5.5) |
(4.8) |
(2.8) |
(9.0) |
(9.0) |
(9.0) |
Acquisitions/disposals |
|
|
3.3 |
(23.6) |
(2.7) |
(59.1) |
(2.1) |
(9.2) |
0.0 |
0.0 |
0.0 |
0.0 |
Financing |
|
|
0.2 |
0.1 |
0.0 |
30.1 |
(0.9) |
(0.8) |
0.3 |
(0.8) |
(0.8) |
(0.8) |
Dividends |
|
|
(3.1) |
(3.6) |
(4.2) |
(5.0) |
(6.4) |
(7.0) |
0.0 |
(9.1) |
(7.4) |
(8.0) |
Net Cash Flow |
|
|
13.4 |
(17.1) |
7.9 |
(24.2) |
14.0 |
4.2 |
50.8 |
0.5 |
13.4 |
12.6 |
Opening net debt/(cash) |
|
|
27.4 |
14.2 |
32.5 |
23.2 |
47.1 |
35.0 |
36.4 |
(10.5) |
(7.0) |
(16.4) |
IFRS16 Finance leases |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
(3.8) |
(4.3) |
(4.0) |
(4.0) |
(4.0) |
Other |
|
|
(0.2) |
(1.2) |
1.4 |
0.3 |
(1.9) |
(1.8) |
0.4 |
0.0 |
0.0 |
0.0 |
Closing net debt/(cash) |
|
|
14.2 |
32.5 |
23.2 |
47.1 |
35.0 |
36.4 |
(10.5) |
(7.0) |
(16.4) |
(25.0) |
IFRS 16 lease liabilities |
|
|
|
|
|
|
|
(25.1) |
(24.2) |
(23.7) |
(23.7) |
(23.7) |
|
Source: Company accounts, Edison Investment Research |
||||||||||||
|
||||||||||||
|
||||||||||||
Research: Industrials
Carr’s Group’s H122 results show it is coping well with commodity price volatility. The high oil prices are boosting demand for precision engineering services, supporting a recovery in the Engineering division. Management is confident that the FY22 performance will be in line with market expectations, so we leave our estimates broadly unchanged.
Get access to the very latest content matched to your personal investment style.
