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Currency in GBP
Last close As at 26/05/2023
GBP1.75
▲ −1.75 (−0.99%)
Market capitalisation
GBP156m
Research: Industrials
An upbeat trading statement (for the four months to 7 February) points to very strong like-for-like revenue growth in both the UK and South Africa. Higher volumes and revenues most likely with an improving mix are all supportive of rising profitability and margins. Our FY21 PBT estimate is now c 16% higher and consistent with updated guidance. We have also increased subsequent years modestly. Gaining market share and virtually de-gearing the business in the last year are notable group achievements.
Written by
Toby Thorrington
Norcros |
Revenue rebound has accelerated in H2 |
Trading update |
Construction & materials |
5 March 2021 |
Share price performance
Business description
Next event
Analyst
Norcros is a research client of Edison Investment Research Limited |
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An upbeat trading statement (for the four months to 7 February) points to very strong like-for-like revenue growth in both the UK and South Africa. Higher volumes and revenues most likely with an improving mix are all supportive of rising profitability and margins. Our FY21 PBT estimate is now c 16% higher and consistent with updated guidance. We have also increased subsequent years modestly. Gaining market share and virtually de-gearing the business in the last year are notable group achievements.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/19 |
331.0 |
30.9 |
29.6 |
8.4 |
8.6 |
3.3 |
03/20 |
342.0 |
27.1 |
26.1 |
3.1 |
9.7 |
1.2 |
03/21e |
317.6 |
22.6 |
21.7 |
3.6 |
11.7 |
1.4 |
03/22e |
327.1 |
26.4 |
25.3 |
6.5 |
10.0 |
2.6 |
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.
Double-digit revenue growth so far in H221
After a challenging end to FY20/start to FY21, UK revenue grew by +4% in Q2 l-f-l y-o-y led by Triton and Merlyn. The sales performance in Q3 and the first month of Q4 (+15% following -16% for H121 overall) brings FY21 to date to -4% on an actual basis in the UK. The same two businesses have continued to perform well and collectively the other five UK companies must now be seeing good positive like-for-like progress also. This appears to be better than recent outlook statements elsewhere (eg Travis Perkins, Howden); Norcros has regularly referred to gaining share and the latest update suggests that this is being achieved. The initial lockdown and subsequent recovery revenue profile has been amplified in South Africa; the latest four months revenue was +22% l-f-l y-o-y (versus -21% at the H121 stage), with FY21 to date now -5% (local FX, actual). The bathroom retailer Tile Africa has seen strong residential demand and this also benefits other operating companies that supply into it. After a strong H1 group cash inflow performance, core net debt (pre IFRS 16) has nudged down further with group gearing remaining at very modest levels.
Estimates raised: FY22e PBT to near FY20 levels
We have revised our divisional revenue expectations upwards to reflect the latest update and this feeds into increased profitability, with FY21e EBIT (up c 12% to £28.1m, company basis) consistent with management’s increased guidance of ‘no less than £28m’ for the year, and we continue to anticipate an FY21 final dividend. Our subsequent years’ earnings estimates have increased more modestly and we will review these (together with dividends, which are unchanged for now) again following the scheduled year-end update on 15 April.
Valuation: Moving from value to growth
A 10% share price increase following the update is recognition that Norcros is performing ahead of its markets. Nevertheless, on higher earnings estimates, the P/E and EV/EBITDA (adjusted for pensions cash) are still only 10.0x and 6.3x, respectively, for FY22. Norcros is positioned for further growth.
Exhibit 1: Financial summary
£m |
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 |
317.6 |
327.1 |
338.5 |
|
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 |
33.7 |
37.4 |
39.6 |
|
Op Profit (before SBP) |
|
|
18.3 |
22.5 |
25.2 |
28.3 |
35.6 |
32.2 |
28.5 |
31.9 |
33.9 |
|
Net Interest |
|
|
(1.2) |
(0.9) |
(0.9) |
(1.1) |
(1.8) |
(1.6) |
(1.9) |
(1.5) |
(1.4) |
|
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 |
22.6 |
26.4 |
28.5 |
|
Profit Before Tax (company norm) |
|
|
15.8 |
20.4 |
22.9 |
26.3 |
32.6 |
28.8 |
24.3 |
28.1 |
30.2 |
|
Profit Before Tax (statutory) |
|
|
11.0 |
15.4 |
11.5 |
13.5 |
25.4 |
15.0 |
13.1 |
21.2 |
23.3 |
|
Tax |
|
|
(3.0) |
(2.4) |
(3.0) |
(3.6) |
(6.0) |
(4.1) |
(3.7) |
(5.1) |
(5.6) |
|
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 |
18.9 |
21.3 |
22.9 |
|
Profit After Tax (statutory) |
|
|
8.1 |
13.0 |
8.5 |
9.9 |
19.4 |
10.9 |
9.4 |
16.1 |
17.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Avge Number of Shares Outstanding (m) |
|
59.2 |
60.6 |
61.1 |
68.0 |
80.2 |
80.3 |
80.7 |
80.8 |
80.8 |
||
Avge Number of Shares Outstanding 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 |
21.7 |
25.3 |
27.4 |
|
EPS FD - co norm (p) |
|
|
21.1 |
27.7 |
27.8 |
29.5 |
31.7 |
28.2 |
23.8 |
27.4 |
29.4 |
|
EPS - statutory (p) |
|
|
13.2 |
20.8 |
13.4 |
14.1 |
23.9 |
13.5 |
11.5 |
19.8 |
21.8 |
|
Dividend per share (p) |
|
|
5.6 |
6.6 |
7.2 |
7.8 |
8.4 |
3.1 |
3.6 |
6.5 |
7.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
10.6 |
11.4 |
11.7 |
|
Op Margin (before GW and except.) (%) |
|
8.2 |
9.5 |
9.3 |
9.4 |
10.8 |
9.4 |
9.0 |
9.7 |
10.0 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
159.3 |
168.6 |
183.3 |
|
Stocks |
|
|
52.2 |
60.1 |
70.3 |
74.9 |
79.5 |
78.9 |
73.3 |
77.5 |
80.2 |
|
Debtors |
|
|
42.6 |
53.4 |
57.5 |
64.4 |
62.8 |
62.5 |
65.9 |
67.6 |
69.6 |
|
Cash |
|
|
5.6 |
5.9 |
37.5 |
25.8 |
27.2 |
47.3 |
20.1 |
23.5 |
33.6 |
|
Current Liabilities |
|
|
(60.0) |
(67.6) |
(105.7) |
(89.8) |
(85.1) |
(79.2) |
(91.2) |
(90.4) |
(93.3) |
|
Creditors |
|
|
(58.6) |
(64.8) |
(74.8) |
(81.3) |
(81.3) |
(79.1) |
(91.2) |
(90.4) |
(93.3) |
|
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 |
117.3 |
128.6 |
140.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW |
|
|
|
|
|
|
|
|
|
|
|
|
Operating Cash Flow |
|
|
16.2 |
18.5 |
25.5 |
23.5 |
35.3 |
34.8 |
44.7 |
32.2 |
36.7 |
|
Net Interest |
|
|
(1.3) |
(0.9) |
(0.9) |
(1.1) |
(1.8) |
(3.5) |
(3.7) |
(3.3) |
(3.2) |
|
Tax |
|
|
(0.5) |
(1.0) |
(1.9) |
(4.9) |
(4.6) |
(5.3) |
(3.0) |
(7.4) |
(5.3) |
|
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 |
(4.7) |
(5.9) |
|
Net Cash Flow |
|
|
13.4 |
(17.1) |
7.9 |
(24.2) |
14.0 |
4.2 |
32.2 |
7.4 |
14.1 |
|
Opening net debt/(cash) |
|
|
27.4 |
14.2 |
32.5 |
23.2 |
47.1 |
35.0 |
36.4 |
7.6 |
4.2 |
|
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 |
7.6 |
4.2 |
(5.9) |
|
IFRS16 lease liabilities |
|
|
|
|
|
|
|
(25.1) |
(26.6) |
(26.6) |
(26.6) |
|
Source: Company accounts, Edison Investment Research
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