Norcros — Well placed to gain market share

Norcros (LSE: NXR)

Currency in GBP

Last close As at 03/02/2023

GBP2.23

13.00 (6.19%)

Market capitalisation

GBP187m

Research: Industrials

Norcros — Well placed to gain market share

Norcros’s interims highlighted a solid H1 performance, and although we have reduced our estimates to reflect a weaker outlook into FY24, we believe that Norcros’s proven strategy remains on track, which should allow it to unlock significant market share opportunities. We also believe that its key strengths are undervalued and that most, if not all, of the legacy issues, particularly the pension deficit, have been resolved. We have reduced our valuation from 314p/sh to 252p implying c 40% upside.

Andy Murphy

Written by

Andy Murphy

Director, Financials & Industrials

Industrials

Norcros

Well placed to gain market share

Interim results update

Construction and materials

6 December 2022

Price

189p

Market cap

£169m

ZAR19.30/£

Net debt (£m) at 30 September 2022

58.9

Shares in issue

89.3m

Free float

98%

Code

NXR

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

7.4

(8.5)

(37.8)

Rel (local)

3.7

(11.8)

(39.1)

52-week high/low

327p

165p

Business description

Norcros is a leading supplier of showers, enclosures and trays, 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

Preliminary results

April 2023

Analyst

Andy Murphy

+44 (0)20 3077 5700

Norcros is a research client of Edison Investment Research Limited

Norcros’s interims highlighted a solid H1 performance, and although we have reduced our estimates to reflect a weaker outlook into FY24, we believe that Norcros’s proven strategy remains on track, which should allow it to unlock significant market share opportunities. We also believe that its key strengths are undervalued and that most, if not all, of the legacy issues, particularly the pension deficit, have been resolved. We have reduced our valuation from 314p/sh to 252p implying c 40% upside.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

03/21

324.2

27.4

29.7

8.2

6.4

4.3

03/22

396.3

38.6

38.7

10.0

4.9

5.3

03/23e

448.9

41.8

37.5

10.0

5.0

5.3

03/24e

462.6

38.9

33.7

9.3

5.6

4.9

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, and exceptional items.

Interims were robust in a volatile market

H1 revenue grew 9.5% y-o-y at the headline level to £219.9m. This figure was up 1.1% y-o-y on a constant currency basis and up an impressive 19.8% on the same basis versus H120. Underlying operating profit was flat at £22m, but was up 26.4% versus the same period in 2019. The margin slid from 11.0% in H122 to 10.0%, largely due to the pass through of input cost inflation. Underlying PBT declined by 4.8% y-o-y as interest costs rose due to the higher levels of net debt reflecting M&A financing, and diluted EPS slid 10.9% y-o-y to 17.8p, affected by the higher number of shares in issue. Net debt was £58.9m, versus a modest net cash position last year, again reflecting recent M&A.

Growth opportunities abound

In our last Norcros note, we focused on the company’s key strengths and its growth potential via acquisition and channel expansion, its potential to move into other verticals in its wider core bathroom market and to cross-sell products from right across the group to existing clients. Norcros is well placed versus its competitors to take market share, being well capitalised and new product focused, with good stock availability and good customer service. Many competitors are leveraged, have squeezed working capital to the detriment of customer service and do not have the supply chain infrastructure to manage ongoing challenges. There are also additional initiatives and opportunities open to Norcros that we address in this note.

Valuation: Reduced valuation of 252p offers upside

Following the sell-off in the shares this year, Norcros is trading at the low end of its long-term forward P/E range on 4.9x, suggesting that a lot of bad news is priced in. In fact, it has only traded materially below the current rating for a brief period in early 2020 during the pandemic, and again recently. We have lowered our valuation from 314p as our earnings estimates, particularly in FY24, have reduced, and the discount rate in our dividend discount model (DDM) has increased. We now value the stock at 252p/share based on the average of our lowered P/E-based model of 253p and our DDM model, which implies a value of 250p/share.

Opportunities abound, but short-term issues

The recent interim results highlighted the robust nature of Norcros, though we have taken a more cautious stance on estimates given the uncertain outlook in FY24 and FY25. However, we believe Norcros is well placed to expand the business, particularly when economies stabilise, based on a number of growth themes. We touched on some in our July note, and there are other potentially interesting themes like legislative changes, geographical expansion and leveraging off the Grant Westfield acquisition that can be supportive. Furthermore, one of the key historical issues faced by Norcros, that of its historically large pension deficit, remains well under control as the fund has been in an accounting surplus at the last two half years. Norcros is a leading player in its field and with the stock trading on a P/E of just 4.9x, we believe there is significant upside from the current depressed price level.

Interim results demonstrate resilience

H1 revenue grew 9.5% y-o-y at the headline level to £219.9m. This figure was up 1.1% y-o-y on a constant currency basis and up an impressive 19.8% on the same basis versus H120. Underlying operating profit was flat at £22m, but was up 26.4% versus the same period in 2019. The margin slid from 11.0% to 10.0% largely due to the pass through of input cost inflation. However, this lower margin was still comfortably higher than it was in both H120, pre-COVID-19, and H121.

Underlying PBT declined 4.8% as interest costs rose due to the higher levels of net debt reflecting M&A financing, and diluted EPS slid 10.9% to 17.8p, affected by the higher number of shares in issue. An interim dividend of 3.4p was declared, compared to 3.1p last year. Net debt was £58.9m, versus a modest net cash position last year, again reflecting the acquisition of Grant Westfield.

Overall, current inflationary pressures are not as severe as they have been previously, with copper, glass and aluminium cost increases moderating versus more energy intensive materials like polymers, sand and cement. Freight costs are also moderating as container shipping costs have fallen materially from the peak of the market. Monitoring these cost pressures is a key focus for all of the Norcros businesses, and management has successfully implemented several price increases across the business units so far, albeit there can be a lag of around one to three months.

With regard to energy, Norcros is almost fully hedged for FY23 and c 50% hedged for FY24. It continues to closely monitor what further price increases will be required this year and next, while also watching the US dollar sterling foreign exchange rates, which will also have an impact on supply costs.

Exhibit 1: H1 results summary, last four years

H120

H121

y-o-y chg

H122

y-o-y chg

H123

y-o-y chg

Total revenues (£m)

181.2

135.3

-25.3%

200.9

48.5%

219.9

9.5%

Operating profit (underlying) (£m)

17.4

12.8

-26.4%

22.0

71.9%

22.0

0.0%

Underlying operating margin

9.6%

9.5%

-

11.0%

-

10.0%

-

Underlying PBT (£m)

15.6

10.7

-31.7%

20.9

96.2%

19.9

-4.8%

Profit before tax (post exceptionals and other) (£m)

13.3

3.4

-74.4%

17.7

420.6%

14.0

-20.9%

EPS – diluted, underlying (p)

15.1

10.6

-30.2%

20.0

89.8%

17.8

-10.9%

Dividend per share (p)

3.1

0.0

-100.0%

3.1

N/A

3.4

9.7%

Underlying net cash/(debt) (£m)

(41.1)

(7.3)

N/A

1.0

-113.7%

(58.9)

N/A

Source: Norcros, Edison Investment Research

Divisional results reflect strong H122 comparator

In the UK, which accounts for 65% of revenue, Norcros generated revenue of £142.8m, up 9.2% in total and up 13.5% versus 2019 on a like-for-like basis. On a like-for-like basis, UK revenue slipped 3.4% against a very strong comparator with the trade sector proving resilient, offset by a combination of softer retail demand and destocking at larger retail customers. Export revenue was weak across many markets, while Grant Westfield generated revenue of £16.5m in the four months, representing positive like-for-like growth. The margin slipped year-on-year, largely due to the exceptional peak in 2021, and Norcros reported underlying operating profit of £16.3m down from £17.0m in H122. The decline reflected the exceptional performance last year, rather than weakness this year. Norcros generated a profit of £12.5m in 2019 (H120).

Exhibit 2: UK – H1 revenue, operating profit and margin

Source: Norcros, Edison Investment Research

The two largest UK brands, Triton and Merlyn, declined 2.9% and 2.1%, respectively, in total as modest UK growth was offset by materially weaker Irish markets. However, like-for-like revenue was up 27.7% and 35.1% respectively versus 2019. Both brands reported lower operating profit year-on-year, largely due to stronger comparators but were up. Vado and Croydex both reported double-digit declines in revenue; Vado because a recovery in the trade segments was offset by weaker retail and challenging export markets, particularly in the Middle East, and Croydex for similar reasons that included destocking and lower offtake from the United States. Both brands reported underlying operating profit lower than last year and 2019.

Grant Westfield, the recently acquired leading manufacturer of high-end waterproof bathroom wall panels, performed well, reporting revenue growth of 8.1% for the four months that it was owned by the group in the period. The business has been integrated ‘seamlessly’ and since acquisition has launched the Multipanel Tile collection, a grout-free alternative to ceramic tiles. Norcros remains confident that it can realise significant new business wins due to new product introductions as well as leveraging off the broader group distribution channels. Underlying profit performance was in line with expectations.

Abode grew revenue 6.5% as it benefited from new products and therefore took an increased ‘share of wallet’. It also benefited from strong market positions with key customers and investment in new design studio space focused on the trade channel. Abode’s operating profit was ahead of both last year and 2019.

Johnson Tiles reported revenue growth of 8%, mainly due to increased selling prices to reflect higher input costs, mainly energy in the production process. The retail sector faced challenging trading conditions and some destocking, which was offset by selling price increases and good stock availability. In trade, revenue grew well aided by good relationships with the national house builders and the supply to a number of major contracts. Exports were weak, largely due to withdrawal of low-margin business. Underlying operating profit was marginally behind H119 and the prior year.

Norcros adhesives reported flat revenue in H1 as a weak retail sector was offset by improved trade revenue. Raw material costs increased and although this was offset by selling price increases, there was a lag that resulted in the division reporting a loss in the period. Management is implementing a programme of measures to improve the H2 performance.

The South African business, which makes up 35% of revenue, grew 10.0% y-o-y and was up 9.7% on a constant currency basis to £77.1m, versus a very strong comparator. Norcros continued to take market share despite reduced consumer confidence due to the rising cost of living. On a like-for-like constant currency basis, revenue was up 31.8% versus H119, with Tile Africa performing particularly well. Operating profit increased 14% to £5.7m and the margin expanded by 30 basis points to 7.4%.

Exhibit 3: South Africa – H1 revenue, operating profit and margin

Source: Norcros, Edison Investment Research

In contrast to the mixed performance of the UK based brands, all of the South African brands grew on a reported and a constant currency basis, with the House of Plumbing being the stand-out revenue performer, growing revenue by 29.7% due to its expanding network of branches, which now stands at eight. Its focus on providing expert technical plumbing advice to the civil engineering, mining and agricultural sectors supported growth, but despite the good top-line performance, profit was marginally lower than last year and also lower than in 2019.

The biggest Norcros brand in South Africa is Tile Africa, which accounts for 51% of divisional revenue. It benefited from improved operating discipline and superior stock availability, which led to market share gains in both the retail and commercial sectors. It also benefited from a new and re-energised product range, which resulted in operating profit that was ahead of the prior year and ‘significantly ahead of 2019’.

TAL and Johnson Tiles South Africa (JTSA) grew revenue by 2.7% and 13.3%, respectively. TAL was held back by a slower recovery in the commercial sector, which contributed to a lower profit in H123 versus last year and H119. JTSA grew due to the repair, maintenance and improvement and new house building segments, which resulted in higher profits versus last year, but below 2019.

Expansion potential update

In our last Norcros note, we focused on the company’s key strengths and its growth potential via acquisition and channel expansion, its potential to move into other verticals in its wider core bathroom market and to cross-sell products from right across the group to existing clients. There are also additional initiatives and opportunities open to Norcros that we address below.

Legislative opportunities

The UK government has said that from 2025, the Future Homes Standard will deliver homes that are ‘zero-carbon ready’. This means that new homes will no longer be built with fossil fuel heating such as a natural gas boiler. This legislation creates an enhanced opportunity for Norcros’s electric shower and associated products from Triton, leveraging Norcros’s strong relationships with house builders.

In addition, the growing need for key customers like the housebuilders and Screwfix to have strong ESG credentials on products from their suppliers are becomingly increasing important. In particular, a key component for Norcros would be the energy and water saving nature (and hence lower usage costs) of the products such as electric showers. A great example of this is Triton. Triton’s sustainability credentials including its online cost saving calculator is here.

A couple of examples that illustrate the point are Triton’s win of the Screwfix ‘Sustainable product of the year award 2022’ and Johnson Tiles’ involvement in Barratt Developments ‘zed-house’.

Cross-selling Grant Westfield products

Norcros is also introducing plans to drive demand synergies by integrating the recently acquired Grant Westfield business into the wider Norcros distribution channels, like it did with Merlyn. There is a large potential opportunity with some of Norcros’s key accounts and in due course the housebuilders. In addition, we believe Norcros has further opportunities in the social housing segment, working closely with Triton, and with pod manufacturing within Vado, which has strong relationships in this area.

Geographical expansion

Norcros has been in South Africa since the 1950s and has a market leading position that could be enhanced via M&A in this fragmented market. Expansion into other geographies have been and would be considered if the strategic investment case was compelling enough (ie markets/products/market position/management/growth opportunities etc). Norcros has reviewed many opportunities across Europe and the Middle East and some other niche markets like the Nordics. We believe these markets are potentially much more attractive than markets like the United States or Germany, which are dominated by much larger competitors like Kohler and Masco.

Pension remains in surplus despite volatility

Norcros has a ‘super-mature’ pension scheme, which until this year had been in deficit by up to £63m, as at March 2017, which was a material negative at the time considering that the market capitalisation at that point was only £101.4m. Since then, the deficit has trended lower and stood at just £6m at the end of September 2021. On an IAS 19R basis, the pension fund swung into a surplus of £19.6m at the end of March 2022, and despite the volatility in markets, especially in the autumn, remained in a modest surplus at the end of September as the fall in the value of the fund’s assets was nearly matched by the decline in liabilities as gilt yields rose. Therefore, the pension should no longer be viewed as the negative it clearly was five years ago.

Exhibit 4: Norcros pension remains in surplus

Source: Norcros

At the last triennial actuarial valuation in March 2021, the actuarial deficit stood at £35.8m (2018: £49.3m), and it was agreed that the company would make deficit repair contributions of £3.8m each year from April 2022 to March 2027, increasing with CPI, capped at 5%.

More conservative stance taken to forecasts

Given the levels of economic uncertainty that pervade, particularly in the UK and to a lesser extent in Europe, we have lowered the overall growth expectations in our forecasts. For example, in the UK for FY23, FY24 and FY25, we have lowered our revenue growth expectations from 5%, 8% and 5%, respectively, to 1% in each year. In South Africa, we have raised FY23 revenue growth from zero to 6% this year given the growth recorded in H1, and maintained revenue growth expectations in all other forecast years at 2% pa. Overall, this implies a modest lowering of revenue expectations in FY23e, and a 4.8% reduction in FY24e.

Lower revenue and potentially higher cost pressures are likely to have a disproportionate impact on profitability and we have therefore reduced ‘normalised’/reported operating profit by 1.5% and 13.8% in FY23e and FY24e, respectively. Lower profits lead to reduced EPS and DPS expectations especially in FY24e. Net debt remains below 1x net debt to EBITDA.

Exhibit 5: Changes to forecasts

£m

FY22

FY23e

FY24e

Old

New

Chg

Old

New

Chg

Revenue

396.3

450.8

448.9

-0.4%

485.9

462.6

-4.8%

y-o-y change

22.2%

13.8%

13.3%

-

7.8%

3.1%

-

EBITDA - Edison basis

47.0

54.3

53.6

-1.4%

59.8

52.4

-12.4%

y-o-y change

19.9%

15.5%

13.9%

-

10.1%

-2.2%

-

EBITDA - reported pre IFRS 16

45.4

53.0

52.3

-1.4%

58.5

51.1

-12.7%

y-o-y change

19.8%

16.7%

15.1%

-

10.4%

-2.3%

-

Normalised/reported operating profit

41.8

48.4

47.7

-1.5%

53.6

46.2

-13.8%

y-o-y change

23.7%

15.8%

14.0%

-

10.7%

-3.0%

-

PBT (reported)

33.0

34.5

31.2

-9.7%

40.9

29.0

-29.1%

y-o-y change

78.4%

4.5%

-5.6%

-

18.6%

-6.9%

-

EPS - Basic, normalised (p)

38.7

40.3

37.5

-6.9

40.6

33.7

-17.1

y-o-y change

30.8%

4.2%

-3.0%

-

0.7%

-10.3%

-

DPS (p)

10.0

10.0

10.0

0.0%

10.5

9.3

-11.9%

y-o-y change

22.0%

0.0%

0.0%

-

5.0%

-7.5%

-

Net (debt)/cash (pre IFRS 16)

8.6

(50.6)

(51.4)

1.6%

(34.1)

(42.0)

23.1%

y-o-y change

-18.1%

N/A

N/A

-

-32.6%

-18.3%

-

Source: Norcros, Edison Investment Research

We believe that Norcros is well placed to offset weaker than expected demand. The business generally operates on a capital-light model and can be flexible in times of declining demand. This can be seen particularly in H121 during the pandemic, when demand fell and the business was run for cash. Norcros reported a net debt position of £36.4m at 31 March 2020, which reduced to net debt of £7.3m by the end of September, and swung to a net cash position of £10.5m just 12 months later.

The wider point about declining demand is how well placed Norcros is versus its competitors to take share, as it is well capitalised and new product focused, with good stock availability and customer service. Many competitors have leverage, squeezed working capital to the detriment of customer service and will not have the infrastructure in China to manage the ongoing supply chain challenges. It is possible that some of the competition would not survive in a downturn and that Norcros is well placed to benefit from any opportunities to gain market share.

Valuation suggests c 40% upside

Following the hard sell-off in the shares over the last 12 months, Norcros is trading at the low end of its long-term forward P/E range on 4.9x, suggesting that a lot of bad news is priced in. In fact, it has only traded materially below the current rating for a brief period in early 2020 during the pandemic. We have lowered our valuation from 314p in our last note as our earnings estimates, particularly in FY24, have reduced, and the discount rate in our DDM has increased. Our P/E based valuation implies a value of 253p/share based on our lowered diluted underlying FY24 EPS of 33.8p/share. Our DDM model implies a value of 250p/share and if we take the average of the two, we arrive at 252p, implying c 40% upside.

Simple forward P/E multiple valuation implies 253p/share

The chart below details the progression of Norcros’s forward P/E over the last cycle. The range at the extremes is a low of 4x reached briefly post COVID-19 and again recently, and the high is c 12x at the end of 2013, before the Brexit hiatus. Over this period and outside the extreme ratings, the ‘real’ range has arguably been 6–9x and the average over the whole period is 7.5x.

Exhibit 6: Norcros – forward P/E ratio (x)

Source: Refinitiv

If we apply the 7.5x forward P/E multiple to our lowered estimate of FY24e diluted underlying EPS of 33.8p, we arrive at a value of 253p/share, implying c 40% upside to the share price. Arguably, this method gives little credit for future acquisitions, which are part of the company’s strategy and may be forthcoming.

Exhibit 7: Implied valuation based on a range of P/E multiples

P/E target (x)

5.0

6.0

7.0

7.5

8.0

9.0

Implied valuation (p/share)

169

203

236

253

270

304

Source: Edison Investment Research

Dividend discount model implies a valuation of 250p

Our DDM supports the P/E valuation of c 250p share, down from 333p/share in our previous note. In this revised model, we have raised the risk-free rate by 200bp to 3.0% reflecting the higher rates that now prevail. However, we have maintained the base dividend of 10p/share even though we are aware that our dividend estimates decline in the short term. We are confident that forecasts are likely to rise in the longer term given the numerous growth channels available to Norcros, justifying our 5% long-term growth estimate.

Exhibit 8: Implied valuation (p/share) based on a range of inputs

Dividend growth rate (%)

3.0%

4.0%

5.0%

6.0%

7.0%

Cost of equity

12.0%

111.1

125.0

142.9

166.7

200.0

11.0%

125.0

142.9

166.7

200.0

250.0

10.0%

142.9

166.7

200.0

250.0

333.3

9.0%

166.7

200.0

250.0

333.3

500.0

8.0%

200.0

250.0

333.3

500.0

1000.0

Source: Edison Investment Research

Exhibit 9: Financial summary

£'m

2020

2021

2022

2023e

2024e

2025e

31-March

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

342.0

324.2

396.3

448.9

462.6

468.8

EBITDA

 

 

39.1

39.2

47.0

53.6

52.4

53.9

Operating profit - Underlying

32.3

33.8

41.8

47.7

46.2

46.8

IAS 19R Pension scheme expenses

(1.5)

(1.4)

(1.7)

(1.7)

(1.7)

(1.7)

Impairment and acquisition related costs

(4.0)

(3.7)

(4.8)

(8.9)

(8.2)

(8.2)

Other

(9.0)

(3.8)

0.9

0.0

0.0

0.0

Reported operating profit

17.8

24.9

36.2

37.1

36.3

36.9

Net Interest

(2.8)

(6.4)

(3.2)

(5.9)

(7.3)

(6.3)

Profit Before Tax (norm)

 

 

29.5

27.4

38.6

41.8

38.9

40.5

PBT - Underlying

 

 

28.8

30.6

39.3

42.6

39.7

41.3

Profit Before Tax (reported)

 

 

15.0

18.5

33.0

31.2

29.0

30.6

Reported tax

(4.1)

(3.5)

(7.3)

(8.7)

(9.0)

(9.5)

Net income (normalised)

25.4

23.9

31.3

33.0

29.9

31.0

Net income (Underlying)

22.8

25.1

31.5

33.8

30.7

31.8

Net income (reported)

10.9

15.0

25.2

22.4

20.0

21.1

Basic average number of shares outstanding (m)

80

81

81

88

89

89

EPS - basic normalised (p)

 

 

31.63

29.65

38.70

37.53

33.67

34.90

EPS - diluted normalised (p)

 

 

31.37

29.58

37.99

35.86

32.89

34.09

EPS - Diluted, underlying

 

 

28.16

31.06

38.23

36.73

33.77

34.97

EPS - basic reported (p)

 

 

13.57

18.61

31.15

25.49

22.53

23.76

Dividend (p)

3.10

8.20

10.00

10.00

9.25

9.50

Revenue growth (%)

3.3

(-5.2)

22.2

13.3

3.1

0.0

EBITDA Margin (%)

11.4

12.1

11.9

11.9

11.3

11.5

Normalised Operating Margin

9.4

10.4

10.5

10.6

10.0

10.0

BALANCE SHEET

Fixed Assets

 

 

150.8

141.2

158.8

226.7

209.6

204.2

Intangible Assets

96.5

93.6

90.3

83.3

75.7

68.1

Tangible Assets

29.0

28.0

29.0

111.5

114.3

116.5

Investments & other

25.3

19.6

39.5

31.9

19.6

19.6

Current Assets

 

 

188.7

171.0

200.7

231.0

241.8

244.7

Stocks

78.9

78.1

100.6

116.7

124.9

126.6

Debtors

60.5

64.6

71.1

85.3

87.9

89.1

Cash & cash equivalents

47.3

28.3

27.4

27.4

27.4

27.4

Other

2.0

0.0

1.6

1.6

1.6

1.6

Current Liabilities

 

 

(79.2)

(104.1)

(110.8)

(125.1)

(123.0)

(124.6)

Creditors

(72.9)

(95.4)

(102.4)

(116.7)

(120.3)

(121.9)

Tax and social security

(1.0)

(1.0)

(2.7)

(2.7)

(2.7)

(2.7)

Short term borrowings

(0.1)

0.0

0.0

0.0

0.0

0.0

Other

(5.2)

(7.7)

(5.7)

(5.7)

0.0

0.0

Long Term Liabilities

 

 

(155.9)

(59.7)

(48.4)

(100.0)

(87.2)

(64.4)

Long term borrowings

(83.6)

(17.8)

(18.8)

(78.8)

(69.4)

(51.8)

Other long term liabilities

(72.3)

(41.9)

(29.6)

(21.2)

(17.8)

(12.6)

Shareholders' equity

 

 

104.4

148.4

200.3

232.6

241.2

259.9

CASH FLOW

Op Cash Flow before WC and tax

39.1

39.2

47.0

53.6

52.4

53.9

Working capital

(4.8)

21.8

(23.6)

(16.0)

(7.2)

(1.2)

Tax

(5.3)

(3.5)

(6.5)

(8.7)

(9.0)

(9.5)

Other

0.4

(2.0)

(0.9)

(2.9)

(0.9)

(0.9)

Net operating cash flow

 

 

29.4

55.5

16.0

25.9

35.2

42.3

Capex

(4.8)

(2.8)

(5.4)

(8.0)

(8.5)

(9.0)

Acquisitions/disposals

(9.2)

0.0

0.0

(80.0)

0.0

0.0

Net interest

(3.5)

(3.2)

(2.5)

(3.4)

(4.8)

(3.8)

Equity financing

(0.9)

0.0

0.0

0.0

0.0

0.0

Dividends

(7.0)

0.0

(9.1)

(8.3)

(8.8)

(8.2)

Other

(3.8)

(3.2)

(2.5)

13.7

(3.7)

(3.7)

Net Cash Flow

0.2

46.3

(3.5)

(60.0)

9.4

17.6

Opening net debt/(cash)

 

 

35.0

36.4

(10.5)

(8.6)

51.4

42.0

FX

(1.6)

0.6

1.6

0.0

0.0

0.0

Closing net debt/(cash)

 

 

36.4

(10.5)

(8.6)

51.4

42.0

24.4

Source: Norcros accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Norcros and prepared and issued by Edison, in consideration of a fee payable by Norcros. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Norcros and prepared and issued by Edison, in consideration of a fee payable by Norcros. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

More on Norcros

View All

Latest from the Industrials sector

View All Industrials content
Concept of energy storage unit consisting of multiple conected containers with batteries. 3d rednering.

Industrials

Battery energy storage

Industrials

DWF Group — Step-by-step strategic progress

Research: TMT

Solid State — Record customer demand

Solid State’s H123 results show strong revenue growth (51% y-o-y) and order intake (up 32% vs end-FY22) reflecting 31% organic growth in constant currency, as well as the acquisition of United States-based Custom Power and currency tailwinds. Trading since the period end has been ahead of management expectations, so consensus EPS estimates have been raised by 9% and 3% for FY23 and FY24, respectively.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free