Don't be alarmed by the sharp drop in headline half-year profits at bathroom accessories and shower manufacturer Norcros (NXR). After adding back one-off items, underlying operating profit actually rose 3.5 per cent year on year to £6.8m. Even so, trading conditions remained tough - although there were signs of improvement towards the half-year end as consumer confidence began picking up.
Typically, though, Norcros has to wait up to a year before an uptick in demand in the all important housebuilding sector will trickle through to an increase in demand for its products. Indeed, trading in the first quarter was tough as retailers ran down their inventories and restructuring at the Triton showers and Johnson Tiles divisions cost £1.5m. However, destocking had levelled out by the end of the second quarter.
Norcros is also beginning to see a decent contribution from boutique bathroom fittings specialist Vado, acquired in March, while further revenue gains will come from the successful sub-leasing of surplus property in Swindon to Network Rail. This will generate £0.8m a year for the next five years. All of this helped to generate a significant improvement in underlying operating cash flow - from £3.3m last year to £10.1m.
Broker Numis Securities expects full-year adjusted pre-tax profit of £14.5m, giving adjusted EPS of 2p (from £11.7m and 1.9p in 2013).
| NORCROS (NXR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 20.8p | MARKET VALUE: | £121m | |
| TOUCH: | 20.8-21p | 12-MONTH HIGH: | 22p | LOW: 12.5p |
| DIVIDEND YIELD: | 2.3% | PE RATIO: | 69 | |
| NET ASSET VALUE: | 10p* | NET DEBT: | 51% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 106 | 4.40 | 0.80 | 0.155 |
| 2013 | 117 | 0.50 | 0.10 | 0.170 |
| % change | +10 | -89 | -88 | +10 |
Ex-div: 4 Dec Payment: 9 Jan *Includes intangible assets of £27.6m, or 4.7p a share | ||||
