An exceptional operating credit of £2.3m slightly flattered reported profit figures for Norcros (NXR), but there's no denying the last financial year was once again strong. Despite weaker trading in the UK retail sector, underlying operating profit leapt a quarter to £21.3m thanks to higher South African profits and the contribution of Croydex, one of two new brands bought in the year.
Those acquisitions have come at a price, namely a 129 per cent increase in net debt. And that could expand with additional bolt-on deals, given the bathroom and tiles specialist's ambition for revenue to hit £420m by 2018. However, chief executive Nick Kelsall is committed to buying businesses offering a 12 to 15 per cent return on capital, and providing Norcros's two times net debt to cash profits ratio is not stretched.
Underlying operating cash flow of £20.4m - a touch lower than 2015 despite the corporate activity - was sufficient for management to propose a major dividend hike, partly to convince the market that it can continue to beat expectations.
Broker Numis remains bullish, and expects pre-tax profit to hit £22.3m and EPS of 27p in the year to March 2017, up from £20.4m and 24.6p in 2016.
NORCROS (NXR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 182p | MARKET VALUE: | £111m | |
| TOUCH: | 175-182p | 12-MONTH HIGH: | 228p | LOW: 159p |
| DIVIDEND YIELD: | 3.6% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 78p | NET DEBT: | 68% | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p)** | Dividend per share (p)** |
|---|---|---|---|---|
| 2012 | 200 | 9.4 | 16.0 | 4.2 |
| 2013 | 200 | 5.2 | 10.0 | 4.6 |
| 2014 | 219 | 5.8 | 17.0 | 5.1 |
| 2015 | 222 | 11.0 | 13.6 | 5.6 |
| 2016 | 236 | 15.4 | 21.4 | 6.6 |
| % change | +6 | +40 | +57 | +18 |
Ex-div: 23 Jun Payment: 28 Jul *Includes intangible assets of £45m, or 73p a share **Adjusted for one-for-10 share consolidation in September 2015 | ||||
