Norcros (NXR) has been investing in plant and equipment, new stores and marketing initiatives, which helps to explain why statutory profits were a little lower in the six months to September 2017. Still, underlying pre-tax profits rose by nearly 10 per cent to £11.5m for the tiles and domestic shower manufacturer, helped by a strong performance in South Africa, where underlying profits jumped from £3m to £4.3m.
Operating cash flow remained strong at 109 per cent of underlying cash profits, and this helped during the period to shave £2.4m off net debt, leaving £23.2m at the period-end. Overall revenue growth was boosted by the South African rand’s appreciation against sterling, but even on a constant-currency basis turnover was up by 7.2 per cent.
Norcros is also paying around £60m in cash for the acquisition of Merlyn, a manufacturer and distributor of shower enclosures and screens, adding to a list of acquisitions including Vado, Croydex and Abode in the past few years. The transaction will be funded through a £31.4m placing and open offer.
Trading in the second half is expected to benefit from a restructuring at Johnson Tiles, and while market conditions remain a challenge, Norcros expects to increase its market share.
Analysts at Numis Securities are forecasting pre-tax profits for the year to March 2018 of £23.9m and EPS of 28.5p (from £22.9m and 27.8p in 2017).
| NORCROS (NXR) | ||||
| ORD PRICE: | 175.25p | MARKET VALUE: | £108m | |
| TOUCH: | 172-179.25p | 12-MONTH HIGH: | 183p | LOW: 145p |
| DIVIDEND YIELD: | 4.2% | PE RATIO: | 6 | |
| NET ASSET VALUE: | 106p* | NET DEBT: | 32% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 129 | 7.7 | 10.0 | 2.4 |
| 2017 | 145 | 7.4 | 8.9 | 2.6 |
| % change | +13 | -4 | -11 | +8 |
| Ex-div: | 30 Nov | |||
| Payment: | 12 Jan | |||
| *Includes intangible assets of £44m or 71p a share | ||||
