Despite lots of evidence to the contrary, investor confidence appears to be draining away from bathroom and kitchen product supplier Norcros (NXR). Shares in the Wilmslow-headquartered group are 16 per cent off a 12-month high, and fell again this week after the release of results highlighting an 18.2 per cent underlying return on capital employed and a rise in the operating margin from 9.1 to 10.4 per cent in the year to March.
Cash conversion also improved, as did operating cash flow, which in turn helped to reduce net debt by £12.1m. But when it comes to the manufacture and sale of showers, taps and tiles, equity markets are peculiarly sensitive.
That’s understandable in Norcros’s South African business, where power rationing, a plant upgrade and pricing pressures hampered margins. But a “challenging” backdrop for the UK segment failed to arrest widening margins and a 42 per cent jump in operating profits.
Still, investor pessimism appeared mirrored in management’s struggles to successfully predict the success of Brexit mitigation plans. Analysts think otherwise, as consensus estimates are for adjusted earnings per share of 33.7p for the year to March 2020.
| NORCROS (NXR) | ||||
| ORD PRICE: | 197p | MARKET VALUE: | £158m | |
| TOUCH: | 191-198p | 12-MONTH HIGH: | 235p | LOW: 182p |
| DIVIDEND YIELD: | 4.3% | PE RATIO: | 8 | |
| NET ASSET VALUE: | 156p* | NET DEBT: | 28% | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015 | 222 | 11.0 | 13.6 | 5.6 |
| 2016 | 236 | 15.4 | 28.5 | 6.6 |
| 2017 | 271 | 11.5 | 13.9 | 7.2 |
| 2018 | 300 | 13.5 | 14.5 | 7.8 |
| 2019 | 331 | 25.4 | 24.2 | 8.4 |
| % change | +10 | +88 | +67 | +8 |
| Ex-div: | 20 Jun | |||
| Payment: | 2 Aug | |||
| *Includes intangible assets of £113m, or 140p a share | ||||
