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Norcros – results good and remains confident: BUY

By Steve Moore & Tom Winnifrith | Sunday 18 June 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Bathroom and household equipment and accessories group Norcros (NXR) has announced results for its year ended 31st March 2017 and that “the board remains confident that the group should continue to make further progress for the year ending 31 March 2018”.

The results note, on revenue of £271.2 million (+4.1% on a constant currency like-for-like basis), an adjusted pre-tax profit of £22.9 million and earnings per share increased to 28.8p.

After outflows including £4.2 million in dividends and £2.7 million on acquisitions, net debt was reduced by £9.3 million to £23.2 million. This was with the UK businesses (revenue: £182.3 million) recovering well in the second half of the year and the South African business continuing sustained progress of recent years. In terms of outlook, Chief Executive Nick Kelsall added;

“Whilst the UK market remains uncertain as the ramifications resulting from the UK's vote to leave the EU begin to unfold, I am confident that our UK business is more resilient and better placed to capture further growth opportunities as they arise. Our South African business has continued to deliver sustainable growth, and, notwithstanding the recent political unrest, the medium-term outlook in South Africa remains positive.”

Also, a dividend per share of 4.8p has been announced to be paid on 3rd August, with an ex-dividend date of 22nd June. This takes the per share total for the year to 7.2p, up from a prior year 6.6p.

The shares have responded positively, comfortably above 170p. There remain risks – including the macroeconomic environment and pension deficit, but the valuation continues to look too cheap given the noted confidence on continued progress. As such, our stance currently remains buy.

This article first appeared on the Nifty Fifty website which Tom Winnifrith runs with Steve Moore & Lucian Miers. To access the website ahead of the next share tips from Tom & Steve and a new shorting piece from Lucian click HERE

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