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Norcros – “pleased” with trading and “well placed to make further progress” BUY

By Tom Winnifrith & Steve Moore | Saturday 14 April 2018

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.

UK and South Africa supplier of bathroom and kitchen products, tiles and adhesives Norcros (NXR) has updated on trading for its year ended 31st March 2018, including “we are pleased with our overall performance during the year. Despite a backdrop of challenging market conditions, the board believes that the resilience of our diversified business portfolio and the strength of our market positions leaves the group well placed to make further progress”

This is with underlying operating profit “expected to be in line with the board's expectations” on revenue up 10.7% to “in the region of £300m” (+8.7% on a constant currency basis, +4.4% on a constant currency like for like basis).

Like-for-like UK revenue was +3.6%, though -0.8% in the second half. However, “Johnson Tiles apart, H2 UK LFL revenue was 8.4% higher (H1 +11.4%)” and it was stated “it is pleasing to note the strong performance of Merlyn, our largest and most recent acquisition”. Constant currency like-for-like South Africa revenue was +6% (H1 +4.8%, H2 +7.2%), continuing the sustained progress of recent years”.

The performance of Johnson Tiles UK has seen “implemented a further restructuring programme which will involve the loss of up to 50 jobs. This will result in a charge of around £2.1m, to be treated as an exceptional item and recognised in the financial year ended 31 March 2018 with the subsequent cash outflow occurring in the first half of 2018/19. Annualised savings are expected to be at least £2m”.

Overall, we’re looking for underlying earnings per share heading towards 30p (and then beyond in the now current year) and a dividend per share of 7.6p+ (prior year: 7.2p). This compares to a current circa 185p share price, though also “closing year end net debt is expected to be around £48m” (circa 60p per share, and there particularly also a pension deficit to consider). However, there still looks earnings-based and income value here – and the stance 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 tip from Tom & Steve and a new shorting piece from Lucian shortly click HERE

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