Norcros Share Discussion Threads

[deanowls] 25/4/2024 17:35

There’s a capital markets day next week so I think maybe we will hear some more?

[rmillaree] 25/4/2024 15:37

cheers deanowls ahaaaa lighbulb moment that the panels are kinda competing with tiles - cant believe i didnt suss that one - to be fair there can be a place for both but maybe its not so much a happy divorce if they will now actively be pushing panels at the expense of tiles. I was really keen to have tiles when i last refurbed my batroom back in 2017 -must admit if i was getting the same job done today it would be panels all the way

[deanowls] 25/4/2024 15:01

There’s also the fact they are now pushing the panels rather than tiles.

Redundancy costs, mothballing etc, although there should be more detail given I am sure they want to complete the deal on good terms first. I’m sure they could still retail tiles through another subsidiary unless there is a non compete claus?

[rmillaree] 25/4/2024 14:02

i was struggling to work whether this was good or bad - dint want to give away summit that can earn monye at worst point in the economic cycle. With cross selling opportunities sending customers elsewhere is nere ideal - hopefully its ahappy divorce with it being business pretty much as usual.

I did randomly look at 2018 annual report to see how well it could do in a good year pre covid and the comments below seem to suggest that thios buisness has been more a millstone around their necks than anything - that being the case offloading to management probably is teh best result possible (better than sending customers directly to competitor)

imho is reasonably clear here that management seem to be reasonably focused here on simple best steps - whether thats going to pay dividends or its simply making the most of a bad job who knows - with regard to acquisitions they seem to have been most acceptable.


per 2018 annual report

Whilst the actions to restructure the Johnson Tiles business in 2017 were completed successfully, market conditions in the second half of the year proved more challenging than expected. As a result, a further restructuring programme has commenced which will involve the loss of up to 50 jobs. This has resulted in an exceptional charge of £2.1m. Annualised savings are expected to be at least £2.0m and we remain confident that this decisive action will return the tilebusiness back into profitability in the current year.d

[davebowler] 25/4/2024 13:06

Zeus-
Sale of Johnson Tiles UK streamlines the business and improves operating margin
Norcros has announced the sale of its Johnson Tiles UK business to the current management team for a consideration of £1.0m, with a further modest earnout based on the equity value of the business, both payable in April 2028. The sale is expected to complete during May 2024. Johnson Tiles UK generated revenue of £35.3m in FY23 (8% of Group revenue) and EBIT of £0.5m (1% of Group adj. EBIT), contributing a margin of c. 1.4% compared to the overall UK EBIT margin of c. 12.6% in FY23. Today’s announcement confirmed Johnson Tiles UK has been consuming cash for the last three years with the sales proceeds to be used for working capital purposes. Zeus view this sale as a positive step towards streamlining the UK operations and highlights the strong operating margin the UK business achieved (excluding Johnson Tiles UK) in FY23 (c. 14.1%). We adjust our forecasts for FY25 and FY26 to reflect the sale but await further details at the full year results to get a clearer impact on the balance sheet of the Group. Detail on Zeus’s initial thoughts on the impact to the income statement can be found on page 2. Based on these, Norcros trades on 4.3x EV/EBITDA for FY25 and 6.3x earnings, a significant discount to peers despite the exceptionally strong operating performance within its UK operations. Zeus believe the market is fundamentally mispricing Norcros at these levels, with our SoTP valuation estimating a fair value of 479p, c. 160% upside.

 Sale of Johnson Tiles UK aligns with management’s strategy: Norcros has confirmed the sales of its Johnson Tiles UK business for a consideration of £1.0m to the existing management team, to be payable in 2028. Johnson Tiles UK was acquired by Norcros is 1979. With revenue of £35.3m and EBIT of £0.5m, the sale makes strategic sense for Norcros and highlights the strong operating performance of the UK business (ex. Johnson Tiles UK) with an EBIT margin of 14.1% for FY23. The UK business is now more streamlined with a clear focus on the core business and achieving operating margin in excess of 15%.

 Change to forecasts: Zeus adjust forecasts for FY25 and FY26 following today’s announcements. We assume Johnson Tiles UK would be capable of generating c. £35.5m in both FY25 and FY26 but contribute no operating profit for the group. This results in EBIT remaining unchanged for both years, with FY25 revenue of £366.7m (previous: £402.2m) and EBIT at £41.5m. We repeat this for FY26. Based on these changes, the Group’s EBIT margin improves 100bps in both FY25 and FY26 to 11.3% and 11.6%, respectively, with the UK generating an operating margin of 14.7% (previous: 12.9%) in FY25 and FY26. Net debt (excl. leases) for the Group remains unchanged at £31.9m in FY25 and £17.8m in FY26. This may turn out to be a conservative assumption as Johnson Tiles UK consumed low single digit millions in cash over the last three years.

 Investment case and valuation: Today’s announcement provides us with further confidence in our investment case that Norcros is materially undervalued vs peers. Norcros’ UK division operated at a c. 14.1% margin in FY23, excluding Johnson Tiles UK, which Zeus forecast to reach 14.7% in FY25. Based on the same assumptions set out in our SoTP valuation at initiation in January 24, Zeus fair value estimate for the Business is 479p, c. 160% upside (see page 3). At its current levels, the Group trades on an FY25 EV/EBITDA of 4.3x and 6.3x earnings, c. 60% below its UK building products peers.

[shbgetreal] 22/4/2024 12:06

Lol - of course, because you said it, it must be 'fact'.

The negative EV currently applied to the S.A. business, and offloading the pension scheme, why would us value investors be bothered by any of that?

[kipper7] 12/4/2024 20:36

We’ve been reading these stories for years. Every analyst thinks they worth 240-250
Fact is they are ex growth

[fegger] 12/4/2024 13:10

Exactly Kipper7. Thats why Im out after 5 years. And there are much better dividend stocks on offer at present such as Polar Capital Holdings which Ive topped up with half the Norcros proceeds. 9% dividend plus good growth prospects.

[kipper7] 11/4/2024 14:27

Does anyone care?There appears to be no interest/ no volumeCompany is fine but no growth in revenues/ eps etc. Dividend stock not growth imo

[edmonda] 11/4/2024 11:54

Agreed, edmundshaw

Norcros has again demonstrated great business resilience in the face of challenges in both of its primary markets, and reduced net debt.

Equity Dev retain their 233p/share fair value in new research note. Free access here:

[edmundshaw] 11/4/2024 10:00

Decent update. UK looks robust and debt coming down very well.

[shbgetreal] 28/3/2024 13:27

Yes, and share appreciation in the past usually equals less appreciation in the future, if we're talking strictly value...

[fegger] 15/3/2024 13:44

My holding period has been 5 years for Sylvania Platinum. That therefore includes the past 3.5 years where you say performance was woeful.

It tells me which investment has been better for me. I had also not realised how significantly better the Sylvania Platinum dividends had been as several had been specials.SO useful analysis for me.

[rmillaree] 15/3/2024 10:47

posting historical results tells us nowt about the future - note presumbaly you were LUCKY enough to buy Sylvania Platinum "back in the day" - its performed pretty woefully for the last 3.5 years.

[fegger] 15/3/2024 09:30

I've done the maths on my holding of Norcros shares.

Have held Norcros shares for just over 7 years and bought and sold a few along the way
Value of total shares bought: 30501
Value of total shares sold: 12800
Dividends received over 7 years: 6018
Value of current shares in market today: 20341

Therefore for an investment of £17700 I have had a return of £26359 over 7 years.

A 4% interest rate would have produced £23408


As a comparison I recently did the same exercise for Sylvania Platinum another share I hold with South African exposure. The return on Sylvania has been for an investment of £14621 I have had a return of £45204 over 5 years.

Norcros pays a decent dividend but Sylvania is better and better share appreciation. Have sold some Norcros today and will likely sell more over next few months

[davebowler] 08/1/2024 09:14

Zeus top ten 2024 pick -
UK underappreciated, South Africa misunderstood Norcros was one of our top picks 2023 and whilst the shares did not get the rerating we argued it deserved they did perform relatively well due to the strength of the operational execution in what was a very difficult year. The company remains a top pick for 2024 due to its discount to peers, despite long term margin expansion within the UK, its ability to win market share and, hopefully, a gradually improving operating environment that will highlight the undervaluation of the South Africa business. The UK business reported 13% operating margin in H1 24 and the SA business consistently generates both profit and cash but both seem to be undervalued by the market. An improving economic backdrop in SA might focus attention on the margin expansion in the UK leading to investors placing a higher multiple on the Group as a result.  The UK business continues to perform well: Over the last 10 years, Norcros has successfully grown revenue in its UK business in all but the two years during the pandemic. Impressively, over the last 5 years, UK revenue has grown at a 8.1% CAGR, whilst rising operating margins have magnified this result on its underlying EBIT, growing at a 5-year CAGR of 14.9%. During H1-24, the UK business also saw a 160bp improvement in its operating margin, growing to 13.0% from 11.4% a year earlier, despite a small drop in revenue. More importantly, this was somewhat driven by its recently acquired brand Grant Westfield (May 2022), highlighting the successful execution by management. If, as we expect, operating margin can get to mid teens over the next couple of years Norcros’ current multiple looks to materially undervalue the business relative to peers. A final point worth highlighting was the ability of its leading shower brand, Triton, to grow volumes during the first six months of the year, bucking the trend vs its peers and the wider RMI market.  South African business misunderstood: Representing c. 33% of Group revenue in FY23, Norcros’ South African business has a strong track record of growth with a 11.0% revenue CAGR between FY13 - FY23 (constant currency) and robust profitability. During H1-24, the region suffered due to some of the worst electricity load-shedding seen in recent history coupled with a GBP/ZAR exchange rate at historic lows. Whilst FX has a clear impact on reported numbers, management recently confirmed the region remains cash generative with no additional cash needed to fund operations, making the region self-sufficient. We believe this is misunderstood by the market. We also have reason to believe recent developments in the South African electricity market will drive higher demand in the medium term. In mid2023, the South African Government approved a new law to open up the electricity market for private companies, allowing the establishment of a competitive market away from its lossmaking state-owned monopoly, Eskom. Not only should this improve manufacturing operations, but less frequent load shedding should drive demand higher as confidence in the economy grows.  Valuation compelling: Based on consensus estimates, Norcros trades on a one-year-forward P/E of 6.2x and EV/EBITDA of only 4.8x, with a 5.4% dividend yield. The P/E ratio is more than a 50% discount to the average of its UK building products peers despite Norcros having forecasted average EBIT margins over the next three years in line with the peer average. At the current average FY1 UK peer EV/EBIT multiple (12.9x), the UK business alone would be worth c. 460p per share (adjusting for all of the Group’s net debt and leases and applying a UK EBIT margin of 12.5%), which is 140% more than the Group’s current share price.

[s34icknote] 20/12/2023 12:20

Some chunky buys Following house builders up !

[rmillaree] 05/12/2023 14:35

what i like here is that the forecasts lkook realistic and are warts and all. So many companies promise the earth then faily deliver. all nxr wants its to be valued at 7.4 * earnings - not much of an ask really is it? or is it ?

[pj84] 05/12/2023 14:13

Valuation suggests c 50% upside

Following the H124 results, we have essentially maintained our profit estimates and therefore our valuation of Norcros. Our P/E based valuation implies a value of 236p/share based on our diluted underlying FY24 EPS estimate of 31.5p/share, while our dividend discount model (DDM) implies a value of 255p/share, and if we take the average of the two, we arrive at 246p, implying c 50% upside. Norcros is trading at the lower end of its long-term consensus forward P/E range on 5.4x (Edison forecast P/E: 5.2x), suggesting that a lot of negativity is priced in. As and when we begin to see recovery in the UK and/or South Africa, the company may well attract a higher multiple.

Simple forward P/E multiple valuation implies 236p/share

The chart below details the progression of Norcros’s forward P/E over the last cycle. The range at the extremes is a low of 4x reached briefly post COVID-19 and again in 2022, and the high is c 12x at the end of 2013, before the Brexit hiatus. Over this period and outside the extreme ratings, the ‘real’ range has arguably been 6–9x and the average over the whole period is 7.4x.


If we apply the 7.4x forward P/E multiple to our estimate of FY24e diluted underlying EPS of 31.5p, we arrive at a value of 236p/share, implying c 45% upside to the share price. Arguably, this method gives little credit for future potential acquisitions, which are part of the company’s strategy and may be forthcoming.

[pj84] 20/11/2023 09:34

Norcros 1 of 5 shares in this morning's expert view update on


Norcros shares look cheap, says Peel Hunt

Bathroom supplier Norcros (NRX) has continued to deliver and the shares are cheap, says Peel Hunt.

Analyst Sam Cullen retained his ‘buy’ recommendation and target price of 220p on the Citywire Elite Companies A-rated stock, which was trading at 164p on Friday.

The group delivered a ‘solid set of interims’ with operating profit 3% lower than the previous year at £21.4m. Cullen kept expectations for full-year 2023 unchanged and reduced 2024 estimates by just 3%.

‘Norcros is delivering against its strategy in what are tough markets,’ he said.

‘The group’s UK brand continues to win share and has scope to grow further new product development and enhanced collaboration. The shares look cheap on just five times current year 2024 earnings, with a 10% free cashflow yield and 7% dividend.’

[rmillaree] 17/11/2023 17:05

Hello Pugugly

I guess we will have to agree to disagree - its not to often sound companies get the chance to buy back shares at dirt cheap levels. Ok norcros has pretty much been the exception to that rule alot byut we shouldnt presume this would be the case in 18 months time. The debt is so under control here i would say if they spent even £10 mill buying back shares now - that would not even start to trouble the debt levels we have. all they would probbaly be doing is delaying repayment of that amount of debt by 9 months or so. This company has proven its ability to pay down debt every time and debt is already over £10 mil below peek levels. Heyho my opinion is just that we all have our own take on what they shoudl be doing - i would say it certainly isnt a stupid option based on decent profits they expect to be making.