Norcros Share Discussion Threads

[edmonda] 24/7/2024 07:59

All looks on track for FY at Norcros plc. CEO updates at AGM that ''We have delivered a resilient performance during the first quarter in markets which have remained challenging''

Equity Dev retains its foeecasts and a Fair Value / share of 253.5p, as per recent detailed review:

[spangle93] 18/7/2024 08:33

Nice broker upgrade




‘Buy’ Norcros, says Deutsche Bank

Bathroom supplies group Norcros (NXR) is ‘poised’ for ‘material value creation’, according to Deutsche Bank.

Analyst Christen Hjorth retained his ‘buy’ recommendation and increased his target price from 305p to 375p on the stock, which inched up 0.4% to 237p on Wednesday and is up 30% year-to-date.

‘Norcros has gone through a transformation over the past decade,’ said Hjorth.

‘The group is now focused on mid-premium positioned, branded, design-led, and capital-light bathroom products, and is the UK leader in electric showers, shower enclosures, and bathroom wall panels.’

He estimated that these product categories represent 75% of the group’s earnings and generate an earnings margin of between 18% and 23%.

‘In contrast, legacy issues have greatly reduced, including exposure to DIY retail – now only 10%, UK tiles – which was recently divested, and the pension scheme, which is now in an accounting surplus,’ he said.

[edmundshaw] 25/6/2024 18:04

260p is very measly. If you think this is just a construction firm then maybe that might wash (no pun intended), or if you thought the management was a right shower (no pun etc), but really as a well run services firm this should be up on a PE of 10-12, and investors at this level should eventually clean up here (no pun etc etc)...

[spangle93] 25/6/2024 08:31

Coverage from a supplier of tips



Target price of 260p set, in line with several other brokers including the note referenced by edmonda

[pj84] 18/6/2024 23:50

The key takeaway for me as well as the low PE and near 5% dividend yield at the current share price is that as well as paying the dividend they are forecast to generate an additional £27m of cash over the next 3 years reducing the debt from £37m to £10m.

[edmonda] 18/6/2024 08:10

Plenty of detail in new reaearch note out today from Equity Dev:

UK business portfolio management is already bearing fruit and collaborative actions should support further margin progress. FY25 has started positively too ✔️

ED fair value is 253.5p/share, read new note here in full, free access:

[deanowls] 14/6/2024 13:38

Am I being thick? Did I read that 4m was released back from grant Westfield? Is that down to sales not being hit? There was a different tone in this years results, previously it was broken down by brand which I liked. Not the same level of detail yesterday. Maybe the annual report will be better.

Also what is the land being rented at to the tile guys?

[davebowler] 14/6/2024 09:13

Zeus-
FY24 results ahead, UK performing strongly
Norcros has reported a strong set of results for FY24 showing Group operating margin ahead of Zeus forecast at 11.0% (Zeus: 10.5%) despite revenue down 6.0% to £392.1m on a L4L constant current basis, broadly in line with Zeus’ forecast of £395.5m. The 30bps yoy margin expansion was driven by a record operating performance in its UK division which saw margins grow 100bps to 13.6% (15.0% excl. Johnson Tiles), highlighting the resilience of the mid-premium segment of the market despite weakness in RMI activity. Market dynamics in South Africa remained challenging and EBIT margins fell to 4.4% (FY23: 7.0%) but operating cash conversion was ahead of the prior year. Net debt (excl. leases) of £37.3m was ahead of Zeus forecast of 40.4m and a total FY24 dividend of 10.2p was flat yoy. Zeus update forecasts and introduce FY27e showing revenue unchanged for FY25 and FY26 but an upgrade to Group operating margin by 50bps in both years to 11.8% and 12.1%, respectively. Net debt for FY25 improves by £7.5m to £24.5m, representing 0.5x EBITDA, which should provide the Group with further optionality to focus on strategic M&A within its highly fragmented markets. On our updated forecasts, Norcros trades on 6.7x FY25 earnings and 5.3x EV/EBIT, representing a discount of c. 50% to its peer group despite having above average margins and a ROCE consistently above 15.0%. Zeus reiterate its fair value estimate of 479p, derived from our SoTP estimate.

 FY24 results: Norcros reported FY24 results ahead of Zeus forecasts at the operating level with Group EBIT of £43.2m (Zeus: £41.4m), indicating a margin expansion of 30bps despite revenue being down 6.0% to £392.1m (cc, L4L). On a reported basis, Group revenue was down 11.1%. A record operating performance in the UK division saw EBIT margin expand 100bps to 13.6% (15.0% excl. JT), supported by strong price increases and a resilient mid-premium market segment. South Africa faced difficulties as load shedding continued, contributing to a 12.3% fall in revenue (cc) and an EBIT margin contraction to 4.4% (FY23: 7.0%). Net debt was £3.1m ahead of Zeus’ forecast to £37.3m and a £12.6m improvement yoy. The final dividend was in line at 6.8p, bringing total FY24 dividend to 10.2p.

 Updated forecasts: Zeus update forecasts following yesterday’s results and introduce estimates for FY27. Revenue is unchanged for FY25 and FY26, but operating profit is rebased on the outperformance in FY24 and the sale of its lower margin Johnson Tiles business. Group EBIT margin increases 50bps in FY25 to 11.8%, driven by an improving South Africa margin and a UK division maintaining an underlying 15.0% margin. Following the sale of its working capital intensive Johnson Tiles and a rebase to FY24, net debt (excl. leases) improves by £7.5m in FY25 to £24.5m and by £6.7m in FY26 to £11.1m versus prior estimates. Net debt to EBITDA is now 0.5x and 0.2x in FY25 and FY26, respectively, providing increased optionality for the Group to execute on its M&A strategy across its highly fragmented markets as indicated in our Capital Markets Day note. Zeus keep dividends unchanged and provide a further breakdown of changes on pages 4-5.

 Valuation remains compelling: Norcros’ current valuation fundamentally undervalues the Group’s operating performance. For a business with a UK division generating a 15.0% margin (ex JT) in FY24 trading on a c. 50% discount to peers based on its current one year forward P/E of 6.7x and EV/EBIT of 5.3x suggests the market is applying an unwarranted discount to South African business despite being profitable, cash generative and a market leader. A dividend yield of 5.0% is further supported by a strong balance sheet with reduced leverage and a strong dividend history growing at a 7.2% CARG over the last decade. Based on our SoTP valuation, Zeus reiterate a fair value of 479p, offering c. 130% upside.

[spangle93] 14/6/2024 07:41

Norcros (NXR) is ‘underappreciated’ by investors who are not pricing in the resilience of its business model, says Shore Capital.

Analyst Tom Fraine retained his ‘buy’ recommendation and ‘fair value’ target price of 400p on the Citywire Elite Companies A-rated bathroom supplies group, which rose 0.5% to 208p yesterday after full-year results showed profits were slightly ahead of target.

Although the shares have rallied nearly 14% this year, Fraine said the valuation ‘fails to recognise Norcros’s resilient operating performance over recent years’.

‘The quality of the group’s offering, including its customer service, distribution, supplier relations and new product development, are continuing to help deliver market share gains,’ he said.

‘We are confident that the company can continue to deliver a resilient performance under uncertain market conditions, as it has consistently done in recent years.’

In particular, the South African business, which has delivered strong growth is ‘materially underappreciated by investors, despite recent temporary difficulties’.

‘We believe the market share gains and the higher returns and margin profile, enhanced by the acquisition of Grant Westfield and the recent disposal of Johnson Tiles UK, indicate the group is a higher quality business than it was previously, and worthy of a much higher valuation,’ said Fraine.

[shbgetreal] 05/6/2024 09:22

Hmm partial credit (IMO of course); growth is obviously not the primary reason I'm here, as the negative values being currently applied to certain parts of the business are clearly the more compelling story, but that is not to say that the company is by any means ex-growth - far from it, a growing population needs more houses and therefore more kitchens etc.

[kipper7] 03/6/2024 15:12

They are not a fast growing company!Just got too cheap from a valuation perspective when the market rallied and small cap sentiment changed

[shbgetreal] 03/6/2024 15:06

A full 6 weeks on from your declaration that 'fact is they are ex growth'.

[kipper7] 27/5/2024 21:38

Finally this stock is gaining some momentum and volume has picked up significantly on the move. Technicals are strong and fundamentals remain solid I'm looking for 300 p pretty quickly assuming markets stay firm

[davebowler] 17/5/2024 14:13

..plus it shows as a 'Golden Cross' chart buy on Stopckopedia.

[davebowler] 17/5/2024 14:12

Zeus Target price 658p!

[edmonda] 16/5/2024 11:08

"Strategy refresh targets growth accelerators" (new research note)

Market sentiment is rapidly re-focusing on earnings potential in an improving economic cycle. Norcros’ CMD was well-timed with this increasing willingness to consider mid-cycle earnings scenarios. Norcros is targeting accelerators to boost organic growth in core bathroom and kitchen product groups to be supplemented by M&A activity.

The CMD reiterated the company’s four strategic pillars and added financial targets including organic, above market revenue growth and margin expansion. Leading market positions and scale at both company and group levels are the platform and new product development, sales channel cross-referrals and operational excellence are the key enablers.

Norcros has announced the proposed disposal of Johnson Tiles UK for an expected £1m (plus potential deferred consideration) with a related exceptional impairment charge of £15m. We have adjusted revenue estimates accordingly with profitability unchanged, however the disposal increases both the pro forma group EBIT margin by c.100bp and group ROCE by c.50bp.

We can see a pathway to a higher valuation, but for now raise our fair value for the company to 257p per share.

New research note:

[castleford tiger] 13/5/2024 22:44

I will be building over a month or so

Let’s hope so oal

[spangle93] 13/5/2024 21:46

Good to see you here, Tiger

Well undervalued company here

[castleford tiger] 13/5/2024 10:05

Taken a position today
Tiger

[davebowler] 09/5/2024 08:27

Bathroom supplies group Norcros (NXR) is 'very undervalued' given its clear focus on growth, says Berenberg.Analyst Robert Chantry retained his 'buy' recommendation and target price of 325p on the stock, which gained 4.6% to 203p yesterday.The group held a capital markets day last week that focused on new medium-term targets and positioning the company as a 'design-led, capital-light and cash-generative building products business'.Its recent full-year trading update showed that it was 'more resilient' than several peers thanks to new product development, cross-selling and new customer wins that all combined to '[sell] a better mix of products and [help] operating margins move in the right direction'.It then disposed of the 'marginally profitable Johnson Tiles business', which Chantry said would 'improve UK margins further'.'More broadly, we like Norcros and its strategy to increase the quality of business mix in the portfolio, and we believe the stock is very undervalued at 6.6 times full-year 2025 price to earnings,' said Chantry.

[edmonda] 08/5/2024 17:47

For those who missed yesterday morning's Webinar with the CEO and CFO, which was clearly very well received, you can now watch the full 1 hour recording.

Covers the solid TU and the detailed Capital Markets Day - plus extensive audience Q&A - click here to watch:

[rmillaree] 26/4/2024 09:31

i think the zues update has said everything we want to know - this transaction isnt really going to change anything - so i would fully expect the capital markets day would relect that and say its pretty much buisness as usual?

[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