Norcros Share Discussion Threads

[sleepy] 02/11/2017 11:39

From Merlyn p&l in euros

2016. 2015

25.8. 17.3 Sales
4.39. 2.38 Op profit
4.35. 2.35 PBT
3.71. 2.09 PAT

11.0. 6.0 Net assets at year end

Above taken from Irish companies filing. Doubtless Norcros can correct if they are inaccurate

[kazoom] 02/11/2017 09:44

I'm probably mis-remembering the number then (a little rushed today).

You're right if it is earnings positive at 6 then there must be more "hidden" positive.

[shanklin] 02/11/2017 09:13

kazoom

According to Stockopedia, NXR was on a forward P/E of 6.19 prior to this acquisition.

If that's correct then, just on the numbers provided its dilutive of earnings. However, I am sure there are reasons for management saying its earnings enhancing, we just have not been given them.

[sspurt] 02/11/2017 09:03

Do Norcros add value to the businesses they buy over the long term or is it simply a question of rationalisation and cost extraction?

[kazoom] 02/11/2017 08:59

Good point Shanklin thanks, but even at that level it's earnings enhancing isn't it?

[ed 123] 02/11/2017 08:55

Yes, looks a good addition for Norcros. Also, dilutes the pension deficit, adding relatively few employees for the increase in annual profit.

The market seems content too. Plenty of support on the order book.

Having said all that, I had been hoping Norcros would hold off from any further acquisitions, at least until Brexit happens and its impact can be assessed

Also of concern is the fall in house prices in London. Is it a temporary blip or will normalisation of interest rates cause something longer term and nationwide?

For me, 'good' would have been another two years of trading reasonably well and paying down more debt. Then, when things have hopefully become clearer regarding the economy and housing market, think if an acquisition would be appropriate.

Well, overall I am somewhat cautious. For me, I am not convinced about the timing and consequently I exited Norcros this morning.

GLA.

[shanklin] 02/11/2017 08:50

kazoom

Going with your numbers, the PBT increase is 4.9m, so after tax (at 20% say) its 3.92m. 30m/3.92 gives a P/E for the acquision of 7.65. And, in fact, its slightly higher than this because of the slight discount of the placing price vs yesterday's closing share price

Hence my earlier comment...

"Yes, its not immediately obvious how this acquisition is earnings enhancing. Presumably they expect there to be a lot of cost savings and/or cross selling opportunities."

[nigelmoat] 02/11/2017 08:42

Will existing shareholders/joe public have chance to participate in buying the new capital raising shares at 172p?

[edmundshaw] 02/11/2017 08:23

Earnings enhancing yes, but that is because they are raising debt for some of the acquisition price. £31.4m raised by the placings, so that is £28.6 of debt.

There again they did reduce debt by over £9 last year (to £23.2 from £32.5) so perhaps they expect to pay down that debt to comparative levels in a couple of years or so... before any other acquisitions, at least.

Eidt: snap, Briley and kazoom

[kazoom] 02/11/2017 08:20

I suspect that the main reason it is earnings enhancing is that it is 50% paid for by debt (which I think is at a cost of c. 5%).

So:

Purchased operating profit : £6.4
Less new interest : - £1.5m
Net profits increase : £4.9m

"Cash" cost (new shares) : £30m

so an effective "PE" of > 6x

[brileyloucan] 02/11/2017 08:17

Its earning enhancing because its funded only partly through equity and largely through debt at ~3%

[shanklin] 02/11/2017 07:22

Yes, its not immediately obvious how this acquisition is earnings enhancing. Presumably they expect there to be a lot of cost savings and/or cross selling opportunities.

[yamaha865] 02/11/2017 07:19

Hmmm, PE of almost 10 and no cost synergies planned. A bit too large a discount for my liking. But maybe cross selling opportunities could make it worthwhile..

[edmundshaw] 29/10/2017 22:42

November 16th is indeed the date for interims Andrew. We have already been told the results will be good - see the last trading statement. What will be good to hear is how H2 has started and what the outlook is.

[loganair] 29/10/2017 21:34

However the South African Rand has be declining which will hurt profits.

[1fox1] 24/10/2017 16:01

FFS what has this got to do to lift the SP:o(

[rimmy2000] 13/10/2017 15:13

i think this is due to breakout over next few weeks

[shauney2] 13/10/2017 08:40

Norcros is ‘significantly undervalued’, says Numis

Shares in bathroom supplier Norcros (NXR) have dipped and Numis believes investors are significantly undervaluing the business.

Analyst Christen Hjorth reiterated his ‘buy’ recommendation and target price of 300p on the shares, which jumped 6.5% to 179p yesterday.

‘Norcros’; share price is down 5% year-to-date and the group now trades on a [forward] price/earnings ratio of 5.7x and dividend yield of 4.8%,’ he said.

‘We continue to believe that this significantly undervalues a business that has recorded revenue growth of 8% compound annual growth rate (CAGR) ove the last four years and profit before tax growth of 19% CAGR.’

The most recent update from the group also shows ‘that strong organic progression is being maintained, and with balance sheet optionality, we believe that incremental growth could be driven through mergers and acquisitions’, said Hjorth.

[1fox1] 12/10/2017 19:58

Hey there's life in the old dog yet! The big question is can we finally smash through 180?

[walbrock82] 12/10/2017 13:26

Norcros has been in the wilderness for four years. Now, it looks like making a comeback. Here are some thoughts on the trading update.

At £1.76 per share, Norcros is an interesting company because the valuation looks insanely low.
Half-year results showed a big improvement, with revenue growing by 12.5%. Their South Africa division grew by 21% helped by their currency.


There has been no mention of profits. I expect South Africa will deliver higher profits, due to favourable currency movements. But, it only contributes 35% of pre-tax profits. I’m concern about their UK division whether reported sales growth of 8.4% has offset greater than expected rise in UK costs.

Valuation
Forecast for normalised EPS in 2018 and 2019 is 28.5p and 30p, giving it forward-PE of 6.2 times and 5.8 times, respectively.
The market capitalisation is 30% below 2013’s peak, despite net cash from operations at a record high of £23m vs. 2013’s £5.6m.
It is currently paying 4.5% in dividend yield, despite the payout ratio being around 35%. Dividend is growing at 10%.

Final thoughts

I like this company and would invest at this level. But given my 30 minutes’ analysis, I urge you to DYOH! If everyone checks out, I can’t see why you shouldn’t buy this share.

You want to read more about companies releasing their results today, then click

[trigger blade] 12/10/2017 09:39

I'm not in here anymore, but when I was, the company said it was aiming to double its turnover, from memory by 2018, which isn't far away now.

That was before a couple of acquisitions, but is that target still mentioned, or has it gone away quietly?