Norcros Share Discussion Threads

[lbo] 04/11/2017 07:41

Management will have a lot to answer down the road as to why they are overpaying for a business nobody else wanted to buy at the valuation they have agreed. As for the token amount that managment are subscribing for in the placing. They will get multiples of that back in more inflated salaries and share options that they will award themselves on the back of this very expensive deal. As usual it will be the shareholders left paying the bill for the bad deal not management.





Companies pull London listings citing market volatility

[xxx] 03/11/2017 07:25

Some background:

[driver7] 02/11/2017 22:45

Financial engineering? Will be interesting to hear from the Board how those synergies will be achieved. That is what a PUBLIC(ally accountable)company does!

[kazoom] 02/11/2017 22:34

NIGELMOAT 2 Nov '17 - 08:42 - 2926 of 2936 0 0
Will existing shareholders/joe public have chance to participate in buying the new capital raising shares at 172p?


Existing shareholders yes - although dependent on how your shares are held, you may need to contact your broker to make sure you don't get left out.

My position is via an IG index spreadbet and they have already opened up the option for me.

[loganair] 02/11/2017 13:04

It proposed to raise £10.6m through the issue of 6,165,312 placing shares pursuant to the firm placing, and £20.8m through the issue of 12,088,849 placing shares pursuant to the placing and open offer.


10 Open Offer Shares for every 51 Existing Ordinary Shares at 172p per Open Offer Share.

[trytotakeiteasy] 02/11/2017 12:25

Shanklin - the reason it is earnings enhancing is that it is largely funded with low cost debt. The takeover valuation for the business is higher than Norcros' current trading valuation in the market.

[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.