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Organic and acquisitive earnings growth

Update | Construction & Building Materials | 02 Jan 2018

In Norcros’s first half, the company delivered improved profitability, made significant organic business investment and completed an earnings enhancing UK acquisition. Merlyn is a highly complementary business and a logical addition to the business portfolio. Taken together, we raised our current year EPS by c 4% and by c 7% and c 9% in the following two years, with dividends nudged up also. The share price has performed well on this newsflow but Norcros still represents good value, in our view.


Divisional progress

Update | Construction & Building Materials | 18 Oct 2017

Norcros’s H118 pre close update flagged group revenue and EBIT in line with management’s full year growth expectations. The period end net debt figure – after some exceptional costs – was also where we expected it to be. Both divisions are achieving good revenue growth without much help from their respective markets and profitability should follow. The rating is yet to give credit for the achievement of this self-generated progress.


Re-rating potential

Outlook | Construction & Building Materials | 31 Aug 2017

Norcros has continued to deliver against our expectations and AGM comments reinforce expectations of progress. The strategy of building a larger complementary business portfolio has been executed well to date and the company retains the financial flexibility to continue this process. Such activity may provide a catalyst for a re-rating but there is already scope for this to happen in our view.


Growing and investing

Update | Construction & Building Materials | 19 Dec 2018

Norcros continues to deliver a progressive trading performance ahead of local market conditions and in line with management guidance. Its share price has risen this year, significantly outperforming the FTSE All Share Index, but the company’s rating remains in single-digit P/E territory. It seems that re-rating will be a gradual process but there is plenty of evidence to suggest that this can continue.


Positive progress in H1

Update | Construction & Building Materials | 18 Oct 2018

The Norcros H119 pre-close update reiterated management’s expectations for progress in FY19. Trading newsflow was similar to that reported in Q1 – with a good uplift to UK EBIT anticipated for H119 and a growing South African top-line – albeit with an implicitly slightly quieter second quarter. Brand presence, coupled with product and channel diversity, appears to be supporting ongoing progress in variable market conditions. Our estimates are unchanged and H119 results are scheduled for 15 November.


Good start to the year

Update | Construction & Building Materials | 30 Jul 2018

FY19 has started well for Norcros and management expectations for full-year progress are unchanged. The maiden Q1 contribution from Merlyn has more than offset Johnson Tiles’ (JT’s) revenue reduction and other operations collectively continue to show good growth. As before, we maintain that a positive re-rating is likely.


Explicit growth aspirations

Update | Construction & Building Materials | 29 Jun 2018

Variable underlying markets did not prevent Norcros from delivering both organic and acquired progress in FY18. Moreover, a new target of almost doubling revenue by 2023 has been set with ROCE sustained above 15%+. Share price movements suggest that the market is starting to give credit for management’s achievements. Performance will be measured against the strategic plan and we believe that a further re-rating is likely.


Solid H2 performance

Update | Construction & Building Materials | 18 Apr 2017

An in-line year end update pointed to an improved H2 trading period for UK based operations and good ongoing progress in South Africa. Full details on underlying profit trends will come with the FY17 results but we feel that the business is performing well in its markets and this is not being fully reflected in the company's valuation.


Good growth delivered and anticipated

Update | Construction & Building Materials | 12 Dec 2016

H117 results contained a mix of individual trading performances which, in aggregate, delivered double-digit percentage y-o-y progress. Balancing business momentum, internal development actions and overall market conditions, we continue to expect good PBT growth and for this to translate to further share price strength in due course.


Full year on track

Update | Construction & Building Materials | 14 Oct 2016

The H116 pre-close IMS echoed previous newsflow and group guidance for the full year is unchanged. Consistent messaging and expected progress are at odds with weak share price performance. While we appreciate some investor caution on UK earnings, a valuation approaching P/E and yield parity for next year overextends these general concerns in our view.


Progressing as planned

Update | Construction & Building Materials | 09 Aug 2016

FY16 was a year of strategic and financial progress for Norcros, with improved profit contributions from both reporting regions and two acquisitions completed. Q117 trading is in line with previous FY17 group guidance and we expect further profit progress over our three-year forecast horizon. UK RMI exposure appears to be out of favour with investors currently, but acquisitions and other regional earnings are positive differentiators not reflected in the rating in our view.


Strategic and financial progress

Update | Construction & Building Materials | 22 Apr 2016

FY16 was a year of strategic and financial progress for Norcros, with improved profit contributions from both reporting regions and two acquisitions completed. The company's rating has yet to reflect this momentum in our view.