Good morning! I'm running slightly late this morning, due to over-indulging in canapes at some friends' launch party for their insured crowdfunding venture, called Archover, at the IoD last night. Things are really starting to change, with the traditional banks being increasingly being by-passed through new portals which connect savers and borrowers.

Norcros (LON:NXR)

Results for the year ended 31 Mar 2014 have been issued by this bathroom fittings company which I've written about extensively before. It's probably the nearest thing to a value share out there, with a particularly low PER. Most other businesses of this size and type are on a PER in the mid to high teens, whereas this is about 9. That's a clear pricing anomaly in my view.

I'm just going through the figures now, so will update this article over the next couple of hours, therefore please refresh this page later today.

Somewhat belatedly I got round to looking at the figures from Norcros, and have to say I'm very pleased to continue holding the shares. These are not the easiest accounts to interpret, as there are a number of distorting factors, namely;

  • Sharp depreciation of South African currency (39% of group turnover was from S.Africa last year)
  • Acquisition of another UK business, Vado.
  • Legacy property issues (empty warehouses & surplus land)
  • An unusually high finance charge of £7m, although £4.6m of this was foreign exchange contract movements.
  • IAS19 adjustments to the pension fund accounting.

However, the company has helpfully included a table showing how they arrive at £14.6m underlying profit, and personally I am happy that these are bona fide adjustments to strip out unusual items that are not part of the underlying performance of the business:


Rather than ploughing through all the detail, I am prepared to accept the underlying diluted EPS figure of 2.1p. In valuation terms then, that means that at 19p Norcros shares are only on a PER of 9. In my opinion that is a bargain, although as always please DYOR.

There is a humungous pension fund at Norcros, although it's reasonably well funded, and the deficit shown on the Balance Sheet has shrunk from £30m to £21.8m. As interest rates begin to rise, the deficit should reduce or melt away altogether. Overpayments are just over £2m at the moment, which is 10% of underlying cashflow. So it's not a huge issue in my view. The only other…

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