Small Cap Value Report (24 Jul) - NXR, GTC, SID

Wednesday, Jul 24 2013 by

Good morning! Norcros (LON:NXR 16.5p) have issued an IMS covering their Q1 trading. They have a 31 March year end, so Q1 obviously covers Apr-Jun.

The first thing that stands out is that the constant currency figures are much better than the sterling figures. This is because about 40% of their business is in South Africa, and the Rand has depreciated significantly against sterling in the past year. Looking at the exchange rate chart, in Q1 of 2012 there were about 13 Rand to £1. In Q1 of this year, it had weakened to between 14-16 Rand to £1.

A range of factors are mentioned, which mainly create a mildly negative impression, however with trading statements I have found that the key things to focus on are: look through the detail and focus only on what the overall impact on profits against expectations is. Secondly, one needs to consider what the outlook is. Thirdly one needs to consider how the shares are currently rated - so cheap stocks tend to absorb negatives with barely a flinch, as expectations are low, whereas highly rated shares tend to get pole-axed by negative news.

Any factors which seem to be one-offs (e.g. the impact of de-stocking by UK customers in April - although I would like to know why they de-stocked) do not concern me, as that should not have any lasting impact on the business. It's more important to evaluate what's likely to happen in the future, and spot the key trends, rather than obsess over the detail of minor problems in the past. That's a general point, not just about Norcros.

The overall impression of this IMS is that H1 is not going to be great, but that cost cutting at Johnson Tiles will benefit H2. The most important sentence by far is the last one, where they say (with my bolding):


Even though the second half weighting of cost reduction benefits in Johnson Tiles UK will mean that profitability will be more heavily weighted to the second half than normal, the Board remains confident of the outcome for the full year.


Normally I don't like second-half weighting comments, as it usually means management are in denial about having a bad year, and are hoping that sales will improve in H2, which usually they don't. So it…

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Norcros Plc is a holding company for the Norcros Group. The Company's principal activities include development, manufacture and marketing of home consumer products in the United Kingdom and South Africa. The Company's segments include UK and South Africa. The Company has six United Kingdom businesses, including Triton Showers, Vado, Croydex, Abode, Johnson Tiles and Norcros Adhesives, and three businesses in South Africa, including Johnson Tiles South Africa, TAL and Tile Africa. The Company is focused on showers, taps, bathroom accessories, tiles and adhesives. In the United Kingdom, the Company offers a range of bathroom and kitchen products both for domestic and commercial applications. The Company offers mixer showers and accessories; tile and stone adhesives; taps, bathroom accessories and valves; bathroom furnishings; ceramic wall and floor tiles; kitchen sinks; tile adhesives, pourable floor coverings and tiling tools through its United Kingdom and South Africa business. more »

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Getech Group Plc is a United Kingdom-based company, which provides geological services, reports and data to the petroleum and mining industries to assist in their exploration activities. The Company's segments include Multiclient products and services, Consultancy projects and All other segments. Its Multiclient products and services segment includes Globe, which is its live Geographic Information Systems (GIS) Earth platform; Gravity and magnetics, which offers global databases; Multiclient regional reports, which include reports on various exploration areas, and Multi-Satellite Altimeter Gravity Programme, which is a three-year study covering gravity data for the continental margins of the world. Its Consultancy projects include Consultancy and licensing rounds, under which the Company provides technical support and advice to the Mozambique government, and GIS software and services, under which, the Company, through Exprodat Consulting Limited, offers Exploration Analyst Online. more »

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  Is LON:NXR fundamentally strong or weak? Find out More »

21 Comment on this Article show/hide all

marben100 24th Jul '13 1 of 21

Hi Paul,

As an interested observer of the situation at Silverdell (no position), this line of an "administrative error" doesn't make sense to me. According to this article, there was a £5m "black hole" at Kitsons. It seems it will cost Silverdell £8m to fill that hole. That's no "administrtive error".

Have I misunderstood?



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About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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