Small Cap Value Report (25 Jun 2015) - NXR, ANP, COST

Thursday, Jun 25 2015 by

Good morning!

Norcros (LON:NXR)

Share price: 19.25p (up 6.2% today)
No. shares: 597.2m
Market Cap: £115.0m

(at the time of writing, I hold a long position in this share)

Croydex acquisition - Norcros made it clear in last week's results statement that it was on the acquisition trail, armed with a hefty bank facility, and today comes news of a deal to buy an Andover (Hampshire) based bathroom fittings company called Croydex Ltd. Please click here to recap on my article from last week which went through Norcros results for the y/e 31 Mar 2015 in some detail.

It looks a really good deal. Looking at their website, Croydex is a long-established (1919) company which designs & distributes a wide range of reasonably priced bathroom fittings and accessories. So this looks a good fit with Norcros's existing businesses.

I've had a look at Croydex's accounts at Companies House, and they look very good - nice clean accounts, a super balance sheet which includes a £2.3m long leasehold property. The company restructured (i.e. reduced costs) in 2013, and is now reaping the benefits. The Directors Report is positive, and speaks optimistically about the outlook.

Croydex reported a profit before tax of £2.1m for calendar 2014, on turnover of £19.9m.

The announcement from Norcros today refers to £2.6m profit before tax and shareholder costs, which I presume must mean Director salaries, which were £606k for the year. Croydex is currently owned by two families, the controlling one being the Browns - which reminds me of the joke about waving goodbye to the Browns, on their trip to the seaside! Rather fitting, given that one of the products that Croydex make is patented "Sit Tight" toilet seats. They look quite good actually.

I curse toilet seat makers every time I have to remove a wobbly or broken one with a hacksaw, as the bolts are all rusted tight, and aligning the hinges is so irksome! You think you've fitted it perfectly, then realise that it's at the wrong angle, and won't stay up. Anyway.

Croydex sell online though their website. and wholesale to both trade and retail buyers. It looks a nice business, and a good fit for Norcros, broadening the product range, and creating cross-selling opportunities.

The acquisition is being funded from Norcros bank facilities, with a cash cost of £20.8m initially, and a further £1.1m deferred for…

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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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Anpario plc is a producer and distributor of natural feed additives for animal health, hygiene and nutrition. The Company operates through two segments: UK and Eire, and International. The Company is focused on the manufacture and sale of natural feed additive products to agricultural markets. Its products for the poultry, pig, ruminant and animal feed markets include acidifiers, enzymes, essential oils, pellet binders, antioxidants, mycotoxin binders, mold control products and a range of nutritional premixes and performance enhancers. It offers natural feed additive/flavor called Orego-Stim. It offers its customers a number of omega 3 & 6 supplements for use in feed. Its products in the aquaculture range include growth promoters, immune enhancers and pellet binders for both shrimp and fish. The Company's trading brands are Kiotechagil, Meriden and Optivite, which trade across approximately 70 countries around the world. more »

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Costain Group PLC is a technology-based engineering solutions provider. The Company offers consulting, project delivery, and operations and maintenance services. The Company operates through two segments: Natural Resources and Infrastructure plus Alcaidesa in Spain. The Infrastructure segment operates in the highways, rail and nuclear markets. The Natural Resources segment includes the Company's activities in water, power, and oil & gas markets. The Company offers a range of services, including advisory and concept development, specialist design, program management, project delivery, technology integration, and asset optimization and support. The Company offers services across whole life cycle of its customers assets in energy, water and transportation business areas focused on the United Kingdom market. more »

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

15 Comments on this Article show/hide all

Gostevie 25th Jun '15 1 of 15

I am reminded of the scene in Carry On At Your Convenience when the boss of W C Boggs & Sons (played by Kenneth Williams) suggests to designer Charles Coote (played by Charles Hawtrey) that his new toilet design didn't look very strong.

"I assure you, an elephant could sit on this toilet" replied Hawtrey, offended.

To which foreman Sid Plummer (played by Sid James) retorted: "Not without a bigger bowl, it couldn't".

Anyway, looks like a good acquisition for Norcros (LON:NXR). Not a holder myself but becoming more interested.


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00mrmark00 25th Jun '15 2 of 15

Hi Paul,

When you say "Numis have raised their EPS forecasts this morning" where do you obtain these updated broker forecasts from? I'm still new to investing and this is something that I'm struggling to lay my hands on. Is this a privilege reserved for those in the know? Institutions etc.?

Many thanks, Mark

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Leven 25th Jun '15 3 of 15

ANP - worth riding out the bumps imo as the spread is a killer and as with all smaller, illiquid shares it can be painful trying to buy shares back in a firm market!

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Ramridge 25th Jun '15 4 of 15

Hi Paul
Re Norcros (LON:NXR). I liked the look of the acquisition and bought some first thing this morning. The new eps forecast of 2.3 makes it 21% above the current 1.9p which I suppose is slightly on the conservative side given that Croydex made £2.1m net profit in 2014.

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herbie47 25th Jun '15 5 of 15

I agree about Costain (LON:COST), I'm surprised at the Stockopedia rating VR 81, PE is 15.6, PEG is 13.6, Price to Book val. 3.11, Div 3.16%, EPS est is -8.8%, so I can't get too excited over this share.

If you look at the EPS for each year, it alternatives + and -. 

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neils 25th Jun '15 6 of 15

Hi Paul
In the light of your comments about the quality and risk/reward profile of Anpario I would be very interested in your view of PHTM Photo-Me International full year results this morning. A strong moat, lots of opportunity, rising dividend but a lofty PE though attached to an inspiring ROCE of 33%?!
Keep up the good work!

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Brackendale 25th Jun '15 7 of 15

Paul, sorry to ask slightly out of date question but it’s driving me mad – understanding debt, using recent Hornby debacle as example. I have a debt aversion for my investments, and before investing in Hornby checked the long term debt on balance sheet going back several years. All looked good. Even net debt buried in the notes was only about 19% of total equity – well below FTSE average of 40%. Current ratio about 1.4. But then they announce that without raising cash this week they will go out of business! My questions are: what did I miss, what could have given a clue that this was on the cards? Has management made mistakes I should have spotted? It has shaken my faith somewhat because now I don’t trust that my other investments have the low debt I want, despite my checking their historic balance sheets.

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tads 25th Jun '15 8 of 15

Hi Paul

I know it's not a small cap. But you have commented on Debenhams previously. They seem to be increasing their online sales nicely.

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bsharman 25th Jun '15 9 of 15

Hi Paul.

I could do with one of those Sit Tight toilet seats right now....

Good deal for Norcros (LON:NXR) and nice bowl forming on the chart. What was most interesting to me is that Miton bought 12% of the company last week.



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herbie47 25th Jun '15 10 of 15

In reply to post #101782

Had a quick look at Hornby (LON:HRN), there were 2 loss making years, 2013/14, which was £6.95m net, cash also fell from £3.5m to £0.46, this year was a small loss. It seems the fund raising was mainly to repay the bank loan of £8m. So I would say the bank would not extend the loan maybe. So although the debt was not high, its the 3 years of losses and no cash. Its surprising the share price had not fallen more. My tip on any shares you hold or considering, click on the discuss button on the Stockranking screen and see if Paul has reviewed it.

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iwright7 25th Jun '15 11 of 15

I have just picked up some Norcros (LON:NXR) too because I like the sound of the Croydex acquisition. Croydex appears to have a useful bathroom products manufacturing base on a 5A site at Andover. In addition the Croydex profitability is greater: £2M profit on £20M sales vs. Norcros £8M on £220M sales. There must be some significant manufacturing, broader customer base and cross selling opportunities for both companies to lever which makes the current PE look too cheap.

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Brackendale 25th Jun '15 12 of 15

In reply to post #101794

Thankyou Herbie, very useful - kind of you to look as well.

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Paul Scott 25th Jun '15 13 of 15

In reply to post #101773

Hi 00mrmark00,

I get broker notes direct from brokers, and also through my stockbroker, and various other contacts.
I'm classified as a professional investor, and also I work part-time in fund management, as a researcher, so it's relatively easy for me to get hold of broker research.

It's much harder for PIs to get hold of broker notes, because of the ridiculous rules that are supposed to "protect" PIs by not letting you be sent broker notes! Absolutely crazy rules - we should be lobbying Govt hard on this, as PIs need all the info available, to create a level playing field.

Some brokers don't want their notes distributed widely, as it's a service for their clients only, whereas others DO want their research to go out, as it's basically marketing material for the subject companies.

Hopefully one of the ways I add value in these reports is by letting you know about broker upgrades, etc, when I hear about them.

You do have access to the broker consensus figures, which are available on Stockopedia of course, and the very useful 12 month change in broker consensus chart.

I get a lot of emails from people, asking me if I have broker notes on particular companies, and would I mind emailing them, but regret that I can't do that, as it would get me into trouble with the brokers, and also it would take up too much time, when I'm already very time pressured.

Regards, Paul.

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WatsonNimrod 26th Jun '15 14 of 15

I'm glad that Norcos (LON-NXR) is finally moving away from the overhang.

It's a smashing company with genuine directors and business plan. (Of course that's my personal opinion)

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00mrmark00 26th Jun '15 15 of 15

In reply to post #101821

Hi Paul,

Many thanks for the reply which reinforces what I have seen to date.

Also, would just like to say, really appreciate all your hard work on the site educating us PI's.

Keep up the good work.

Cheers, Mark

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 Are LON:NXR's fundamentals sound as an investment? Find out More »

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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