Good morning! Timings are very tight for me today, so there's not likely to be that much posted here this morning, but I'll try to do some more this evening, and I need to circle back to review Snoozebox Holdings (LON:ZZZ) in yesterday's report too - it's on the to do list!


Norcros (LON:NXR)

Share price: 17.0p (up 4.5% today)
No. shares: 597.1m
Market Cap: £101.5m

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

Trading update - for the year ended 31 Mar 2015, from this bathroom fittings and tiles company, which operates mainly in the UK, but also S.Africa.

Key points;

  • Most importantly, underlying operating profit is "expected to be in line with market expectations"
  • Turnover C.£221m - up 1.1% on prior year, and 1.8% below broker consensus
  • Sales growth accelerated usefully in H2 (up 5.4% in H2, up 1.5% for the full year)
  • UK housebuilding sales were strong, offsetting "challenging" (why?!) UK retail sector
  • S.Africa - strong local currency sales (up 19.1% in H2)
  • Impact of S.African Rand depreciation now stabilising, so growth is feeding through into sterling terms too now
  • Closing net debt lower than market expectations at c.£15m
  • Pension fund & deficit not mentioned



Valuation - this share has a high StockRank of 92. Also there is plenty of green on the usual Stockopedia graphics - in particular the forecast PER is very modest, at 8.25, especially considering the company has little debt now (which in any case is more than offset by remaining freehold properties). I also like the growing divis, yielding about 3.6%.

55263b51b92edNXR.JPG


My opinion - this is a strange share. There seems a permanent overhang in the market, but for the patient investor that doesn't really matter. What is more important is that the shares look good value, and the company is trading well. I particularly like the low PER, and there should be favourable macro tailwinds too (with increasing housebuilding), especially in the UK.

The only issue on trading that concerns me a bit, is the lack of progress in the UK retail sector. This suggests competitive pressures may be problematic perhaps?

Also, the pension fund here is huge, which wasn't much of a problem in the past, as it was quite well funded. However, recent lower bond yields has probably increased the deficit. So investors should be…

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