Hello, it's Paul here.

This report is 2 working days late, which was missing from the sequence last week. My apologies for the delay. 

Readers have specifically asked me to look at these stocks, which I think are interesting, so am happy to oblige.



Norcros (LON:NXR)

Share price: 228p
No. shares: 80.3m
Market cap: £183.1m

Interim results


Norcros, a market leading supplier of high quality and innovative bathroom and kitchen products, today announces its results for the six months ended 30 September 2018.


The financial highlights look strong;


5bf30c4a6610aNXR_highlights.PNG


Note that underlying operating profit growth of 29.9% is well ahead of revenue growth of +12.1% - impressive to see an improved net profit margin. Sales growth is from acquisitions.

Organic revenues growth was -0.3% on a like-for-like, constant currency basis. Although if Johnson Tiles UK is excluded (which suffered from Kingfisher buying less product), the rest of the group achieved an impressive +4.4% organic growth.

The 105.4% increase in statutory profit before tax is a red herring, because of a one-off £4.3m finance income credit - relating to a favourable movement on derivatives (I assume forex hedges). The underlying figures make more sense to me. I've checked the adjustments, and they look reasonable, apart perhaps from the £0.7m pension scheme administrative expenses, which I think should not be adjusted out, as it's a real, ongoing cost.

Diluted underlying EPS is actually slightly down, despite profit being up. This is due to dilution - 18.25m new shares were issued in a fundraising related to an acquisition called Merlyn Industries Ltd, in Nov 2017.

The period being reported, of 6 months to 30 Sep 2018 includes a full half year of trading from Merlyn. That is reflected in the average number of shares in note 5 being the same as the total number of shares currently in issue. So there's no further dilution to come through in future reporting periods.


5bf30edda5502NXR_shares.PNG


As you can see, the share count has risen by about a third in the last year, to fund acquisitions.  The group is doing a buy & build - making good quality acquisitions of complementary companies, then pushing more sales through its…

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