Overlooked and undervalued
Norcros has leading positions in its market segments built upon strong brands, new product development, channel diversity and supply chain strengths. It is seeking to drive further market share gains organically by intensifying group synergy benefits and through M&A activity.H1 results saw an 8.3% reported group revenue decline (or -4.1% on a constant currency, LFL basis) was substantially driven by lower demand in South Africa while the UK was broadly flat y-o-y. EBIT came in 2.7% lower (unchanged in constant currency) reflecting a better UK outturn – being the net effect of exiting Norcros Adhesives and two additional month’s contribution from Grant Westfield (GW) – more than offsetting adverse operational gearing in South Africa.
Norcros is profitable, strongly cash generative and moderately geared at 1x EV/EVITDA. We initiate coverage with our DCF analysis suggesting a fair value midpoint of 233p / share, giving c. 50% upside potential on a rerating.
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.
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