Strategy refresh targets growth accelerators
Market sentiment is rapidly re-focusing on earnings potential in an improving economic cycle. Norcros’ CMD was well-timed with this increasing willingness to consider mid-cycle earnings scenarios. Norcros is targeting accelerators to boost organic growth in core bathroom and kitchen product groups to be supplemented by M&A activity.The CMD reiterated the company’s four strategic pillars and added financial targets including organic, above market revenue growth and margin expansion. Leading market positions and scale at both company and group levels are the platform and new product development, sales channel cross-referrals and operational excellence are the key enablers.
Norcros has announced the proposed disposal of Johnson Tiles UK for an expected £1m (plus potential deferred consideration) with a related exceptional impairment charge of £15m. We have adjusted revenue estimates accordingly with profitability unchanged, however the disposal increases both the pro forma group EBIT margin by c.100bp and group ROCE by c.50bp.
We can see a pathway to a higher valuation, but for now raise our fair value for the company to 257p per share.
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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