Variable underlying markets did not prevent Norcros Plc (LON:NXR) from delivering both organic and acquired progress in FY18. Moreover, a new target of almost doubling revenue by 2023 has been set with ROCE sustained above 15%+. Share price movements suggest that the market is starting to give credit for management’s achievements. Performance will be measured against the strategic plan and we believe that a further re-rating is likely.
Good progress seen in FY18
FY18 showed good y-o-y progress driven primarily by a strong trading performance in South Africa and a first time contribution from Merlyn (acquired on 23 November 2017). Within the mix, South Africa did better than we had anticipated, partly contributing to a PBT out-turn £0.6m above our estimate. Most of the UK operations traded well throughout the year, the primary exception being Johnson Tiles where a second cost-cutting program to eliminate losses is underway. A turnaround here, a full year contribution from Merlyn and further organic progress elsewhere supports management’s confidence in the FY19 outlook and reflected in an 8.3% FY18 DPS uplift. Our estimates are substantially unchanged save for a slightly higher tax charge.
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