Norcros plc (LON:NXR) is under focus from research company, Equity Development who highlight the following points in their latest note. Norcros is a leading supplier of bathroom and kitchen products in the UK, South African and selected export markets.
Financial Highlights:
Norcros has maintained strong business resilience in FY24 amidst challenges in its primary markets, the UK and South Africa. The company reported a pre-close FY24 expected revenue of approximately £390 million with underlying EBIT (Earnings Before Interest and Taxes) aligning with market consensus at £42.7 million. A year-end gearing (debt-to-EBITDA ratio) below 0.9x (pre-IFRS16) highlights a healthy financial posture, bolstered by positive cash flows.
Operational Insights:
In the UK, despite a year-over-year revenue decline of 4.7% on a reported basis (equivalent to divisional revenue of about £282 million), margins improved. Adjusted for certain factors, the full-year decline was 3.3%, reflecting persistent tough market conditions in the second half of the year.
South Africa saw a significant year-over-year revenue decline of 24.1% partly due to unfavorable exchange rate movements. The local currency revenue reduction was 12.3%, consistent with first half trends. Reduced load shedding in H224 had little immediate impact on consumer behavior.
Cash Flow and Debt:
Norcros concluded FY24 with approximately £37 million in net debt, a notable improvement from £50 million a year earlier. This improvement, exceeding initial expectations, was primarily driven by a positive working capital inflow in the second half of the year.
Market and Valuation Perspective:
Despite solid operational performance, the company’s stock valuation does not fully reflect its financial health and market standing. The upcoming Capital Markets event on May 1 is expected to provide deeper insights into the company’s strategies, market positions, and medium-term prospects.
The current valuation suggests that the stock is undervalued with an estimated fair value of 233p per share, implying a potential 32% upside in a re-rating scenario.
Overall, the company has shown notable resilience and financial discipline, with its performance likely not yet fully appreciated in its market valuation.
You can read the full note on the https://www.equitydevelopment.co.uk/ website.
