I have been in Norcros for getting on for three years now; continually adding by reinvesting dividends and also making a further couple of purchases over this time. As a result NXR had just about become the largest single holding in my portfolio and to that extent I have to admit I was hovering over the Investigate site at 07:00 this morning. My expectation was for more dreary dialogue from a boring company that pays a reasonable dividend and to my estimation has a decent but steady future.
Well it was a nice surprise to see a very positive narrative from Norcros. Note: usually they have that ability of making Steve Davis the snooker player, appear a real hell raiser in comparison. I do like boring stocks but in previous years this lot have taken the biscuit especially in the way they have portrayed announcements; it’ been like looking out of the window on a fine day and declaring “at some time it’s going to rain”. So all in all today’s interims made very pleasant reading:
Revenue up +9.3% which is + 12.0% in constant currency terms
Underlying operating profit up + 34%
Profit before tax up +11%
Underlying operating cash flow up +15%
Diluted EPS up +46%
Interim Dividend up +19% to 2.2p
Note there is an accompanying and expected increase in debt due to the Croydex acquisition which IMO isa really decent acquisition for Norcros.
Martin Towers, Chairman, commented:
"I am pleased to announce a strong set of results for the six months ended 30 September 2015. Not only has the Group continued to make excellent progress in its existing businesses, but it has continued to advance towards its strategic targets with the acquisition of Croydex at the end of June 2015.
With our strong brands, leading market positions and continued self-help initiatives focused on market share gain the Group is well positioned to make further progress. Given the strong first half performance and momentum within our businesses, the Board now expects the Group to achieve underlying operating profit marginally ahead of market expectations for the year to 31 March 2016."
As you can see there is a very healthy increase in interim dividend up 19% and hopefully such excitement can be carried forward to the finals; let’s wait and see.
Although the valuation seems way out of step to me, possibly because the company has just not been loved much by the market and also I guess the market has had concerns about the pension deficit which thankfully seems to be reducing.
The excellent Stockopedia gives a PE(f) of 7.7, yield 3.6% and also gives a very good Stock Rank of 95. All of this adds up to some degree of optimism but this is Norcros and it’s a slow boring plod. I remain optimistic but won’t break into any type of excited dancing just yet!
For anybody interested, Paul Scott who is also a big follower of NXR gives his usual high quality analysis in his Small Cap value Report on Stockopedia.
Overall; I am happy to continue to hold.
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