An encouraging trading update from tiles-to-bathroom fit-out specialist Norcros (NXR) sees the £130 million cap's share price surge 7.9% to 22.12p. The Wilmslow-based shower and tile company expects group revenue for the year to come in at £229 million while group underlying profit is forecast to show a 25% hike to £16.3 million.

Central to this strong performance has been the March 2013 acquisition of Vado – a major manufacturer of bathroom controls including taps, mixer showers, bathroom accessories and valves, which are exported to over 60 countries, most notably in the Middle East and Africa. It says 'the successful integration of the business during the year leaves Vado well positioned to make further progress.'

Overall, when one strips out the 2013 acquisition of Vado, full-year UK revenues (to 30 September 2013) fell 3.1% year-on-year, but this was due in large part to lower revenues at the Johnson Tiles unit. The group remains confident nevertheless that decisive action taken to reduce the cost base should limit the ongoing impact on profits.

Based on March 2015 consensus earnings per share (EPS) forecasts of 2p, Norcros trades on 11.1 times earnings.

Norcros should continue to benefit from improving market conditions and while the trade sector in the UK has already shown strong signs of vitality, the retail sector still lags although a pick-up in the last quarter suggests the potential for greater upside throughout the remainder of calendar 2014.

Broker N+1 Singer's Andy Brown remains a fan. He says: 'With the shares trading at a large discount to a range of housing related stocks, we are happy to reiterate our positive stance and target price of 27p.'

Issue Date: 10 Apr 2014