Bathroom fit-out specialist Norcros (NXR) jumps 4.5% to 178.75p after the £111.6 million cap's trading update informed the market that underlying operating profit for the year to the end of March 2016 would be marginally ahead of market expectations.

Group revenue for the year is expected to come in at around £236 million compared to the previous year's £222.1 million. This is 6.3% higher than 2015 and 11.0% higher on a constant currency basis which works out being 2.9% higher on a like-for-like constant currency basis.


Breaking down the figures on a regional basis, UK revenue for the year was 9.3% higher than the prior year and this for the first time reflected the Croydex contribution. The designer, manufacturer and distributor of high quality bathroom furnishings was acquired on 25 June 2015 and Croydex continues to perform strongly in line with the Board’s expectations. On a like-for-like basis, UK revenue was 2.2% lower than the prior year and this says management reflects more challenging conditions in a number of UK retail channels and export markets.

The South African business continued to perform strongly recording double-digit constant currency revenue growth in the second half of the year, resulting in full year revenue growth of 15% on a constant currency basis. Growth in this market was however significantly offset by the fact that the South African Rand was 15% weaker than the prior year and consequently, South African revenue, on a reported Sterling basis, flatlined in 2016.

Norcros-Triton shower

The group has long had issues relating to its pension deficit but the 14 April update assured investors that a revised pension deficit recovery plan has been agreed with the trustee. Under the agreement, Norcros will make a cash contribution of £2.5 million per annum (increasing with CPI) from FY 2017, which compares to the Group's deficit recovery payment of £2.1 million in 2016.

With legacy issues like that being demonstrably dealt with and the prospect of an encouraging M&A pipeline, Numis rates Norcros a 'buy' with a 300p target price.

Issue Date: 14 Apr 2016