Full-year results from the Human Screen

Norcros went into the credit crunch unprepared and has emerged a leaner company, but the Human Screen can’t look beyond the cyclicality of tiles and showers.

Highlights

• Adjusted operating profit up 2%
• Return on tangible assets: 7%
• Adjusted net profit of ''11m compared to net cash flow of ''4 (-''3m after net capital expenditure)
• Net debt including approximate capitalised lease obligations of ''4.7m up 49% at ''22.5m, 16% of tangible assets (the company also has a pension deficit of ''19m)
• Per-share dividend up 17%
• Shares in issue up 0.5%

The Human Screen comments:

The one constant in Norcros’ turbulent corporate history is tiles, which it’s been making since at least the 1930′s. The company delisted from the London Stock Exchange in 1999 after a management buyout and disposed of a number of loosely related businesses to focus on showers, tiles and adhesives. It relisted in 2007.

Norcros’ share price history confirms everything the Human Screen fears about floatations. The shares are down 90% since 2007. Despite the money it raised, Norcros went into the credit crunch overly indebted. Losses forced it to renegotiate the terms of its bank agreements on less favourable terms, issue ''30m in new shares to pay off debt, and cut the dividend to zero in 2009.

Today it owns the UK’s favourite electric shower brand, Triton, and manufactures tiles and adhesives under the Johnson and Norcros brand names in the UK and the Johnson and TAL brand names in South Africa where it’s marginally loss-making. It claims to be the UK’s leading ceramic tile manufacture, and number two in South Africa, an operation it’s restructuring. It also owns a chain of 37 tile and sanitary-ware retailers in South Africa and a tile importer and distributor in Australia.

Twenty-twelve’s results are respectable enough, low cash-flow is due to nearly ''8m in lease surrender costs and so might be construed as a one-off. But although he recognises the UK brands, the Human Screen can’t see beyond Norcros’  turbulent record. It’s patently cyclical, dependent for profit on a buoyant housing market and low energy costs at its kilns.

With the earnings unreliable, and the shares trading at 1.7 times tangible book value, there’s no obvious value in Norcros now.

More on Norcros

LON:NXR

HS+ (worth watching for improvement in fundamentals/price)