Norcros resumes divi payments

18th Nov 2010 16:39

Showers and tiles group Norcros has resumed dividend payments after reporting a sharp increase in underlying profits at the interim stage.The company, which last paid a dividend in July 2008, has proposed an interim dividend of 0.12p, well covered by adjusted earnings per share of 0.9p."Normal rule of thumb is for the interim dividend to be about half the final dividend," chief executive designate Nick Kelsall told Sharecast. "We're being cautious about the outlook but we'll be looking at dividends being covered perhaps three to four times by earnings," Kelsall added.Revenue in the 27 weeks to 30 September rose 17.2% to £97.3m from £83.0m in the 26 week period in the previous year, helped by the strength of the South African rand.With the effects of the extra week and currency fluctuations stripped out, revenue growth was still a healthy 6.8%, and the company claims to be gaining market share.The demise of rival tiles firm Pilkington's in June helped juice sales up some, and the full effect of that firm's withdrawal from the market is likely to be felt more fully in the next set of results, said chief executive officer Joe Matthews.What the company terms benchmark profit before tax, which excludes exceptional items, non-cash finance costs and share of results from associates, soared 367% to £5.6m from £1.2m last year. "We're quite encouraged by the progress in the first half in a market that wasn't doing us any favours," Matthews said. "We grew turnover in virtually every part of the business, and we are now reaping the benefit of maintaining investment in the business during the recent recession," he added. Performance in the second quarter was "about the same" as the first, Kelsall said, with a slight improvement on the South African side.The South African business is "much more driven by new builds," Kelsall explained. Though the South African retail business was still loss making in the period, it reduced losses despite a depressed market for new housing. Building plans passed in South Africa were 13.1% lower for the period January 2010 to July 2010 compared with the prior year and building completions were 22.3% lower over the same period.The company's balance sheet is in a lot healthier state after the company raised £30m last December. Net debt fell to £13.0m at the end of September from £48.9m a year earlier. That, and the company's cash flow, has paved the way for a resumption of dividend payments and also, should the right opportunity present itself, the possibility of a bolt-on acquisition.Matthews, who is due to give up the chief executive role at the end of March next year, did not sound in a hurry to make a purchase, however. "We've got lots of momentum in our existing business at the moment. We're not under any pressure to make an acquisition although obviously we would not rule it out if a value enhancing opportunity came our way," he suggested.