16 January 2019 – acquisition and trading update

Norcros has announced that its South African business, Norcros South Africa (Proprietary) Limited has entered into a conditional agreement to acquire 100% of the share capital of South African based RAP Plumbing Supplies (Proprietary) Limited for a total consideration of up to the equivalent of approximately £12.1m on a debt and cash free and normalised working capital basis.  The transaction is subject to regulatory approval from The Competition Commission of South Africa.  Completion will follow once this approval has been granted to the satisfaction of Norcros.  Of the total consideration around £9.7m will be settled in cash on completion and up to a further £2.4m may be payable in two years via an earn out mechanism.  The acquisition will be funded entirely from local cash resources and existing facilities.  The Board expects the transaction to be earnings enhancing immediately.  The company has also noted that trading has continued to be in line with expectations and a trading update for the year ending 31 March 2019 will be released on 10 April.  We see no reason to change our BUY rating.