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24 March 2021
By Maynard Paton
Let me start by confessing this article covers pension deficits.
What follows may not be that thrilling and does require you to concentrate. But please stick with me, especially if you have ever fallen victim to a ‘value trap’.
A burdensome pension scheme is a common reason why companies trade on permanently low ratings. The market essentially believes too much of their future profits will have to plug a retirement ‘black hole’ instead of being paid out as dividends.
A good example is Norcros, a £214 million manufacturer of bathroom showers, taps and tiles.
This share has stubbornly traded on a single-digit P/E for years…
… and studying the group’s pension situation goes some way to explain why.