Tyman — Update 18 November 2015

Tyman (LN: TYMN)

Last close As at 18/04/2024

318.50

−4.50 (−1.39%)

Market capitalisation

625m

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Research: Industrials

Tyman — Update 18 November 2015

Tyman

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Written by

Industrials

Tyman

Subdued markets, but progress expected

Trading update

Construction & materials

19 November 2015

Price

238.75p

Market cap

£405m

£/US$1.51

Net debt (£m) at end June 2015

104.4

Shares in issue

169.6m

Free float

91%

Code

TYMN

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(17.7)

(24.3)

(15.3)

Rel (local)

(16.8)

(21.4)

(12.0)

52-week high/low

340.0p

233.5p

Business description

Tyman’s product portfolio now solely addresses the residential RMI and building markets. It manufactures and sources window and door hardware and seals, largely for the North American (63%) and UK (26%) markets. (Percentages are for FY14 revenue).

Next event

FY15 results

8 March 2016

Analysts

Toby Thorrington

+44 (0)20 3077 5721

Roger Johnston

+44 (0)20 3077 5722

Tyman is a research client of Edison Investment Research Limited

As Tyman's year end approaches, it has pointed to subdued Q3 trading in a number of regional markets but also provided grounds for improved profitability in FY16. Overall, we have trimmed our FY15 PBT estimate by 3.4% with no net change to future years at this stage. We believe that the absence of a growth premium understates market and company prospects.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/13

298.1

28.6

13.5

6.0

17.7

2.5

12/14

350.9

41.6

18.4

8.0

13.0

3.4

12/15e

359.6

42.7

17.8

9.0

13.4

3.8

12/16e

362.0

47.6

20.2

9.5

11.8

4.0

Note: *PBT and EPS (fully diluted) are normalised, as defined by Tyman, excluding intangible amortisation and exceptional items.

Half-year order promise not sustained in demand

Trading in H215 to date has not been as positive as end-H115 order books (in all three reporting regions) appeared to suggest. In North America, AmesburyTruth noted a Q3 lull in both newbuild and RMI sectors, while Canada remains a soft market. We believe that FX effects overall (US$ stronger, C$ weaker) have been marginally more beneficial than at the interim stage, with firmer product pricing also supporting better margins. In the UK, ERA’s order book was flat at the end of H1 and it has seen lower demand during H2; channel performance has been variable with OEM share gains positive; weaker retail/distribution sales less so. Elsewhere, Schlegel has continued to see country-by-country trading variability and intends to further consolidate pile seal production into a UK facility by closing one in Spain.

FY15 PBT estimates revised down by c 3%

Ahead of the IMS, our FY15 EBITA estimate was towards the lower end of the range and we have reduced our EBITA/PBT expectation by £2m (or 3.4%) with all three regions contributing to this. Our group profit expectations beyond this are unchanged; the US continues to be the main driver of progress in our model (and housing permits/starts have improved again here), though we see scope for some incremental improvement elsewhere. For example, ERA’s new product and masterbrand strategy should gain momentum next year, while management has flagged that Schlegel’s European site consolidation may equate to a c €2m profit swing when complete (ie not all in FY16).

Valuation: Share price decline depresses rating

Tyman’s share price had been performing in line with the FTSE All-Share index since H115 results (end July) but, consistent with many sector peers, the relative has deteriorated since the beginning of October. It now stands c 23% below the start-year level and approaching 30% lower than its 340p peak in February. While this type of sector exposure may be out of favour currently, we still believe that the cyclical housing recovery has some way to go in Tyman’s leading markets and, subject to no major reaction to gradually rising interest rate, expect to see this result in a resumption of more positive share price performance.

Exhibit 1: Financial summary

£m

2010

2011

2012

2013

2014

2015e

2016e

2017e

Year-end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

 

Group

Continuing

Continuing

 

 

 

 

 

Revenue

 

 

266.2

216.3

228.8

298.1

350.9

359.6

362.0

375.3

Cost of Sales

 

 

(173.4)

(145.2)

(154.0)

(198.8)

(236.1)

(242.0)

(243.6)

(252.5)

Gross Profit

 

 

92.8

71.1

74.7

99.3

114.8

117.6

118.4

122.7

EBITDA

 

 

40.2

27.7

28.5

39.4

54.6

58.5

63.1

68.0

Operating Profit (Edison)

 

 

33.7

22.4

23.4

33.0

46.9

50.5

54.6

59.0

Net Interest

 

 

(8.9)

(5.9)

(3.3)

(3.4)

(4.5)

(6.0)

(5.7)

(5.2)

Other Finance

 

 

(2.9)

(3.6)

(0.9)

0.2

(2.2)

(1.1)

(0.5)

(0.5)

Share Based Payments

 

 

(0.1)

(0.2)

(0.5)

(0.7)

(0.9)

(0.9)

(0.9)

(0.9)

Intangible Amortisation

 

 

(11.7)

(10.6)

(10.8)

(16.6)

(17.8)

(18.0)

(18.0)

(18.0)

Exceptionals

 

 

(0.4)

0.7

(33.4)

(11.4)

(9.3)

(7.7)

(4.5)

(3.5)

Other

 

 

(0.3)

(0.1)

(0.4)

(0.4)

(0.3)

(0.3)

(0.3)

(0.3)

Profit Before Tax (Edison norm)

 

21.9

12.7

18.7

29.2

39.3

42.5

47.4

52.4

Profit Before Tax (Company norm)

 

24.8

17.4

21.3

28.6

41.6

42.7

47.6

52.5

Profit Before Tax (FRS 3)

 

 

9.5

2.6

(25.8)

0.8

11.9

16.6

24.6

30.5

Tax

 

 

(2.5)

6.4

3.7

0.2

(2.6)

(7.1)

(7.9)

(9.3)

Profit After Tax (norm)

 

 

19.4

19.1

22.4

29.4

36.8

35.4

39.5

43.1

Profit After Tax (FRS 3)

 

 

7.0

9.1

(22.1)

1.0

9.3

9.5

16.7

21.2

 

 

 

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding (m)

 

129.8

129.7

129.7

152.8

167.8

167.9

167.9

167.9

EPS - Edison normalised (p) FD

 

 

10.7

6.7

9.6

13.9

17.1

17.8

20.1

22.2

EPS - Company normalised (p) FD

 

 

11.4

9.4

10.2

13.5

18.4

17.8

20.2

22.3

EPS - FRS 3 (p)

 

 

5.3

6.8

(16.7)

0.6

5.6

5.6

9.9

12.7

Dividend per share (p)

 

 

2.0

3.4

4.5

6.0

8.0

9.0

9.5

10.5

 

 

 

 

 

 

 

 

 

 

 

Gross Margin (%)

 

 

34.9

32.9

32.7

33.3

32.7

32.7

32.7

32.7

EBITDA Margin (%)

 

 

15.1

12.8

12.5

13.2

15.6

16.3

17.4

18.1

Operating Margin (before GW and except.) (%)

12.7

10.4

10.2

11.1

13.4

14.1

15.1

15.7

 

 

 

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

Group

Continuing

Continuing

 

 

 

 

 

Fixed Assets

 

 

367.4

352.8

298.1

404.2

410.6

385.1

371.2

358.5

Intangible Assets

 

 

328.2

312.7

258.7

354.4

355.7

333.7

317.8

301.9

Tangible Assets

 

 

31.5

30.5

29.8

39.9

42.9

36.4

40.1

43.3

Investments

 

 

7.7

9.6

9.5

9.8

12.1

15.0

13.3

13.3

Current Assets

 

 

86.7

96.361

90.7

118.9

124.0

145.7

159.1

179.8

Stocks

 

 

26.0

26.6

27.6

40.7

47.6

53.8

54.1

56.1

Debtors

 

 

28.2

24.1

23.7

29.9

31.5

32.2

32.5

33.7

Cash

 

 

27.7

20.4

35.9

43.6

39.3

54.1

66.9

84.4

Current Liabilities

 

 

(51.8)

(55.1)

(44.2)

(60.8)

(52.3)

(56.3)

(57.7)

(61.8)

Creditors

 

 

(46.6)

(42.2)

(36.7)

(54.0)

(52.3)

(56.3)

(57.7)

(61.8)

Short term borrowings

 

 

(5.2)

(12.9)

(7.5)

(6.8)

0.0

0.0

0.0

0.0

Long Term Liabilities

 

 

(163.7)

(144.8)

(96.9)

(161.7)

(176.2)

(178.9)

(177.9)

(176.9)

Long term borrowings

 

 

(114.3)

(100.2)

(63.6)

(115.5)

(128.0)

(136.1)

(136.1)

(136.1)

Other long term liabilities

 

 

(49.4)

(44.6)

(33.3)

(46.2)

(48.2)

(42.8)

(41.8)

(40.8)

Net Assets

 

 

238.6

249.2

247.7

300.6

306.1

295.6

294.7

299.6

 

 

 

 

0.000

 

 

 

 

 

 

CASH FLOW

 

 

Group

Continuing

Continuing

 

 

 

 

 

Operating Cash Flow

 

 

38.6

32.6

23.6

38.9

40.1

40.8

55.0

61.2

Net Interest

 

 

(9.3)

(6.7)

(4.2)

(2.6)

(4.6)

(6.0)

(5.7)

(5.2)

Tax

 

 

(2.3)

(1.9)

(4.9)

(6.2)

(6.3)

(5.6)

(6.4)

(7.8)

Capex

 

 

(3.5)

(4.9)

(6.8)

(8.1)

(10.2)

(11.3)

(14.3)

(14.3)

Acquisitions/disposals

 

 

0.0

(10.3)

51.2

(131.2)

(6.5)

7.3

0.0

0.0

Financing

 

 

0.0

(0.3)

(1.1)

68.1

(4.3)

(3.5)

0.0

0.0

Dividends

 

 

0.0

(2.6)

(5.8)

(7.0)

(10.9)

(14.6)

(15.8)

(16.4)

Net Cash Flow

 

 

23.5

6.0

51.9

(48.2)

(2.8)

7.0

12.8

17.5

Opening net debt/(cash)

 

 

111.0

91.7

92.7

35.2

78.7

88.7

81.9

69.2

HP finance leases initiated

 

 

(0.0)

(2.7)

0.0

0.0

0.0

0.0

0.0

0.0

Other

 

 

(4.2)

(4.4)

5.6

4.7

(7.2)

(0.3)

(0.0)

(0.0)

Closing net debt/(cash)

 

 

91.7

92.7

35.2

78.7

88.7

81.9

69.2

51.7

Source: Company accounts, Edison Investment Research

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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