Tyman (TYMN), formerly known as Lupus Capital, specialises in supplying components to the door and window industry. As such, it is deeply dependent on the health of the housing sector, most notably in the US where it generates around two thirds of group revenue.
- Strong performance in core US market
- UK set to benefit from recovering repair-and-maintenance market
- Solid cash generation
- Modest debt levels
- Tough trading in mainland Europe
- Closure costs to trim profits
Happily, in the US, where Tyman acquired Truth Hardware for $200m (£127m) last year, business is picking up nicely. The AmesburyTruth trading arm benefited from a 15 per cent increase in housing completions in the first half and the trend has continued into the third quarter. Meanwhile, the major revenue generator - repair and remodelling work - has been boosted by an improvement in the weather - bad weather made for a slow start to the year. Business in Canada is also starting to look up. And the integration of the Truth business is expected to deliver cost savings of at least $5m this year, rising to $8m in 2015.
In the UK, the operating arm Grouphomesafe, which accounts for about a quarter of sales, is delivering a consistent increase in order intake, notably from its customer base of original equipment manufacturers (OEM). Increased market penetration has come from growing the OEM base, and operational gearing helped to boost underlying operating margins in the first half from 11.7 per cent to 13.3 per cent. And further growth is expected in 2015 as momentum accelerates in the new build sector, while consumer confidence and transactions on existing homes are forecast to increase demand in the repair and maintenance sector.
| TYMAN (TYMN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 282p | MARKET VALUE: | £478m | |
| TOUCH: | 282-284p | 12M HIGH: | 325p | LOW: 210p |
| FWD DIVIDEND YIELD: | 2.6% | FWD PE RATIO: | 14 | |
| NET ASSET VALUE: | 169p* | NET DEBT: | 38% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m)** | Earnings per share (p)** | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 216 | 12.5 | 8.9 | 3.5 |
| 2012 | 229 | 18.5 | 10.5 | 4.5 |
| 2013 | 298 | 28.6 | 13.7 | 6.0 |
| 2014** | 344 | 41.0 | 17.2 | 6.6 |
| 2015** | 371 | 48.0 | 20.1 | 7.3 |
| % change | +8 | +17 | +17 | +11 |
NMS:1,500 Matched Bargain Trading BETA:0.54 * Includes intangibles of £344m or 203p per share ** Canaccord Genuity forecasts, adjusted PTP and EPS figures. £ = $1.57 | ||||
Trading in mainland Europe paints a more sombre picture, however. In late 2012, the group ceased production of building products at its Gistel plant in Belgium. These products were not considered integral to the group's European industrial business, and more importantly, had been running at a small operating loss for the previous two years. The operation is expected to make an operating loss of €300,000 (£239,635) in the current year, and closure costs will total €3m.
Elsewhere in Europe, the Schlegel International operating arm has struggled, mainly as a result of weak demand in the Nordic countries, Germany and France. On the plus side, business in Eastern Europe remained relatively robust. Trading elsewhere has seen a return to growth in the Brazilian market, as conditions return to normal after the football World Cup, and cost savings are expected from the integration of weather seals specialist Vedasil Brasil, which was acquired in February, into the Schlegel Americas Latina operation. Together with a stronger performance in Australia, and before taking into account closure costs, Schlegel International is expected to break even this year.
Higher levels of capital expenditure and working capital investment trimmed cash conversion in the 12 months to June to 71.5 per cent, but operational cash flow remains strong. Indeed, the group is expected to be back within its target range of 1.5-2.0 times net debt to underlying cash profits by the year end compared with 2.2 times at the half-year stage and 2.6 times following the completion of the Truth deal in July 2013. The company has also increased the dividend payout significantly, and while the forecast yield remains relatively modest, the dividend payout is forecast to double from 2011 to 2015.
