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Tougher times for Tyman

Demand softens as DIY and housebuilding activity slow in the US
March 3, 2023
  • Company takes action on costs
  • Shares trade at discount to peers

When windows and doors components maker Tyman (TYMN) reported its half-year results last July, we were more concerned about the squeeze on margins the company was experiencing than any drop-off in demand. It turns out we should have been worried about both. 

The US market, where Tyman makes two-thirds of its sales, witnessed the same softness in the DIY market as the UK as higher inflation squeezed household incomes.  A hike in US mortgage rates (the 30-year fixed rate hit 6.71 per cent last week) has also triggered house price declines, meaning fewer new projects – housing starts in January fell by more than a quarter year on year. 

Tyman said a decline in demand “became significantly more pronounced” as the year ended and although it took action to address costs – changing shift patterns, cutting its use of temporary labour and even winding down inventory as supply chain pressures eased – operating profit fell by 3 per cent to £70.7mn. It has also made “structural” cost savings – withdrawing from three factories in the UK and Germany, which it said will save around £3mn a year.

Things are showing no sign of getting better in the short term. Although house broker Numis argues that Tyman trades on a “meaningful discount” of eight times earnings (compared with 13 times for peers) as well as offering a 5 per cent dividend yield, there doesn't seem to be much scope for growth. 

The FactSet consensus forecast is for a 14 per cent earnings per share decline this year, with a recovery to last year’s level only expected by 2025. That’s a long time to wait in a market where even cash offers reasonable returns. Sell.

Last IC View: Sell, 268p, 26 Jul 2022

TYMAN (TYMN)   
ORD PRICE:245pMARKET VALUE:£481mn
TOUCH:244-246p12-MONTH HIGH:376pLOW: 182p
DIVIDEND YIELD:5.6%PE RATIO:10
NET ASSET VALUE:276p*NET DEBT:32%
Year to 31 DecTurnover (£mn)Pre-tax profit (£mn)Earnings per share (p)Dividend per share (p)
201859238.913.812.0
201961424.89.103.90
202057347.619.14.00
202163664.025.412.9
202271661.424.613.7
% change+13-4-3+6
Ex-div:27 Apr   
Payment:26 May   
* includes intangible assets of £457mn, or 233p a share