- 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: | 245p | MARKET VALUE: | £481mn | |
TOUCH: | 244-246p | 12-MONTH HIGH: | 376p | LOW: 182p |
DIVIDEND YIELD: | 5.6% | PE RATIO: | 10 | |
NET ASSET VALUE: | 276p* | NET DEBT: | 32% |
Year to 31 Dec | Turnover (£mn) | Pre-tax profit (£mn) | Earnings per share (p) | Dividend per share (p) |
2018 | 592 | 38.9 | 13.8 | 12.0 |
2019 | 614 | 24.8 | 9.10 | 3.90 |
2020 | 573 | 47.6 | 19.1 | 4.00 |
2021 | 636 | 64.0 | 25.4 | 12.9 |
2022 | 716 | 61.4 | 24.6 | 13.7 |
% change | +13 | -4 | -3 | +6 |
Ex-div: | 27 Apr | |||
Payment: | 26 May | |||
* includes intangible assets of £457mn, or 233p a share |