Tyman rides recovery wave

A lot has happened since Tyman (TYMN) reported its full-year numbers in March – its chief executive Jo Hallas resigned with immediate effect towards the end of that month and the company reported a “challenging demand environment” ahead of its AGM in May.

First-half figures reflected this – adjusted operating profit fell by around a quarter at constant currency rates. The company blamed lower sales volumes for its weaker margin, citing customer destocking in a tougher economic climate. Reported profit was down by almost 40 per cent once adjusting items, including £2.5mn of one-off redundancy and restructuring costs, were added.

And yet Tyman's shares have been rallying strongly over the past quarter and now sit at a 12-month high.

One reason for this is that although it was weaker than last year, half-year profit came in ahead of analysts’ forecasts. It managed down inventory well, converting 100 per cent of adjusted operating profit into cash. It also managed to nudge up its operating margin in North America, where it makes around two-thirds of its sales.

Another is the more resilient US housing market – mortgage applications for new homes in June were up 26 per cent year on year. This led the company to lift expectations about its full-year profitability. Interim chief executive Jason Ashton said adjusted operating profit would be "at the top end" of the current range of analysts’ forecasts of between £77.6mn amd £84.3mn.

Tyman’s shares now trade ahead of their five-year price/earnings ratio, at 11 times broker Peel Hunt’s forecast earnings of 26.9p a share. We have some concern the market may be getting ahead of itself, but acknowledge the prospects for a recovery look better now than they did four months ago. Move to hold.

Last IC View: Sell, 245p, 3 Mar 2023