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Tyman looks to get a handle on costs

The door and window handles maker's operating margin diluted by higher overheads
July 26, 2022
  • US revenue growth fuelled by higher pricing
  • International arm makes market share and profit gains

The importance of keeping a grip on costs will not be lost on management at door and handle maker Tyman (TYMN).

It has faced a profitability squeeze in the first half of the year, with its operating margin dropping by 120 basis points to 11.3 per cent. The company has faced “significant” input cost inflation, including higher freight and salary costs. Although it has managed to recoup some of this through price increases, there has been both a timing lag and a dilutive effect on its margins.

Demand so far has been solid. In North America – its biggest market, generating 64 per cent of revenue – like-for-like sales were up 12 per cent. Although volume growth was flat, this was against a busy period last year.

Business was slower in the UK and Ireland (15 per cent of revenue), where both sales and operating profit dropped by 1 per cent but an international arm serving the rest of the world grew like-for-like revenue by 17 per cent and adjusted operating profit by 37 per cent as it made gains in Italy, Australia and the Middle East.

The company is spending more on capex to drive efficiencies – it is automating factories in Italy and the UK, as well as addressing bottlenecks in seals manufacturing in the UK and the US. The trouble is, it is doing this at a time when many of its end markets look wobbly.

Broker Peel Hunt forecasts flat earnings per share of 32p for this year. Although Tyman's shares are valued below both their five-year average and their peer group after falling in value by a third this year, the company is relying on market share gains to make progress in a “more challenging” environment, so the scope for enhancing earnings looks limited. Sell.

Last IC View: Hold, 172p, 29 Jul 2020

TYMAN (TYMN)    
ORD PRICE:268pMARKET VALUE:£ 526mn
TOUCH:267-269p12-MONTH HIGH:464pLOW: 227p
DIVIDEND YIELD:4.9%PE RATIO:10
NET ASSET VALUE:270p*NET DEBT:34%
Half-year to 30 JunTurnover (£mn)Pre-tax profit (£mn)Earnings per share (p)Dividend per share (p)
202131334.313.54.00
202236037.414.64.20
% change+15+9+8+5
Ex-div:04 Aug   
Payment:09 Sep   
*Includes intangible assets of £463mn, or 236p a share