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Regional variation in resilient markets

Tyman 25 November 2021 Update
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Tyman

Regional variation in resilient markets

Q4 update

Construction & materials

25 November 2021

Price

401p

Market cap

£789m

US$1.39/£

Net debt (£m) at end June 2021
(ex IFRS 16 leases £52m)

95

Shares in issue

196.8m

Free float

91%

Code

TYMN

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

5.0

(1.1)

29.4

Rel (local)

3.9

(2.2)

13.2

52-week high/low

507p

305p

Business description

Tyman’s product portfolio substantially addresses the residential RMI and building markets with increasing commercial sector exposure following acquisitions. It manufactures and sources window and door hardware and seals, reporting in three divisions: AmesburyTruth (North America; 65% of reported FY20 revenue), ERA (UK; 16%) and SchlegelGiesse (RoW; 19%).

Next events

FY21 year end

December 2021

Analyst

Toby Thorrington

+44 (0)20 3077 5721

Tyman is a research client of Edison Investment Research Limited

Residential markets remain firm and Tyman’s International division has been the star performer so far in H2. At the same time, supply chain challenges have constrained progress more in the other two divisions. We have modestly lowered our FY21 PBT expectations and nudged up FY22, supported by robust markets and normalising margins.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS**
(p)

P/E
(x)

Yield
(%)

12/19

613.7

71.0

27.3

3.9

14.7

1.0

12/20

572.8

68.4

27.1

4.0

14.8

1.0

12/21e

629.4

78.8

30.9

10.0

13.0

2.5

12/22e

645.5

86.2

33.4

12.0

12.0

3.0

Note: *PBT and EPS (fully diluted) are normalised, as defined by Tyman, excluding intangible amortisation and exceptional items. **DPS – FY19 was an interim dividend only and FY20 a final dividend only.

Firm demand, supply chain challenges

Underlying residential sector end-market demand has remained firm in all three of Tyman’s divisions thus far in H2, extending momentum seen at the end of FY20. That said, supply chain constraints (variously materials, labour availability and transport) have affected industry top-line growth. Consequently, compared to pre-COVID FY19, Tyman’s like-for-like revenue growth has slowed for the 10 months ytd compared to H1 in North America (+6% and +10% respectively) and UK/Ireland (+4% and 7%), although International has accelerated further (+18% and +13%) and is clearly taking market share in the process. Allowing for an increasing year-on-year benefit from pricing as the year progressed (to recover rising input costs), we believe underlying volume growth has accelerated in International and slowed elsewhere during H2 so far. Note that the commercial sector has been less buoyant and exposure here will have diluted headline progress to some extent.

Mix change, marginal FY21 PBT reduction

Management caution with H1 in July was prudent and was well placed. Tyman continues to work closely with customers and pull the levers available (including managed price rises, investment and balance sheet flexibility) to mitigate operational pressures. We have amended our revenue/profit mix slightly (in favour of International at the expense of North America), resulting in marginal PBT estimate changes (lower in FY21, higher in FY22) with a sterling translation headwind already factored in. Order intake and backlogs, especially in the United States, suggest that the company will have a busy end to FY21, and should progressively feed through to improving group margins as input cost inflation is fully recovered.

Valuation: Outperforming, but well-off highs

Tyman’s share price is up c 14% ytd (slightly ahead of the FTSE All-Share Index), although it has retraced significantly from its 507p peak at the beginning of June. Our estimates have not changed materially since then, so the company’s rating for the closing year has compressed to a P/E of 13.0x and EV/EBITDA (adjusted for pensions cash) of 8.5x. While more optimistic expectations around mid-year will not be met, there are no material changes in our own estimates, which suggests that the share price could regain ground once supply chain tightness begins to subside.

Exhibit 1: Financial summary

£'m

2014

2015

2016

2017

2018

2019

2020

2021e

2022e

2023e

December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

350.9

353.4

457.6

522.7

591.5

613.7

572.8

629.4

645.5

663.0

Cost of Sales

 

 

(236.1)

(234.0)

(290.4)

(331.8)

(383.3)

(408.1)

(380.7)

(415.9)

(423.5)

(433.0)

Gross Profit

 

 

114.8

119.4

167.3

190.9

208.3

205.6

192.1

213.5

222.0

230.0

EBITDA (pre-IFRS16)

 

 

54.6

60.9

82.5

91.7

98.5

100.8

94.9

103.4

110.0

112.2

Operating Profit (Edison)

 

 

46.9

52.9

70.9

78.8

84.7

86.2

80.7

88.9

95.3

97.2

Net Interest

 

 

(4.5)

(6.0)

(6.9)

(8.0)

(10.0)

(11.9)

(8.3)

(6.0)

(5.0)

(4.5)

Other Finance

 

 

(2.2)

(0.6)

(0.4)

(0.8)

(1.3)

(3.5)

(3.5)

(3.0)

(3.0)

(3.0)

Share Based Payments

 

 

(0.9)

(1.0)

(1.0)

(2.0)

(1.1)

(0.8)

(0.4)

(0.8)

(0.8)

(0.8)

Intangible Amortisation

 

 

(17.8)

(19.6)

(21.7)

(22.9)

(25.8)

(23.5)

(18.8)

(18.0)

(18.0)

(18.0)

Exceptionals

 

 

(9.3)

(9.4)

(10.9)

(10.0)

(7.3)

(21.4)

(1.8)

(1.0)

0.0

0.0

Other

 

 

(0.3)

(0.4)

(0.5)

(0.6)

(0.3)

(0.3)

(0.3)

(0.3)

(0.3)

(0.3)

Profit Before Tax (Edison norm)

 

 

39.3

45.4

62.5

68.0

72.3

70.0

68.5

79.1

86.5

88.9

Profit Before Tax (Company norm) 

 

41.6

45.4

62.1

68.3

72.7

71.0

68.4

78.8

86.2

88.7

Profit Before Tax (statutory)

 

 

11.9

16.1

29.4

34.5

38.9

24.8

47.6

59.8

68.2

70.7

Tax

 

 

(2.6)

(8.0)

(8.6)

(3.3)

(12.5)

(7.1)

(10.4)

(12.8)

(15.4)

(16.8)

Profit After Tax (norm)

 

 

36.8

37.3

53.8

64.7

59.8

62.9

58.1

66.3

71.2

72.1

Profit After Tax (statutory)

 

 

9.3

8.1

20.7

31.2

26.3

17.7

37.2

47.0

52.9

53.8

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding (m)

 

167.8

168.2

173.0

177.2

191.4

194.9

195.1

195.3

195.3

195.3

EPS - Edison norm (p) FD

 

 

17.1

19.3

25.5

26.6

27.3

26.8

27.2

31.1

33.5

34.0

EPS - Company norm (p) FD

 

 

18.4

19.4

25.3

26.7

27.5

27.3

27.1

30.9

33.4

33.9

EPS - statutory (p)

 

 

5.6

4.8

12.0

17.6

13.8

9.1

19.1

24.1

27.1

27.6

Dividend per share (p)

 

 

8.0

8.8

10.5

11.3

12.0

3.9

4.0

10.0

12.0

14.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Margin (%)

 

 

32.7

33.8

36.5

36.5

35.2

33.5

33.5

33.9

34.4

34.7

EBITDA Margin (%)

 

 

15.6

17.2

18.0

17.5

16.7

16.4

16.6

16.4

17.0

16.9

Operating Margin (before GW and except.) (%)

 

13.4

15.0

15.5

15.1

14.3

14.0

14.1

14.1

14.8

14.7

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

 

 

 

 

 

Fixed Assets

 

 

410.6

398.4

564.7

509.9

612.5

618.8

575.9

552.6

535.9

518.9

Intangible Assets

 

 

355.7

340.5

480.0

427.2

516.9

475.3

446.0

422.2

403.7

385.2

Tangible Assets

 

 

42.9

42.8

71.7

68.4

77.0

125.2

112.5

113.5

115.3

116.8

Investments

 

 

12.1

15.0

12.9

14.2

18.6

18.3

17.4

16.9

16.9

16.9

Current Assets

 

 

124.0

111.0

180.6

188.1

244.8

213.9

226.6

225.8

274.7

321.1

Stocks

 

 

47.6

46.0

70.7

75.3

105.3

88.6

84.0

104.8

106.7

109.1

Debtors

 

 

37.1

35.0

69.0

70.2

87.7

76.3

72.9

81.4

83.3

85.2

Cash

 

 

39.3

30.0

40.9

42.6

51.9

49.0

69.7

39.6

84.7

126.8

Current Liabilities

 

 

(52.3)

(44.4)

(86.4)

(82.0)

(102.9)

(100.9)

(138.4)

(105.5)

(109.2)

(113.1)

Creditors

 

 

(52.3)

(44.4)

(86.4)

(80.9)

(101.4)

(100.6)

(98.1)

(105.5)

(109.2)

(113.1)

Short term borrowings

 

 

0.0

0.0

0.0

(1.1)

(1.5)

(0.3)

(40.3)

0.0

0.0

0.0

Long Term Liabilities

 

 

(176.2)

(156.7)

(285.3)

(251.4)

(320.5)

(315.5)

(221.0)

(199.8)

(198.1)

(196.4)

Long term borrowings

 

 

(128.0)

(111.6)

(216.5)

(204.3)

(259.2)

(211.5)

(128.8)

(116.3)

(116.3)

(116.3)

Other long term liabilities

 

 

(48.2)

(45.1)

(68.8)

(47.0)

(61.3)

(104.0)

(92.2)

(83.5)

(81.8)

(80.1)

Net Assets

 

 

306.1

308.3

373.6

364.5

433.8

416.3

443.1

473.0

503.2

530.5

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOW

 

 

 

 

 

 

 

 

 

 

 

 

Operating Cash Flow

 

 

40.1

49.4

79.9

67.0

85.0

111.3

109.7

81.5

113.1

114.9

Net Interest

 

 

(4.6)

(6.2)

(7.0)

(7.6)

(9.1)

(15.0)

(12.5)

(9.0)

(8.0)

(7.5)

Tax

 

 

(6.3)

(8.9)

(12.7)

(15.1)

(12.3)

(14.2)

(13.8)

(12.3)

(14.9)

(16.3)

Capex

 

 

(10.2)

(10.9)

(15.3)

(12.6)

(12.0)

(10.7)

(10.5)

(19.3)

(16.0)

(16.0)

Acquisitions/disposals

 

 

(6.5)

6.8

(96.1)

(6.3)

(106.4)

(0.9)

(1.5)

0.0

0.0

0.0

Financing

 

 

(4.3)

(2.6)

16.7

(0.8)

47.2

(2.0)

(0.3)

(2.0)

(2.0)

(2.0)

Dividends

 

 

(10.9)

(14.6)

(15.6)

(19.5)

(22.4)

(23.6)

0.0

(15.7)

(20.7)

(24.6)

Net Cash Flow

 

 

(2.8)

13.0

(50.0)

5.1

(30.1)

44.9

71.1

23.1

51.6

48.5

Opening net debt/(cash)

 

 

78.7

88.7

81.6

175.6

162.9

208.8

162.8

99.4

76.7

31.6

Finance leases initiated

 

 

0.0

0.0

0.0

0.0

(2.0)

(0.3)

0.0

0.0

0.0

0.0

Other

 

 

(7.2)

(5.9)

(44.0)

7.6

(13.9)

1.4

(7.7)

(0.5)

(6.4)

(6.4)

Closing net debt/(cash)

 

 

88.7

81.6

175.6

162.9

208.8

162.8

99.4

76.7

31.6

(10.5)

Lease finance (under IFRS16)

 

 

 

 

 

 

 

60.0

53.8

51.8

51.8

51.8

Source: Company data, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Tyman and prepared and issued by Edison, in consideration of a fee payable by Tyman. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney+61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Tyman and prepared and issued by Edison, in consideration of a fee payable by Tyman. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney+61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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