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Research: Industrials
A strong end to FY20 has fed into good momentum at the beginning of FY21 and all three divisions performed ahead of management’s expectations in the first four months of the year. Moreover, Tyman is more optimistic now about the outlook for the remainder of the year. We have raised our earnings estimates by c 10% following similar upgrades with the FY20 results at the beginning of March.
Written by
Tyman |
More upgrades from ongoing trading momentum |
Trading update |
Construction & materials |
12 May 2021 |
Share price performance
Business description
Next events
Analyst
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A strong end to FY20 has fed into good momentum at the beginning of FY21 and all three divisions performed ahead of management’s expectations in the first four months of the year. Moreover, Tyman is more optimistic now about the outlook for the remainder of the year. We have raised our earnings estimates by c 10% following similar upgrades with the FY20 results at the beginning of March.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS** |
P/E |
Yield |
12/19 |
613.7 |
71.0 |
27.3 |
3.9 |
17.5 |
0.8 |
12/20 |
572.8 |
68.4 |
27.1 |
4.0 |
17.7 |
0.8 |
12/21e |
620.0 |
80.1 |
31.5 |
10.0 |
15.2 |
2.1 |
12/22e |
635.8 |
85.1 |
33.0 |
12.0 |
14.5 |
2.5 |
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.
Good broad-based progress, optimistic outlook
Tyman’s FY20 results included commentary noting that year-end momentum had carried over into the early months of FY21. A four-month (to end April) update indicates that this has continued and even accelerated in places. Looking at pre-pandemic benchmarks, Tyman provides more normalised context by pointing to y-o-y revenue uplifts versus FY19; on this basis, all three divisions are ahead by c 9–10% in reported terms, including underlying/local FX progress of 16% in North America, the company’s largest market. Unsurprisingly, this is causing industry supply chain strains – which will differ by region – that the company is working hard to mitigate through a combination of pricing/surcharges, production capacity increases and freight actions. Limited visibility of likely post-pandemic market behaviours meant that management comments in early FY21 were heavily caveated – they now express optimism ‘for the remainder of the year’.
Divisional and group estimates raised
FY21 EBIT guidance has been raised above the previous top of the estimate range (ie £85m). We have increased our expected contributions from all three divisions – North America being the largest in value terms – and for all three estimate years, resulting in an FY21 EPS uplift of c 11%, followed by +9% in each of the following two years (with FX inputs unchanged). At the PBT/EPS level, our FY21 estimates are now comfortably ahead of pre-pandemic FY19 levels (including an unfavourable £/US$ comparator effect). This corporate update pre-empts the usual AGM one, but a capital markets day (CMD) scheduled for the same day later this month (20 May) should provide further insight on the current ‘Focus, Define, Grow’ improvement strategy.
Valuation: Upgrades driving share price higher
The company’s share price has travelled well since the FY20 results announcement (up c 40%), a move that looks well underpinned by the latest trading update. Our revised estimates – which raise the three-year EPS CAGR to 7.7% – result in P/E and EV/EBITDA (adjusted for pensions cash) multiples of 14.1x and 8.4x respectively by the end of our estimate horizon.
Tyman is a research client of Edison Investment Research Limited
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 |
620.0 |
635.8 |
653.1 |
|
Cost of Sales |
|
|
(236.1) |
(234.0) |
(290.4) |
(331.8) |
(383.3) |
(408.1) |
(380.7) |
(411.5) |
(420.3) |
(432.1) |
|
Gross Profit |
|
|
114.8 |
119.4 |
167.3 |
190.9 |
208.3 |
205.6 |
192.1 |
208.5 |
215.5 |
221.0 |
|
EBITDA (pre-IFRS16) |
|
|
54.6 |
60.9 |
82.5 |
91.7 |
98.5 |
100.8 |
94.9 |
104.7 |
108.9 |
112.2 |
|
Operating Profit (Edison) |
|
|
46.9 |
52.9 |
70.9 |
78.8 |
84.7 |
86.2 |
80.7 |
90.2 |
94.2 |
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) |
(18.8) |
(18.8) |
(18.8) |
|
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 |
80.4 |
85.4 |
88.9 |
|
Profit Before Tax (Company norm) |
|
|
41.6 |
45.4 |
62.1 |
68.3 |
72.7 |
71.0 |
68.4 |
80.1 |
85.1 |
88.6 |
|
Profit Before Tax (statutory) |
|
|
11.9 |
16.1 |
29.4 |
34.5 |
38.9 |
24.8 |
47.6 |
60.3 |
66.3 |
69.8 |
|
Tax |
|
|
(2.6) |
(8.0) |
(8.6) |
(3.3) |
(12.5) |
(7.1) |
(10.4) |
(12.9) |
(14.9) |
(16.6) |
|
Profit After Tax (norm) |
|
|
36.8 |
37.3 |
53.8 |
64.7 |
59.8 |
62.9 |
58.1 |
67.6 |
70.6 |
72.3 |
|
Profit After Tax (statutory) |
|
|
9.3 |
8.1 |
20.7 |
31.2 |
26.3 |
17.7 |
37.2 |
47.5 |
51.5 |
53.2 |
|
Average Number of Shares Outstanding (m) |
|
167.8 |
168.2 |
173.0 |
177.2 |
191.4 |
194.9 |
195.1 |
195.1 |
195.1 |
195.1 |
||
EPS - Edison norm (p) FD |
|
|
17.1 |
19.3 |
25.5 |
26.6 |
27.3 |
26.8 |
27.2 |
31.6 |
33.2 |
34.1 |
|
EPS - Company norm (p) FD |
|
|
18.4 |
19.4 |
25.3 |
26.7 |
27.5 |
27.3 |
27.1 |
31.5 |
33.0 |
33.9 |
|
EPS - statutory (p) |
|
|
5.6 |
4.8 |
12.0 |
17.6 |
13.8 |
9.1 |
19.1 |
24.3 |
26.4 |
27.3 |
|
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 |
33.6 |
33.9 |
33.8 |
|
EBITDA Margin (%) |
|
|
15.6 |
17.2 |
18.0 |
17.5 |
16.7 |
16.4 |
16.6 |
16.9 |
17.1 |
17.2 |
|
Operating Margin (before GW and except.) (%) |
|
13.4 |
15.0 |
15.5 |
15.1 |
14.3 |
14.0 |
14.1 |
14.6 |
14.8 |
14.9 |
||
BALANCE SHEET |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Assets |
|
|
410.6 |
398.4 |
564.7 |
509.9 |
612.5 |
618.8 |
575.9 |
568.2 |
550.3 |
532.2 |
|
Intangible Assets |
|
|
355.7 |
340.5 |
480.0 |
427.2 |
516.9 |
475.3 |
446.0 |
426.3 |
406.6 |
386.9 |
|
Tangible Assets |
|
|
42.9 |
42.8 |
71.7 |
68.4 |
77.0 |
125.2 |
112.5 |
124.6 |
126.4 |
127.9 |
|
Investments |
|
|
12.1 |
15.0 |
12.9 |
14.2 |
18.6 |
18.3 |
17.4 |
17.4 |
17.4 |
17.4 |
|
Current Assets |
|
|
124.0 |
111.0 |
180.6 |
188.1 |
244.8 |
213.9 |
226.6 |
228.2 |
276.1 |
321.3 |
|
Stocks |
|
|
47.6 |
46.0 |
70.7 |
75.3 |
105.3 |
88.6 |
84.0 |
95.8 |
97.9 |
100.6 |
|
Debtors |
|
|
37.1 |
35.0 |
69.0 |
70.2 |
87.7 |
76.3 |
72.9 |
77.5 |
79.2 |
81.1 |
|
Cash |
|
|
39.3 |
30.0 |
40.9 |
42.6 |
51.9 |
49.0 |
69.7 |
54.8 |
99.0 |
139.6 |
|
Current Liabilities |
|
|
(52.3) |
(44.4) |
(86.4) |
(82.0) |
(102.9) |
(100.9) |
(138.4) |
(102.8) |
(106.7) |
(111.0) |
|
Creditors |
|
|
(52.3) |
(44.4) |
(86.4) |
(80.9) |
(101.4) |
(100.6) |
(98.1) |
(102.8) |
(106.7) |
(111.0) |
|
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) |
(219.3) |
(217.6) |
(215.9) |
|
Long term borrowings |
|
|
(128.0) |
(111.6) |
(216.5) |
(204.3) |
(259.2) |
(211.5) |
(128.8) |
(128.8) |
(128.8) |
(128.8) |
|
Other long-term liabilities |
|
|
(48.2) |
(45.1) |
(68.8) |
(47.0) |
(61.3) |
(104.0) |
(92.2) |
(90.5) |
(88.8) |
(87.1) |
|
Net Assets |
|
|
306.1 |
308.3 |
373.6 |
364.5 |
433.8 |
416.3 |
443.1 |
474.3 |
502.1 |
526.6 |
|
CASH FLOW |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Cash Flow |
|
|
40.1 |
49.4 |
79.9 |
67.0 |
85.0 |
111.3 |
109.7 |
95.1 |
112.1 |
115.0 |
|
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) |
(12.4) |
(14.4) |
(16.1) |
|
Capex |
|
|
(10.2) |
(10.9) |
(15.3) |
(12.6) |
(12.0) |
(10.7) |
(10.5) |
(25.6) |
(15.6) |
(15.6) |
|
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 |
(14.3) |
(21.6) |
(26.8) |
|
Net Cash Flow |
|
|
(2.8) |
13.0 |
(50.0) |
5.1 |
(30.1) |
44.9 |
71.1 |
31.8 |
50.5 |
47.0 |
|
Opening net debt/(cash) |
|
|
78.7 |
88.7 |
81.6 |
175.6 |
162.9 |
208.8 |
162.8 |
99.4 |
74.0 |
29.8 |
|
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) |
(6.4) |
(6.4) |
(6.4) |
|
Closing net debt/(cash) |
|
|
88.7 |
81.6 |
175.6 |
162.9 |
208.8 |
162.8 |
99.4 |
74.0 |
29.8 |
(10.8) |
|
Lease finance (under IFRS 16) |
|
|
|
|
|
|
|
60.0 |
53.8 |
53.8 |
53.8 |
53.8 |
|
Source: Company accounts, Edison Investment Research
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Research: Industrials
2G Energy’s FY20 results marked the fifth successive year of revenue growth, despite the coronavirus pandemic. Customers in Germany and elsewhere continued to invest in combined heat and power (CHP) systems that help cut electricity costs, reduce dependence on overstretched electricity grids and address the variability of output from wind and solar sources. Importantly 2G’s CHP systems can be upgraded to run on hydrogen, future proofing the investment as the sector decarbonises.