H117 results showed underlying progress compared to the prior year (like-for-like revenue +2%, EBIT +3.9%). Overseas operations also benefited from favourable translation following sterling weakness and all regions contained positive year-on-year acquisition effects, leaving reported revenue and EBIT both well up versus the prior year. Seasonal cash outflow was within the normal range. Management expects the working capital component to substantially reverse in H2 and for market conditions to remain broadly the same for each of the three divisions.
Exhibit 1: Tyman interim and divisional splits
Year end 31 December, £m |
H116 |
H216 |
FY16 |
H117 |
|
H117 year-on-year, chg % |
Reported |
CER* |
LFL |
Group revenue |
201.040 |
256.604 |
457.644 |
260.402 |
|
29.5% |
17% |
2.0% |
AmesburyTruth |
126.762 |
164.522 |
291.284 |
166.052 |
|
31.0% |
15% |
0.0% |
Schlegel International |
38.865 |
55.712 |
94.577 |
54.406 |
|
40.0% |
25% |
7.4% |
ERA |
35.413 |
36.370 |
71.783 |
39.944 |
|
12.8% |
13% |
4.6% |
Group operating profit (reported, post SBP) |
27.170 |
42.633 |
69.803 |
35.497 |
|
30.6% |
17% |
4% |
AmesburyTruth |
21.784 |
33.032 |
54.816 |
27.395 |
|
25.8% |
11% |
1% |
Schlegel International |
3.324 |
6.089 |
9.413 |
6.321 |
|
90.2% |
70% |
50% |
ERA |
5.772 |
5.782 |
11.554 |
5.628 |
|
-2.5% |
-2% |
-12% |
Central costs |
(3.710) |
(2.270) |
(5.980) |
(3.847) |
|
|
|
|
Source: Tyman, Edison Investment Research. Note: *Edison Investment Research estimates.
North America – AmesburyTruth (AT): Against a strong comparator (H116 LFL +6%), AT achieved a similar underlying outturn to the prior year. The smaller Canadian market has shown more encouraging signs recently, implying that underlying US activity was broadly flat year-on-year. A slower ramp up of vertically integrated balance production at the expanded Juarez facility may have partly contributed to this, but has now reached expected run rates. Bilco saw slight softness in certain residential lines but overall performed similarly to AT existing operations and made its maiden H1 contribution. This, and some gains from Giesse’s US offering, explained the divisional US dollar performance (ie revenue uplift and margin dilution). The manufacturing optimisation project progress report now reads one expansion and one newbuild facility completed and operational (at Juarez and Sioux Falls, respectively), construction of a third factory (at Statesville) is well advanced while two previous sites have been exited. Operationally, consolidating third-party distribution (to smaller independent accounts) and developing the combined commercial offering appear to be the areas where AT is looking to gain market share. AT’s period end order book was up 5.6% y-o-y going into the busy third quarter.
Other/RoW – Schlegel International: The acquisition of Giesse in March 2016 represented a step change in the scale and profitability of this division. Happily it appears to have bedded in well; a further €2.4m in synergies were achieved in H117 (taking the annualised total to €4.8m) and the consolidation of Bologna manufacturing in H217 will contribute further to the increased €6m total now expected by March 2018. We have been surprised by this rate of progress and feel that operational changes (in line management and distribution), together with wider group commercial sector opportunities signal further growth. Notably, the existing Schlegel businesses appeared to have responded favourably too in markets that are generally but not universally improving.
UK – ERA: As has been widely reported, UK RMI spending has been very patchy and rather subdued overall in line with earlier management comments. Rising input costs have pegged back profitability, which in reported terms was largely made up by acquisition contribution effects (being Response, Bilco UK and Howe Green). Divisional investment has been made in electronic door access IP with a previously flagged consolidation of three Midlands sites onto one scheduled to complete in Q118. These actions will allow ERA to resume profit growth in FY18, in our view.
Cash generation and business investment
At the end of H117, net debt stood at £189.5m, an increase of almost £14m from the start of the year; an underlying cash outflow of £19.2m in the period was partly offset by a c £5m favourable period end translation of predominantly US dollar denominated debt. The period end group net debt position represented 2.1x trailing 12-month EBITDA.
At face value the operating cash inflow of £20.6m was similar to and slightly ahead of the prior year. The major moving parts were rather different, however, with c £10m uplifts in both EBITDA – with all elements benefiting from acquisition effects and some organic progress – and in seasonal working capital requirements (and to c £20m in total), which obviously netted off. Inventory and trade debtor movements were both larger than we have seen in recent years; higher input costs and the expansion of group operations will have contributed to this, as did the absence of favourable timing seen in the prior year. These effects were partially countered by an increase in payables. Taken together, this suggests that the second quarter was a strong, and possibly accelerating, quarter and the end June AT order book position would seem to support this view of good period end momentum.
As expected, higher average net debt after acquisition activity since the beginning of 2016 resulted in higher interest costs. Timing of US tax advance payments did swell the associated cash outflow but net capex was down y-o-y owing to project phasing, especially the US footprint development with earlier than anticipated receipt of property disposal proceeds from this programme. After these items, free cash flow was just in positive territory and slightly below H116 levels. The £5.1m Howe Green acquisition in March, £1.1m expenditure on bringing in the software IP for Response’s electronic door access products, the £13.3m FY16 final dividend payment and, lastly, £0.8m spent on EBT share purchases accounted for the underlying c £19m overall H117 cash outflow.
Our new end FY17 net debt projection is slightly higher than before at £170m, mainly due to a conservative position on the working capital flow back from the mid-year high. This represents c 1.8x FY17 EBITDA and with interest costs well covered, a positive cash outlook and headroom under existing borrowing facilities, we expect growth investment to continue to be a feature of Tyman’s financial performance. In the near term, AmesburyTruth’s manufacturing footprint programme will be the dominant area of focus.
Schlegel driving increased estimates
Conditions in Tyman’s main markets appear to be fairly well set currently with US segments seeing modest improvement and Canada showing some signs of growth. AmesburyTruth’s enlarged commercial offering may bring opportunities for above market growth in this sub-sector. Elsewhere, we expect to see sustained recovery/growth in Europe, while UK RMI activity remains subdued.
Our estimates have increased to account for strong performance from Schlegel International and, notwithstanding a flat market, our UK expectations have been nudged up for acquisition effects. Our AmesburyTruth EBIT estimates remain unchanged. We have trimmed net finance costs in our model compared to pre-results levels. A c 100bp increase in the assumed tax charge in all years slightly reduces the positive impact of our earnings upgrades at the EPS level.
Exhibit 2: Tyman estimate revisions
|
EPS FD norm (p) |
PBT norm (£m) |
EBITDA (£m) |
|
Old |
New |
% chg. |
Old |
New |
% chg. |
Old |
New |
% chg. |
2017e |
26.9 |
27.7 |
+3.0% |
68.8 |
72.4 |
+5.2% |
92.3 |
95.2 |
+3.1% |
2018e |
28.2 |
29.3 |
+3.9% |
72.1 |
76.8 |
+6.5% |
96.1 |
100.1 |
+4.2% |
2019e |
30.0 |
30.9 |
+3.0% |
76.7 |
80.9 |
+5.5% |
100.7 |
104.8 |
+4.1% |
Source: Edison Investment Research
Not shown in Exhibit 2 but we now project FY17 dividend growth in line with H117 results (ie +17%), which contributes to a three-year (FY16-19e) DPS CAGR of 12%+.
Exhibit 3: Financial summary
|
|
£m |
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017e |
2018e |
2019e |
Year end 31 December |
|
|
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
PROFIT & LOSS |
|
|
Group |
Cont. |
Cont. |
|
|
|
|
|
|
|
Revenue |
|
|
266.2 |
216.3 |
228.8 |
298.1 |
350.9 |
353.4 |
457.6 |
535.8 |
547.7 |
560.7 |
Cost of Sales |
|
|
(173.4) |
(145.2) |
(154.0) |
(198.8) |
(236.1) |
(234.0) |
(290.4) |
(332.8) |
(339.7) |
(346.7) |
Gross Profit |
|
|
92.8 |
71.1 |
74.7 |
99.3 |
114.8 |
119.4 |
167.3 |
203.0 |
208.0 |
214.0 |
EBITDA |
|
|
40.2 |
27.7 |
28.5 |
39.4 |
54.6 |
60.4 |
82.5 |
95.2 |
100.1 |
104.8 |
Operating Profit (Edison) |
|
|
33.7 |
22.4 |
23.4 |
33.0 |
46.9 |
52.4 |
70.9 |
82.2 |
86.6 |
90.8 |
Net Interest |
|
|
(8.9) |
(5.9) |
(3.3) |
(3.4) |
(4.5) |
(6.0) |
(6.9) |
(8.0) |
(8.0) |
(8.0) |
Other Finance |
|
|
(2.9) |
(3.6) |
(0.9) |
0.2 |
(2.2) |
(0.6) |
(0.4) |
(0.8) |
(0.8) |
(0.8) |
Share Based Payments |
|
|
(0.1) |
(0.2) |
(0.5) |
(0.7) |
(0.9) |
(1.0) |
(1.0) |
(1.1) |
(1.1) |
(1.1) |
Intangible Amortisation |
|
|
(11.7) |
(10.6) |
(10.8) |
(16.6) |
(17.8) |
(19.6) |
(21.7) |
(23.0) |
(23.0) |
(23.0) |
Exceptionals |
|
|
(0.4) |
0.7 |
(33.4) |
(11.4) |
(9.3) |
(9.4) |
(10.9) |
(9.2) |
(7.6) |
(4.0) |
Other |
|
|
(0.3) |
(0.1) |
(0.4) |
(0.4) |
(0.3) |
(0.4) |
(0.5) |
(0.5) |
(0.5) |
(0.5) |
Profit Before Tax (Edison norm) |
|
21.9 |
12.7 |
18.7 |
29.2 |
39.3 |
44.9 |
62.5 |
72.4 |
76.8 |
80.9 |
Profit Before Tax (company norm) |
|
24.8 |
17.4 |
21.3 |
28.6 |
41.6 |
44.9 |
62.1 |
72.3 |
76.7 |
80.9 |
Profit Before Tax (FRS 3) |
|
|
9.5 |
2.6 |
(25.8) |
0.8 |
11.9 |
15.6 |
29.4 |
39.7 |
45.7 |
53.5 |
Tax |
|
|
(2.5) |
6.4 |
3.7 |
0.2 |
(2.6) |
(7.9) |
(8.6) |
(15.9) |
(17.7) |
(19.0) |
Profit After Tax (norm) |
|
|
19.4 |
19.1 |
22.4 |
29.4 |
36.8 |
37.0 |
53.8 |
56.4 |
59.1 |
61.9 |
Profit After Tax (FRS 3) |
|
|
7.0 |
9.1 |
(22.1) |
1.0 |
9.3 |
7.7 |
20.7 |
23.7 |
28.0 |
34.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of shares outstanding (m) |
|
129.8 |
129.7 |
129.7 |
152.8 |
167.8 |
168.2 |
173.0 |
177.2 |
177.2 |
177.2 |
EPS – Edison normalised (p) FD |
|
|
10.7 |
6.7 |
9.6 |
13.9 |
17.1 |
19.1 |
25.5 |
27.7 |
29.3 |
30.9 |
EPS – company normalised (p) FD |
11.4 |
9.4 |
10.2 |
13.5 |
18.4 |
19.2 |
25.3 |
27.6 |
29.3 |
30.9 |
EPS – FRS 3 (p) |
|
|
5.3 |
6.8 |
(16.7) |
0.6 |
5.6 |
4.6 |
12.0 |
13.4 |
15.8 |
19.4 |
Dividend per share (p) |
|
|
2.0 |
3.4 |
4.5 |
6.0 |
8.0 |
8.8 |
10.5 |
12.3 |
13.8 |
15.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin (%) |
|
|
34.9 |
32.9 |
32.7 |
33.3 |
32.7 |
33.8 |
36.5 |
37.9 |
38.0 |
38.2 |
EBITDA Margin (%) |
|
|
15.1 |
12.8 |
12.5 |
13.2 |
15.6 |
17.1 |
18.0 |
17.8 |
18.3 |
18.7 |
Operating margin (before GW and except.) (%) |
12.7 |
10.4 |
10.2 |
11.1 |
13.4 |
14.8 |
15.5 |
15.3 |
15.8 |
16.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET |
|
|
Group |
Cont. |
Cont. |
|
|
|
|
|
|
|
Fixed Assets |
|
|
367.4 |
352.8 |
298.1 |
404.2 |
410.6 |
398.4 |
564.7 |
535.2 |
517.5 |
501.5 |
Intangible Assets |
|
|
328.2 |
312.7 |
258.7 |
354.4 |
355.7 |
340.5 |
480.0 |
441.3 |
420.3 |
399.3 |
Tangible Assets |
|
|
31.5 |
30.5 |
29.8 |
39.9 |
42.9 |
42.8 |
71.7 |
78.0 |
83.5 |
88.5 |
Investments |
|
|
7.7 |
9.6 |
9.5 |
9.8 |
12.1 |
15.0 |
12.9 |
15.9 |
13.7 |
13.7 |
Current Assets |
|
|
86.7 |
96.361 |
90.7 |
118.9 |
124.0 |
111.0 |
180.6 |
200.1 |
225.7 |
256.3 |
Stocks |
|
|
26.0 |
26.6 |
27.6 |
40.7 |
47.6 |
46.0 |
70.7 |
71.1 |
72.5 |
74.0 |
Debtors |
|
|
28.2 |
24.1 |
23.7 |
29.9 |
31.5 |
29.5 |
55.3 |
61.8 |
63.1 |
64.6 |
Cash |
|
|
27.7 |
20.4 |
35.9 |
43.6 |
39.3 |
30.0 |
40.9 |
53.6 |
76.4 |
104.0 |
Current Liabilities |
|
|
(51.8) |
(55.1) |
(44.2) |
(60.8) |
(52.3) |
(44.4) |
(86.4) |
(82.1) |
(89.6) |
(97.9) |
Creditors |
|
|
(46.6) |
(42.2) |
(36.7) |
(54.0) |
(52.3) |
(44.4) |
(86.4) |
(82.1) |
(89.6) |
(97.9) |
Short term borrowings |
|
|
(5.2) |
(12.9) |
(7.5) |
(6.8) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Long Term Liabilities |
|
|
(163.7) |
(144.8) |
(96.9) |
(161.7) |
(176.2) |
(156.7) |
(285.3) |
(285.9) |
(284.9) |
(284.0) |
Long term borrowings |
|
|
(114.3) |
(100.2) |
(63.6) |
(115.5) |
(128.0) |
(111.6) |
(216.5) |
(223.7) |
(223.7) |
(223.7) |
Other long term liabilities |
|
|
(49.4) |
(44.6) |
(33.3) |
(46.2) |
(48.2) |
(45.1) |
(68.8) |
(62.1) |
(61.2) |
(60.3) |
Net Assets |
|
|
238.6 |
249.2 |
247.7 |
300.6 |
306.1 |
308.3 |
373.6 |
367.4 |
368.6 |
375.9 |
|
|
|
|
0.000 |
|
|
|
|
|
|
|
|
CASH FLOW |
|
|
Group |
Cont. |
Cont. |
|
|
|
|
|
|
|
Operating Cash Flow |
|
|
38.6 |
32.6 |
23.6 |
38.9 |
40.1 |
48.9 |
79.9 |
71.7 |
91.4 |
100.3 |
Net Interest |
|
|
(9.3) |
(6.7) |
(4.2) |
(2.6) |
(4.6) |
(6.2) |
(7.0) |
(8.0) |
(8.0) |
(8.0) |
Tax |
|
|
(2.3) |
(1.9) |
(4.9) |
(6.2) |
(6.3) |
(8.9) |
(12.7) |
(14.4) |
(16.2) |
(17.5) |
Capex |
|
|
(3.5) |
(4.9) |
(6.8) |
(8.1) |
(10.2) |
(10.9) |
(15.3) |
(21.2) |
(20.0) |
(20.0) |
Acquisitions/disposals |
|
|
0.0 |
(10.3) |
51.2 |
(131.2) |
(6.5) |
6.8 |
(96.1) |
(5.1) |
0.0 |
0.0 |
Financing |
|
|
0.0 |
(0.3) |
(1.1) |
68.1 |
(4.3) |
(2.6) |
16.7 |
(2.0) |
(2.0) |
(2.0) |
Dividends |
|
|
0.0 |
(2.6) |
(5.8) |
(7.0) |
(10.9) |
(14.6) |
(15.6) |
(19.6) |
(22.5) |
(25.2) |
Net Cash Flow |
|
|
23.5 |
6.0 |
51.9 |
(48.2) |
(2.8) |
12.5 |
(50.0) |
1.3 |
22.7 |
27.6 |
Opening net debt/(cash) |
|
|
111.0 |
91.7 |
92.7 |
35.2 |
78.7 |
88.7 |
81.6 |
175.6 |
170.1 |
147.4 |
HP finance leases initiated |
|
|
(0.0) |
(2.7) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Other |
|
|
(4.2) |
(4.4) |
5.6 |
4.7 |
(7.2) |
(5.4) |
(44.0) |
4.2 |
0.0 |
(0.0) |
Closing net debt/(cash) |
|
|
91.7 |
92.7 |
35.2 |
78.7 |
88.7 |
81.6 |
175.6 |
170.1 |
147.4 |
119.7 |
Source: Tyman accounts, Edison Investment Research
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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 295 Madison Avenue, 18th Floor New York, NY10017 US |
Sydney +61 (0)2 8249 8342 Level 12, Office 1205, 95 Pitt Street Sydney, NSW 2000 Australia |
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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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent. |
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 295 Madison Avenue, 18th Floor New York, NY10017 US |
Sydney +61 (0)2 8249 8342 Level 12, Office 1205, 95 Pitt Street Sydney, NSW 2000 Australia |
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 295 Madison Avenue, 18th Floor New York, NY10017 US |
Sydney +61 (0)2 8249 8342 Level 12, Office 1205, 95 Pitt Street Sydney, NSW 2000 Australia |
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