With a share price that has been under pressure this year, an in-line trading performance should provide some reassurance to investors. A lack of improvement in Tyman Plc (LON:TYMN)’s underlying markets should come as no surprise but, with steps being taken in each division, overall group progress is anticipated for the year as a whole. This provides grounds for greater confidence in the company’s prospects, in our view.
US stabilises, group progress expectation confirmed
Tyman’s trading update points to flattish US markets and some weakening in the UK and RoW markets that it serves since the half year. Nevertheless, management expects to report small y-o-y progress in revenue and operating profit for the year as a whole, performing in line with consensus EBIT of £84.8m (slightly above our £83.9m estimate and versus the c £83.6m reported for FY18). As at the half year, favourable FX and full year acquisition effects contribute to this expected outturn, although to a lesser extent than seen in H1, we believe. There is some way to go to the year end, but management expects year-end gearing (frozen GAAP/pre-IFRS 16 basis) to be below 2x EBITDA. We believe a downward trend in core net debt will be well received as Tyman progresses towards its stated medium term 1–1.5x target.
In the US, AmesburyTruth (AT) customer service levels appear to have stabilised following factory move-related inefficiencies and are now said to be improving, but there is further to go. Options for problematic door seals line production (ie make or buy) are still under review. Otherwise, AT is seeing normal seasonal trading patterns in the group’s largest market. Elsewhere, new next-generation smartware product launches by ERA in the UK and general cost reduction steps at SchlegelGiesse (RoW) operations are noted actions in mixed but generally soft market conditions.
Valuation: Unchanged estimates, low valuation
Tyman’s share price has recovered somewhat from a 196p low following the interim results, but is yet to regain pre-results levels. The trading update – and our unchanged estimates – suggests grounds for further recovery with valuation multiples having compressed too far. A current year P/E and EV/EBITDA (adjusted for pensions cash) of 7.9x and 5.9x respectively are low historically and a prospective dividend yield of 6% reinforces this view.
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; 64% of reported FY18 revenue), ERA (UK; 16%) and SchlegelGiesse (RoW; 20%).
