Economic recovery is still painstakingly slow in Britain, but the signs are much more encouraging in the US. This is good news for Tyman, which makes seals, locks and other parts for doors and windows in the UK and America.
The group last week announced the £130 million acquisition of Truth Hardware, a Minnesota-based business whose door and window products neatly complement its own. The deal is a bold but clever move by Tyman and the , at 207p, should prove a rewarding long-term investment.
Tyman has come a long way over the past four years. Formerly known as Lupus Capital and run by Greg Hutchings, the flamboyant ex-boss of conglomerate Tomkins, the firm floundered after the financial crisis and almost collapsed.
Demand: Jamie Pike, left, and Louis Eperjesi should do well as the US housing market begins its recoveryMonths of turmoil ensued, but ultimately Hutchings resigned, the board was rebuilt and the group began to find its feet.
Jamie Pike, formerly chief executive of Foseco, a steel-related business that was sold to the industrial group Cookson in 2008, was made chairman late in 2009. And Louis Eperjesi, who was a senior director at building products group Kingspan, joined as chief executive in February 2010.
Pike and Eperjesi have worked hard to turn Tyman from a ragbag of different businesses into a company focused on top-grade components for doors and windows.
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Thanks to their efforts, profits have risen from £1.9 million in 2009 to £23 million last year. Dividends were resumed in 2011, 4.5p was announced for 2012 and the company intends to lift payments steadily over the next few years.
In March, the group changed its name from Lupus to Tyman, which is derived from an archaic word for turn. The company is also moving from AIM to the main market this summer.
Against this backdrop, the Truth deal can be seen as fresh evidence of Tyman’s transformation from basket case to growth story.
Last year, Tyman made half its sales in the US, with a third coming from Britain and the rest from the Continent, Asia Pacific and Latin America. After the deal, about 65 per cent of sales will come from North America, including Canada, where Truth has a strong position.
In the US, Tyman and Truth’s customers are big makers of doors and windows and demand for components is strongest when lots of new homes are being built. Last year, 780,000 new homes were put up in the US. This year the figure is forecast at 930,000 and over the next few years it is expected to rise to about 1.3 million.
Even before the takeover, this momentum would have boosted Tyman. But the new deal will enable it to offer more components to existing customers and add new Truth customers to its roster. It should also benefit from a recovering US refurbishment market.
Eperjesi is excited about potential in emerging markets too, particularly Latin America, where the business has grown rapidly in the past couple of years.
In Britain, activity has been rather dull but Tyman is increasing market share and should continue to make progress.
As part of the Truth deal, Tyman is borrowing £65 million from Barclays, HSBC, Lloyds and RBS – an indication that they have confidence in the business. The group has also raised £73 million in the equity market.
Brokers expect Truth to boost Tyman’s results from this year, so they forecast profits of £30 million for 2013 and £40 million for 2014, against £24 million and £26 million before the deal was announced.
Midas verdict: Tyman shares are 207p and should rise steadily. The Truth deal marks a coming of age and should put Tyman in an even stronger position over the next few years. Buy for the long term.