Today I’ll be examining the long-term investment appeal of paving specialist Marshalls and door and window components supplier Tyman. Could these lesser-known London-listed companies really make you rich, or will the impact of Brexit put a halt to their growth prospects?
2020 vision
Mid-cap paving specialist Marshalls (LSE: MSLH) reported a solid first half to its trading year when it updated the market with its interim results for the six months to the end of June. Revenue was up 2% to £202.4m from £199.1m for the same period a year earlier, with pre-tax profits leaping to £25.1m, a 21% improvement on the £20.8m reported for the first half of 2015. As a result, management declared an interim dividend of 2.90p, 29% higher than the 2.25p paid out the previous year.
The Halifax-based company continues to press ahead with its 2020 Strategy to grow the business organically and selectively through acquisitions. The strategy is driven by a focus on innovation and new product development with the aim of extending the product range and providing more integrated solutions to improve the customer experience and differentiate the Marshalls brand.
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Brokers expect Marshall’s underlying earnings to reach £40.65m by the end of next year, leaving the shares trading on an attractive price-to-earnings ratio of 15 for 2017. With the shares losing a fifth of their value over the last 12 months, now could be a good time to buy for both capital growth and improving income.
Optimistic outlook
Door and window components supplier Tyman (LSE: TYMN) also achieved a strong first half performance as it continued to make improvements to margins. Pre-tax profits for the period January to June rose from £7.7m to £7.8m, with revenues 15% higher at £201m, compared to £175.4m reported for the same period a year earlier. As a result, management raised the interim dividend to 3p per share, 13% higher than the 2.66p declared for the first half of 2015.
The small-cap firm said its strong performance in the US was aided by year-on-year growth in new build permits and single-family homes, although conditions in the Canadian residential market continued to be challenging. There was also continued improvement in Europe and the Middle East, helped by a contribution from Italian aluminium windows and doors manufacturer Giesse, which it acquired in March for €78.9m.
City analysts share my optimistic outlook for the company, with consensus forecasts predicting an 11% rise in earnings for the full year to December, followed by an even better 14% improvement in 2017. The shares look excellent value trading on a forward price-to-earnings ratio of just 12, and supporting a prospective dividend yield of 3.7% for 2017. In my opinion both Marshalls and Tyman remain well positioned to see off the long-term effects of Brexit and continue to make progress in their respective niche markets.
