Tomkins trading statement

graeme at 7:39 a.m. Fri 06 Nov 2009

Tomkins’, in a statement covering the last four months, expects further declines in housing markets (it supplies a range of products from air conditioners to window frames), but stability in most markets for its industrial and automotive components.

Tomkins expects a strong bounce (+25%) in residential construction in 2010, but that comes after steep declines. It is also a smaller business for Tomkins than non-residential construction where a 30%+ decline in the is expected, to be followed by another 10% decline next year. This reflects these businesses heacy reliance (95% of sales) on North America.

Tomkins expects a recovery in demand for automotive components in the fourth quarter, with growth continuing in 2010. The growth will largely come from demand the increase in the manufacture of new cars, with sales of replacement parts slower to take off.

Tomkins looks expensive on the earnings forecast for the current year (at 171p it is on something like 30× or more). However, earnings collapsed over the last two years, and there is a lot of scope for recovery. Looking at last year’s earnings, it is on a historical PE of 11&times (using adjusted EPS), and even that was well down on the previous year’s earnings.

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