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Haynes is on the right path

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Last week Haynes (LSE:HYNS) reported revenue up 15% and earnings per share up 75% for the six months to November. This Newsletter will unpick those results and put them in the context of company’s recent history.

The first thing to note is that the numbers are flattered by the drop in the pound. Much of the rise in European sales and profits can be put down to the fact that money comes in as euros, which then translate to a larger number of pounds at the lower FX rate. Like for like, for the company as a whole sales were up only 1%.

But within that, HaynesPro has rocketed – up by 25% even in local European currency terms.

Also UK revenue growth was 17% YoY. The humorous “Haynes Explains” manuals helping increase sales of non-automotive titles by 47%.

On the other hand, the problems of the N American and Australian manual business continued to be manifest, with sales there down 20% YoY.

Sales and earnings history

The table provides figures for the company as a whole since 2007. Sales were £29m ten years ago. Today they are an annualised £28m.  Thus, revenues are almost back to the level of a decade ago after having passed £35m in 2009.

While sales have not moved very much, with HaynesPro rises partially offsetting the declines in automotive manual revenue, profit has declined dramatically from over £7m to around £1m.

But dividends have been maintained, signalling confidence that the company will be turned around. The dividend commitment was enhanced by the regular good cash flow and positive profits (if we ignore exceptionals).

The managerial team had a strong belief in the strategy of greater emphasis on the professional market, and in the restructuring and innovation in the manual business.

  2011 2010 2009 2008 2007
Sales £m 33 33 35 31 29
Profit before tax (before restructuring costs) £m 7.2 7.2 7.1 7.1 7.1
           
Adjusted basic eps 29p 28.6p 29.4p 30.8p 31.6p
Basic eps 29p 28.6p 29.4p 30.8p 31.6p
Dividends per share 15.7p 15.5p 15.5p 15.5p 15.5p

 

  2017 H1 annualised 2016 2015 2014 2013 2012
Sales £m 28 25.7 26.1 29 28 30
Profit before tax (before restructuring costs) £m 1.0 1.9 2.5 4.2 3.2 4.7
             
Adjusted basic eps 4.2p 7.6p 10.7p 18.7p 14.2p 20p
Basic eps 4.2p -11.8p -39.2p 7.4p 14.2p 20p
Dividends 7p 7.5p 7.5p 7.5p 7.5p 15.7p

Examining the market segments

We will now look at the UK, Europe US and Australia separately.

Revenue and profits for the different regions

Revenue £000s 2017 H1 annualised 2016 2015 2014 2013
United Kingdom (mostly printed consumer manuals) 5,978 4,918 4,741 5,950 6,808
Rest of Europe (mostly Professional, “HaynesPro”) 10,094 7,971 6,700 6,591 6,106
USA (manuals) 10,020 11,021 11,963 12,685 11,164
Australasia (manuals) 1,546 1,093 1,859 2,751 2,553
Rest of World (manuals) 426 707 802 1,307 1,001
Analysed as follows:          
Printed products 17,662 17,575 19,454 22,955 22,209
Digital 10,188 7,945 6,377 6,073 5,160
Rights and licenses 224 190 234 256 263
Operating profit          
Op. profit (UK + Europe) 2,170 1,471 623 949 890
Op. profit (N. America and Aus.) (542) 340 1,237 2,612 1,755

UK manuals

For UK book sales 2015 was the nadir year with only £4.7m of revenue……. To read the rest of this article, and more like it, subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1

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