|One-third of Haynes’ (LSE:HYNS) revenue comes from a nicely profitable online information service for professional mechanics. Turnover in this business, HaynesPro, has doubled in eight years to about £8m, after rising by a very impressive 29% last year.
Furthermore, in the Report and Accounts just published the directors say that the 2016/17 year has started very well for the professional side of its business, with “strong first quarter trading”, so further profit gains can be expected.
It is the market leader in many European countries, with a duopoly in the UK and close to monopoly in other countries (e.g. 90% of the German market), with 40,000 customers, consisting of both independent auto repair shops and manufacturers of diagnostic equipment. Of the five major vehicle diagnostic equipment groups, three select HaynesPro as the preferred supplier.
Its customers are subscribers rather than outright buyers, thus there is an ongoing source of income and some degree of customer captivity, i.e. mechanics’ familiarity with the HaynesPro system, combined with natural human inertia, mitigate against switching to competitors’ offerings.
It offers data on 19,000 vehicles in 25 languages with over 1,000,000 data requests per day, helping with:
•maintenance and repair methods;
•tracing and fixing electronic faults;
•links to component codes;
•ordering the right parts;
•job cost estimates;
•comfort wiring diagrams.
There are 90,000 drawings on the system to help mechanics deal with a bewildering array of vehicles.
HaynesPro makes an operating profit of at least £1.5m, occupying more than half of the Group’s 236 employees. It is set to take on more staff, while the older paper-based manuals business sheds people.
To put HaynesPro profit in perspective: the Group’s market capitalisation is £19m, at a share price of £1.25.
(Previous Newsletters for Haynes: 11th – 19th Feb 2015, 8th – 12th Oct 2015, 29th Oct 2015, 4th – 9th Feb 2016, 18th May 2016)
(I bought at £1.159 in February 2015 and have received 15p in dividends, if you count next month’s 4p)
While the professional division has enjoyed impressive revenue growth, UK printed manuals (paper plus online resources) have fallen over five years – see table.
Whereas in 2012 UK mechanical enthusiasts bought over £7m of manuals, in the year to May 2016 less than £5m were sold. In fact, UK manual sales have halved in a decade.
The fall of manual sales in America over the decade is also worrying, from £15.2m to £11m. But, the decline is most dramatic for Australia with sales volumes only 44% of what they were five years ago.
With volume falls of this magnitude you can understand why investors have abandoned Haynes, pushing the share from over £4 to only £1.25. The sellers do not see a future for a business that expensively strips down a car, writes a manual and then tries to interest DIYers in buying it, when they could access information from the web for free, or get the local garage to work on the ever more complex repairs and maintenance jobs.
Revenue and operating profits
Revenue £000s 2016 2015 2014 2013 2012
4,918 4,741 5,950 6,808 7,415
Rest of Europe
7,971 6,700 6,591 6,106 5,918
11,021 11,963 12,685 11,164 12,888
1,093 1,859 2,751 2,553 2,496
Rest of World (manuals)
707 802 1,307 1,001 1,097
Analysed as follows:
17,575 19,454 22,955 22,209 24,692
7,945 6,377 6,073 5,160 4,698
Rights and licenses
190 234 256 263 424
(UK + Europe)
1,471 623 949 890 1,762
Op. profit (N. America and Aus.)
340 1,237 2,612 1,755 2,625
And yet, there are glimpses of light for the automotive and the non-automotive manuals businesses.
For one, UK sales rose over the last year.
Second, operating profit in North America remains positive, despite volume reductions.
I’ll look at some more reasons for hope in the next two Newsletters.|
|Results indicated that the digital side of the business is progressing to plan - print is on the way out which we all know and I think has been priced in. I think the market agrees hence the tick up but very very early days at the mo. IMHO.|
|Wad.....except the valuation of the company which is up circa 25% since early June as investors begin to see the turnaround taking shape.....|
|Anyone notice the final results 2 weeks ago ? No , thought not . Best not to look , everything is down again.......surprise?|
|Panmure have reiterated their 150p price target and Buy rating|
|Further to prior posted I and very pleased to note that Haynes Group £HYNS recd residential planning permission for their Sparkford HQ site yesterday. Some minor conditions incl 106 Agreement. Excellent news.|
|False share price rise today ; the MMs have marked up 4% , only problem is that there are no trades at all.|
|Read Panmure Gordon & Co's note on HAYNES PUBLISHING GRP PLC (HYNS), out this morning, by visiting hxxps://www.research-tree.com/company/GB0004160833
"PBT expectations for the year reduce by 30% as a result of continuing tough trading in the US and Australia. The group has also revealed the broad conclusions of its operational review, including the closure of US print and distribution offices, closure of the Swedish sales office, a 17% staff reduction, and a charge against unsaleable inventory in the US. This should generate ‘substantial8217; cost savings, some of which will be reinvested in its growing professional and consumer digital platforms. The restructuring should allow..."|
|No further comment to previous .. Only came back to look as a top list faller.
4 Feb'13 - 13:02 - 155 of 220 0 0 edit
Broken business model - Going the way of the buggy whip makers. (imo etc). Being well and truely run out of business by the internet - Taken off watch list.|
|I am personally not discouraged by the Trading Update and/or the drop in valuation and no stock movement suggests either lack of concern or apathy!
Tough decisions need to be made in tough markets and we all know there is a declining automotive market for printed matter.
Investors need to give the refreshed Board time to make the necessary adjustments to the business.
HaynesPro is profitable, non-automotive printed titles are growing nicely and now 10%+ of sales and the balance sheet is stacked with F/H property. Planning decision due on their main application for the Sparkford site next week which will be a welcome cash injection.
|I emailed management and various other people to see what they were doing about pirate copies of their products on eBay etc, they never gave me the courtesy of a reply and hence I never gave them the courtesy of an investment.|
|It seems inevitable this company is going to get flushed away unless it does something radical. The latest statement is the usual pattern. Glad I hold so few of these.|
|Mkt is a bit thin here. :)|
|Good to see that they have got planning permission today for change of use for the Grade II listed farm house currently on the Sparkford HQ site. It was originally residential and then changed to commercial / offices - now back to residential again and part of the overall planning strategy for the site.
The main redevelopment seems well supported by local residents / neighbouring businesses which is encouraging.|
|Wad - you are correct and it is easy to overlook.
What we do know re: freeholds is that they own property in the UK, Australia, the US and also Romania. I am unaware, however, as to when these properties were originally acquired; some of which came as part of acquisitions as I recall.
If there are any long standing investors who can clarify it would be appreciated.|
|Don't forget in your valuation the dual listing of Haynes ; the family own 17 million A shares and non - beneficiary shares , which seem to get ignored in asset valuation assessments "per share".|
Does anybody have any knowledge of the other freeholds?|
|I see that a planning application has gone in for a mixed use redevelopment of their 2.2Ha Sparkford HQ site:
The site is proposed to contain 48 residential units (from a 1 bed flat to a 6 bed detached house) and a B1/B2 unit. The site was for sale in its current guise but with limited interest due to its size and location. Guide price was GBP 3.95m.
Land in South Somerset (with planning for resi) is worth (I estimate from research) around GBP 1.1m / Ha although the site already contains a listed farmhouse that would be worth around GBP 750k once refurbished. Hence circa GBP 3m valuation.
I estimate the whole site to be worth circa GBP 12m if developed as intended and on that basis assume the land to be worth around a third of that - say GBP4m.
So in summary the land appears to be worth between GBP3-4m or 25% of the market cap. Investors will already be aware that HYNS own a number of other freehold properties in the UK and overseas and hence there is a high asset backing to the valuation. It would not be unreasonable to state that circa 60% of the market cap is backed up by Freehold assets alone.
Now their operational review is complete and with their plans to leverage the potential of HaynesPro I very much look forward to their results in September.|
-- Total revenue up 3% at GBP12.2 million (2014: GBP11.9 million)
-- EBITDA of GBP3.4 million (2014: GBP3.3 million(1) )
-- Operating profit of GBP0.6 million (2014: GBP0.3 million)
-- Profit before tax of GBP0.3 million (2014: GBP0.1 million)
-- Basic earnings per share of 1.2 pence (2014: 0.2 pence)
-- Interim dividend declared of 3.5 pence per share (2014: 3.5 pence)
So the dividend appears unsustainable but still being paid?|
|Yes two trades today on LSE, total of 1473 shares traded.
I am not sure if this trades on the PLUS market.|
|Price drop of 5p at time of writing any news anyone knows of?|
|Following the AGM I wrote a 1700 word report. Obviously I can't post it all here - but you may find it useful if I post some of the paragraphs here.
Haynes Publishing – yesterday’s AGM
Boy am I glad that I doubled my holding in Haynes (LSE:HYNS) a couple of weeks ago because I got the distinct impression that this company is on the up at the AGM.
As usual I hogged the largest part of the question time. After that I chatted with the key directors about the company’s position and strategy for the future.
(for background see my Newsletter posts: 11th – 19th Feb, 8th-12th Oct)
Firstly let me say that the people who run this company could not be more welcoming to the interested investor. They seem decent and honest, judging by their open attitude, sincerity and gentleness. In short, I do not fear a lack of integrity with regard to shareholders’ interests. For me this is a vital criteria for investment. I would have sold my today shares if I did not trust them.
Second, I detected a general atmosphere of confidence. They could not be too specific because of Listing rule restrictions (i.e. avoiding giving some shareholders privileged information) in indicating why they are so optimistic, but my impression is that most excitement has been generated by the fruit that is coming from the knowledge and skill base built up in HaynesPro.
The ability to supply detailed data on hundreds on vehicles to professional users can be used not only to deepen and broaden the moat around the franchise that already has 40,000 loyalists across European (e.g. 90% of the German market), but can be used in all sorts of other ways.
With this in mind, they have been recruiting heavily in this area (hence the failure of staffing numbers to fall as revenue fell 20% over the last 5 years – an answer to one of my questions) so as to bring the vital computer and online capabilities in-house.
This now provides a platform for extending into more services for the manual buyer or the online user of the manual. They have invested in created an unrivalled knowledge base which already has customer trust; and they have created in-house distribution methods which are right up there with the best that Silicon Valley has to offer. They can leverage this competitive advantage in so many ways – some that are only just now beginning to be revealed to them as the possibilities for new services and products come to mind.
I’ll give you one example: Before the meeting I had a phone call from my youngest son who had taken to a garage a van that we use for the property developing business - the power assisted steering went phut.
This was not a garage we normally use. The mechanic said this will cost quite a lot to fix. We have no idea what the normal cost would be. It would have been very useful to know the labour time and the cost of the part.
HaynesPro provides this information to its subscribing mechanics already so they can price a job. It’s also useful for hire car companies and other organisations.
The knowledge has already been created by HaynesPro. So, at little additional cost, it could be made available to the general public – my son would pay a few quid to know what would be a reasonable amount to fix his steering.
And that is just one idea for brand and knowledge extension now that Haynes has the information base.
A question was raised about dividend policy, and the reply was: “the dividend we have declared is our confidence in the future.”
This statement contributed to my hope for the future of this firm, because what I think they are saying is that the current low dividend cover ratio will be corrected as earnings grow again when the rewards of the strategic shift that started in 2008 with the purchase of Vivid (now HaynesPro) come through.
On the issue of profits at HaynesPro I raised a concern: I said that the accounts did not reveal whether or not HaynesPro made a profit, could the Board enlighten us. The answer came back: Oh yes, it is definitely profitable, as their eyes lit up.
The two manuals businesses
One question that had been bugging me is......|
|Thanks mrx9000 - I look forward to our future discussions|
|Profdoc: You may be better off doing your newsletter without advfn, just a thought. Alas your posts do not upset me, in fact you are one of the genuine types on advfn! Look forward to discussing HYNS further with you in the future.|