Haynes – a focus on profits

PUBLISHED: 14 Oct 2016 @ 08:01 | Comments (0) |

Haynes (LSE:HYNS) started as a paper-based automotive manual business to help people maintain/repair cars and light commercial vehicles.

This business was once very profitable – see table – but in recent years demand has declined as cars became more complex, some people wanted a professional mechanic to do it for them and Youtube videos supplied information.

Sales and earnings history

	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

	2016	2015	2014	2013	2012
Sales £m	25.7	26.1	29	28	30
Profit before tax (before restructuring costs) £m	1.9	2.5	4.2	3.2	4.7

Adjusted basic eps	7.6p	10.7p	18.7p	14.2p	20p
Basic eps	-11.8p	-39.2p	7.4p	14.2p	20p
Dividends	7.5p	7.5p	7.5p	7.5p	15.7p

For us to know whether to focus on the earnings per share before exceptional deductions (“adjusted basic eps”), or after these deductions (“basic”), we need information on the nature of those costs.

2015 Exceptionals

At the start of 2015 the Group balance sheet showed £9.7m of “acquired goodwill” (companies had been bought, but did not bring many net assets compared with the price) and copyrights for its USA business.

Due to the poor prospects of its US manual business the directors decided to write this off in 2015 (a loss of £7.5m after the tax benefit on the loss).

With this large negative number going through the P&L the headline “reported” loss for the year was £5.9m, or 39.2p per share.

If the exceptional item is ignored the Group produced profit after tax of £1.6m.

Obviously, we cannot completely ignore the false hope represented in the BS as goodwill at a time of manual market slide – more should have been written off the profits of previous years.

But should we, when looking to the future potential of the business, accept that something like………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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