Hydro Intl Share Discussion Threads

[gac100] 05/3/2007 11:21

Obviously been mixed trading conditions this year for HYD:

- In the UK wastewater business: AMP4 delays – mitigated by efficiency gains

- In the UK stormwater business: solid performance – no negatives

- Entry into the water conservation market – but no concrete statement on trading or expectations

- In the Irish subsidiary: sound contribution – but increased competition in certain sectors

- In the US: pleasing growth in stormwater business – but wastewater business challenging

- In the international business: strong sales growth – no negatives

The outlook statement is broadly bullish:

"The outlook for 2007 is positive, as the underlying drivers remain strong and we expect to make further progress over the next 12 months."

But I have a slight concern:

Growth in the "order book" figured in the "highlights" of the last interims, and in last year's annual report HYD trumpeted "The closing order book at 31 December 2005 was at a record high." This year, although there are some "orders and sales" at a "strong level", I note there are also references merely to "enquiry" levels: In the UK wastewater business "Enquiry levels remain buoyant" and in the US "enquiry levels remain encouraging." So although the directors are generally bullish, its not quite as reassuring as last year's record high closing order book.

So, in summary and IMHO, a very good financial performance in 2006 despite a challenging environment in several areas. Outlook for 2007 positive in theory, but in practice, reading between the lines, probably some way from being realised by forward orders. Nevertheless I'm optimistic for the future and will continue to hold.

[nhb] 05/3/2007 11:18

Steady as she goes.

Bubbling away nicely and starting to look undervalued again IMO.

Cheers

[rivaldo] 05/3/2007 10:18

Cambo, on a day like today no price action is equivalent to being up 10 points :o))

I wish they'd highlighted the 9.94p adjusted EPS at the top of the statement - it seems like they're hiding their light under a bushel.

The overall impression must be that despite a number of largely short-term negatives, HYD are thriving. When AMP4 kicks in, and with the USA looking strong, what can HYD achieve with continued global expansion?

Later I'll calculate the P/E after adjusting for the £2.7m cash pile.

[cambium] 05/3/2007 09:30

and no price action, doh!

[gac100] 05/3/2007 09:22

Only had a quick scan so far, but agree results look good Rivaldo. Nice to see strong cashflow per share in addition to EPS and a very decent return on equity.

Margins up on last year but below '04 and '03 margins. Gross margins had been comfortably above 40% but have been around 35% the past 2 years, so cost of sales at the root. Not surprising really, with rises in costs of materials, drive to penetrate the US market, and the dollar/pound rate. HYD looks like it can live with it though judged by the financials ...

... Right, I'll go away now and see what the directors have to say, should be pleasant reading.

[cheap] 05/3/2007 09:01

I wouldn't expect a re-rating in the short term on the basis of these results but they are very reassuring.
The effects of the rise and fall of orders caused by the way the Asset Management Periods (AMP) are structured was a major cause of Hydro's erratic past performance. The fact that Hydro now seems to have managed to maintain a respectable profit during a lean AMP year is very reassuring, especially as it's coincided with disadvantageous conditions in the US, its other main market. And it sounds as if some of the business we might have hoped for is still to come.
The fact that the dividend is being more than maintained is very positive

[rivaldo] 05/3/2007 07:24

I love these one-liners! HYD also say there's "significant growth expected in early 2007" in the USA and the outlook is "positive".

So what do you think of the info in my last post then, noting that EPS and divi are well ahead of expectations and the outlook bullish....

[rivaldo] 05/3/2007 07:17

Excellent results, with EPS and divi well ahead of forecasts - and £2.7m of cash against a £22m m/cap...



Adjusted EPS excluding £136k amortisation was 9.94p, or £1.87m PBT, compared to £1.75m and 8.61p EPS forecast by Peel Hunt. The 2007 forecast was 9.84p EPS - this will surely have to be upgraded.

The results is even better when you consider the negatives of the delayed AMP4 programme, the US dollar, rising steel prices etc.

With a very bullish outlook, particularly for the USA and with AMP4 spending now coming on nicely, things look good for HYD. There could be another rerating in sight.

[rivaldo] 02/3/2007 14:46

Many thx Eriksay. Presumably HYD could/will ally with other suppliers to provide a multi-rpoduct solution if that was what was required - though I can understand that the industry behemoths have a natural advantage, obviously dependent on whether their solutions are as effective/cost-saving etc.

And if water recovery/harvesting is included in the Building Regs then HYD would only ned a small slice of the market to be very successful indeed.

Still, with gearing up for AMP4 in this country and expansion seemingly across the globe it should be quite an exciting time for HYD at present.

[eriksay] 02/3/2007 09:26

Rivaldo (and all) - I did go to Ecobuild at Earls Court on Tuesday. Ecobuild is a part of a wider exhibition on innovation in the building industry - there were also sections on city landscapes, future build technology (not necesarily green), building for health (hospitals etc) and regeneration of urban areas. From talking to the exhibitors, the Eco side has grown considerably since the 2006 show - some said by 3 times.

The main Eco exhibitors fell into following areas:
- renewable engery (wood fuel/solar/heat pump/wind power),
- natural insulation materials,
- rain water harvesting/green roofs,
- trade press, and
- various regional bodies/specialist consultants promoting green building.

The timber frame mob were mainly in the Future Build part of the show (Eleco (ELCO) had a very impressive display and demonstration of their timber framing design software).

I have to say that the rainwater harvesting represenatation was dominated by Polypipe (an outfit I'm trying to research further at the moment) - they had a big impressive stand near the entrance and as far as I could see had all the same gear as HYD and more - guttering systems etc. The HYD stand was a normal 10' (?) pitch and was busy with delegates but then most stands were.

From a brief chat to the HYD representative, I didn't really get any info that would add to the discussion here - he didn't really want to engage in business development other than the current product offerings and gave the usual 'business is good' etc. So my guess is that HYD are concentrating on overseas expansion rather than product development - something that we already knew.

Curreently, the spread of rainwater management relies on early adopters willing to pay the premium for the installation. HYD strategy is to campaign for water recovery to be a requirement in the Building Regulations - if that happens then great, but watch out for the competition, HYD are not the only firm in this sector. If I learned anything from attending the show, it was that there is some serious competition out there. I know from previous experience in the construction industry that buyers like whole solution providers and an total water handing solution including pipes, guttering and tank systems would look very attractive against a multi suplier solution.

My overall impression from the show was that while Eco awareness was rising it was still very much of a fringe area of mainstream construciton. Alot of the exhibitors were small suppliers charging premium prices to early adopters - CHP plants that run on wood chip are all well and good but they are not currently going to really compete with electricity and gas. When it does become competitive then you'll see increased competition from some of the current larger construction industry market participants.

Saying all that I will try to go again next year and I'll be keeping my HYD holding.

[rivaldo] 01/3/2007 20:57

Eriksay, did you go to EcoBuild and meet HYD? Looking forward to your thoughts.

[asparks] 01/3/2007 11:14

hydro have just been at the ecobuild conference (finishes today) may resulty in some interest.
another company there is AXS - they convert softwood into hardwood.
SP soaring:

[cheap] 01/3/2007 11:12

Presumably all the seas will run dry before the market for sand removal in Egypt becomes saturated.

[rivaldo] 01/3/2007 08:53

More coverage of the Egypt agreement:



"Cairo Agreement Brings Hydro International Grit King To Egypt
2/26/2007
Portland, ME - Hydro International announces that Intech Ltd, a major Cairo engineering firm, has signed a licence agreement for the manufacture and sales of 5 sizes of the Hydro International Grit® King separator within Egypt. The agreement comes on the heels of several successful Egyptian installations where the Grit King® has proven to be cost-effective at removing grit and sand from wastewater flows.

Intech Chairman Hazem Kamal says, "We are delighted to be able to manufacture the Grit King® with Hydro's agreement. It has a great future in Egypt, where investment in infrastructure projects and pollution control is increasing. As it does not require power, is very low maintenance and highly reliable, it is ideal for rural and remote locations, for example the growing population of Northern Egypt."

Graeme Fenton, Export Manager for Hydro International continues, "Our relationship with Intech started at the IFAT Exhibition in 2005, and continued with the successful installation of two Grit King® Separators upstream of a low energy biological treatment process in 2006. Egyptian import restraints make this limited transfer of technology, under license, a logical move, and we are delighted to be able to work with Intech." "

[rivaldo] 26/2/2007 07:54

Indeed. In which case HYD are probably reasonably or slightly undervalued on pure fundamentals - though it'll be interesting to see how much cash they have at the year end. Strip that out and the P/E might reduce substantially to maybe only 11 or 12?

But I'm happy to hold - there could be a big jump up with more contract news for example. HYD's global prospect list will only grow and grow, and HYD will be a tasty acquisition morsel for someone at some stage. This is a slow-burner with huge worldwide potential at a reasonable valuation imo, and if management carry it off there's a big opportunity.

[cambium] 26/2/2007 07:41

Thats probably why these have been marking time for a wee while

[rivaldo] 26/2/2007 07:27

Results will be out on 5th March:



Good news - there's been no trading statement, so we can assume that results will be in line with expectations, or maybe up to 10% better (or worse of course, though that seems unlikely to me).

[rivaldo] 24/2/2007 15:28

Ta cheap, nicely put - HYD will continue to be a slow-burner of an investment methinks with surges along the way from tips, contract wins etc.

Asparks, personally I really hate it when there are zillions of charts in the header - but then I'm not a chartist. Sorry :o))

Would you Adam and Eve it - yet more news, this time expansion in Egypt:



"Cairo Agreement Brings Hydro Grit King® to Egypt
23-Feb-2007

The success of Hydro International's Grit King® Separators in controlling sand and grit at waste water treatment plants in Egypt has lead to an agreement with major Cairo engineering firm Intech Ltd. Intech has signed a license agreement for the promotion and sale of Hydro's Grit King® separator within Egypt.

Intech's Chairman, Hazem Kamal comments: "We are delighted to have established a closer relationship with Hydro International for the promotion of the Grit King®. It has a great future in Egypt, where investment in infrastructure projects and pollution control is increasing. As it does not require power, is very low maintenance and highly reliable, it is ideal for rural and remote locations, for example the growing population of Egypt."

Graeme Fenton, Export Manager for Hydro International continues: "Our relationship with Intech started at the IFAT Exhibition in 2005, and continued with the successful installation of four Grit King® Separators upstream of a low energy biological treatment process in 2006. Egyptian import restraints make this technology transfer, under license, a logical move, and we are delighted to be able to work with Intech."

The Grit King®'s hydrodynamic vortex design principle ensures separation efficiency up to 95% down to 200 microns with a specific gravity of 2.65 without the need for moving parts or any sophisticated process automation control. The design allows particles to settle out by gravity into the grit pot over a very wide range of flow rates, traps floatables and enables the overflow to be discharged to the treatment works.

The flow is introduced tangentially into the cylindrical vessel, causing the contents to spiral slowly about the vertical shaft down the cylinder. Drag from the cylinder wall and base helps the contents to settle out by gravity into the grit pot under an inverted cone, located at the bottom of the central shaft.

If you would like any further information on any of Hydro International's stormwater, wastewater and sewage treatment systems, please call 0800 269371."

[cheap] 23/2/2007 15:49

No news or clear ideas Rivaldo at the moment. I imagine results will be solid and the outlook promising all else being well. The good thing with all this valuable news you are posting for us is that in such a slow moving conservative industry, Hydro are establishing themselves very solidly and seem to have overcome the kind of problems a purely UK business might expect to have in the US. As in the UK, they seem to have integrated very well with the academic, regulatory/government and commercial wastewater worlds. It looks as if they are close to achieving a status and critical momentum that will begin to produce very substantial rewards in the US market within the next couple of years.

[asparks] 23/2/2007 07:59

rivaldo - I just wanted to see a volume chart - which should be in the header along with all the other basic charts

[rivaldo] 23/2/2007 07:24

Asparks, thx for the charts, but.....erm, what do they tell you?

Ta for the responses chaps. All this news of expansion in the USA, receipts of grants, new products etc is great and sudden - if the results are only in line then that should be good enough to get the share price rising again imo.

[gac100] 22/2/2007 11:33

Thanks for all the good work Rivaldo.

Very much appreciated by me, and I guess by a lot of other "invisibles".


gac

[picnic] 22/2/2007 11:12

Blimey rivaldo HYD are keeping you busy just recently. Keep the stream coming(lol)but hopefully no mention about plug holes (as in down!)
cheers
picnic