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Haynes’ (LSE:HYNS) shareholders have some reasons for thinking that a return to satisfactory profits in print and digital consumer manuals in the UK and Europe is possible – see last Friday’s Newsletter. But the task ahead of the directors is far from easy.
Another group of subsidiaries which on their own might justify the current market capitalization of the entire company is in North America and Australia.
As well as scrambling back to health on the eastern side of the Atlantic it is trying to get these more distant markets to generate profits similar to those in the past, e.g. £4.4m operating profit in 2011 or £2.6m in 2014.
North America, Australia and Rest of the World
There are 1,300 titles offered in these regions with 300 online versions. (The professional mechanics market is not targeted there as HaynesPro concentrates on Europe for now)
USA sales have fallen from about £16m each year to about £10m over the last half-decade – shocking.
But not as shocking as the loss of sales in Australia, where sales of manuals fell 43% in the most recent half-year compared with the year before.
The company commented in the interim report on its US and Australia revenue: “the difficult trading conditions we are encountering for our printed manuals in the US and Australia remains a concern for management and early second half trading is continuing to track behind last year.” No sign of recovery on the horizon there then.
I suppose there is some comfort in the still positive operating profit, however thin that is.
| 2011 | 2012 | 2013 | 2014 | 2015 | H1 2016
annualised |
|
| USA printed
Sales |
£15.8m
(growth 7%) |
£12.9m (decline 18%) | £11.2m (decline 13%) | £12.7m (growth 14%) | £12.0m (decline 6%) | £10.2m (decline 15%) |
| Australasia + RoW printed
Sales |
£3.6m (growth 2%) | £3.6m (growth 1%) | £3.6m (decline 1%) | £4.1m (growth 14%) | £2.7m (decline 33%) | £2.3m (decline 14%) |
| North America + Australia
Operating profit |
£4.4m (growth 10%) | £2.6m (decline 41%) | £1.7m (decline 33%) | £2.6m (growth 50%) | £1.2m (decline 53%) | £0.1m (decline 92%) |
| North America + Australia
printed Net assets employed |
£21.9m | £22.4m | £21.6m | £20.9m | £16.1m | £15.7m |
| North America + Australia
printed Operating profit/Net Assets |
20% | 12% | 8% | 12% | 8% | 1% |
| Group profit after tax (before exceptionals deduction) | £5.0m | £3.2m | £2.5m | £2.8m | £1.6m | £0.4m |
Shift in the centre of gravity
Historically, the USA manual business was the powerhouse of the group, accounting for the lion’s share of profits. Now we have the growing strength of HaynesPro in Europe and the first tentative signs of a UK consumer manual revival.
As an outsider it is very difficult for me to see what has gone wrong. It certainly worries the directors – see comments from last week’s interview conducted by Simon Hedger:
Question. What does the Board see as the biggest risk………..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
