Haynes: the emergence of a company fit for the future

PUBLISHED: Feb 02 2017 @ 04:15 | Comments (0) |

Back in February 2015 I wrote a Newsletter pointing out that we should no longer think of Haynes Publications (LSE:HYNS) as being dependent on old-fashioned paper automotive manuals aimed at DIY enthusiasts.

Its push to modernisation was there for all to see in 2015, but it was only last week that Mr Market was able to believe that the strategic transformation going on will result in good and growing profits. As the scales fell from Mr Market’s eyes the share price jumped by one-quarter in a couple of days.

I bought at 115.9p (total market capitalisation of £17.5m) in Feb 2015. Since then I’ve received 15p of dividends and now the share is at 150p, a 42% return, so far.

(Previous Newsletters for Haynes: 11th – 19th Feb 2015, 8th – 12th Oct 2015, 29th Oct 2015, 4th – 9th Feb 2016, 18th May 2016, 13th – 19th Oct 2016, 14th Nov 2016)

Building the foundations in 2014/15

In 2015 I encouraged people to see Haynes not just as a car manual producer but as a “hi-tech B2B e-commerce company with 40,000 online business subscribers” plus a book publishing enterprise.

As well as its recently built hi-tech business it still had a strong brand in books with over 2,000 titles in 15 languages. It’s the market leader for these types of books in the UK, USA, Australia, most of northern Europe.

In the prior eight years it never made a loss, with the lowest earnings per share of 14.2p and the highest at 31.6p. It also offered a safely covered dividend yield of 6.5%

I figured that Haynes actually has three businesses. While it is true that the use of automotive manuals has declined significantly in the past ten years as cars became more complex and free online advice became available, Haynes had the other two businesses to fall back on.

And besides, the automotive manual business is perfectly capable of profits if the cost base is made commensurate with the lower sales level.

The three businesses:

Business 1: Information for professional mechanics

Independent garage mechanics need technical information on maintenance and repairs, tracing and fixing electronic faults, links to component codes, ordering the right parts and job cost estimates.

Over 20 years ago a Dutch firm called Vivid, established such a service. Haynes acquired it in 2008 – it’s now called HaynesPro.

The technical and maintenance data for all 19,000 types of cars and light commercial vehicles available in Europe is based on the original manufacturers’ information and servicing schedules.

The service can be purchased as a stand-alone product, through the internet or through a parts distributor’s own online catalogue. Currently, over 1,000,000 pieces of information are accessed daily across Europe.

Part suppliers and diagnostic equipment vendors also need HaynesPro’s technical, maintenance data and repair data. The system allows integration with parts catalogues, diagnostic devices and other databases where technical data is needed.

HaynesPro has 111 staff in six offices (half of the Group’s staff), from which they serve almost the entire EU region, translated into 25 languages for cars and 19 languages for trucks.

Turnover of HaynesPro is about £10m per year.

Business 2. Printed automotive manuals.

The uniquely detailed and precise manuals, based on the strip-down and rebuild of the project vehicle, with step-by-step photographs, have been a great success, with over 150m sold.

Even after the recent decline in demand, more than half a million are sold in the UK alone each year. There are 180 online digital manuals and 600 automotive printed titles sold in UK and Europe, and 400 online manuals with 1,300 printed titles in North America and Australasia. Haynes dominates markets in the US, Australia and Sweden. For example, its car and motorcycle manuals are on display in over 15,000 US retail outlets. Online manuals are available on a subscription basis.

Business 3. Brand-leveraging into other books

Name recognition, accuracy, clarity and detail of a Haynes manual helped it extend its range into……..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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