Haynes is a niche publisher with a strong balance sheet and steady earnings.
There's something iconic and quintessentially British about Haynes Publishing (LSE: HYNS), which reported its year-end results on Thursday.
Founded in 1960 by John Haynes OBE, who retired as chairman in June this year, the firm has sold 150 million 'how to' manuals to successive generations of DIYers -- DIY car mechanics originally, but increasingly other forms of DIY and general interest as well.
Today, there are owners' manuals on aircraft, motorcycles, caravans and poultry, as well as children's books, health guides, computer repair manuals, classic vehicle restoration guides -- you name it, and it's likely there's a Haynes manual or 'how to' guide published on it. Like many people, I routinely buy one when buying a new car: it repays its original purchase price many times over.
Additionally, through a subsidiary, Haynes Group is a leading European supplier of digital technical information to the motor trade, usefully broadening its business to include professional mechanics as well as DIY enthusiasts.
Punching above its weight
Yet, despite publishing manuals in no fewer than 20 languages and having a hefty presence in the American market (including an editorial office in Los Angeles), Somerset-based Haynes is a surprisingly small business.
It joined the main market in 1996, and has a market capitalisation of £42.5 million. No analysts bother to cover the share, there are no broker recommendations, and the shares are thinly traded.
They also appear to be something of a bargain, having been trading on a P/E of around 8 for most of the year.
Rock steady
That said, the business's trading history over the past few years has been fairly static. A go-go growth share, in short, Haynes most certainly isn't. Here's how today's results compare to prior years:
| | 2010 | 2009 | 2008 | 2007 | 2006 |
|---|
| Revenues (£m) | 33.3 | 35.3 | 31.1 | 29.2 | 30.6 |
| Pre-tax profit (£m) | 7.2 | 7.1 | 7.1 | 7.1 | 8.5 |
| Diluted eps | 28.6p | 29.4p | 30.8p | 31.6p | 35.2p |
| Dividend per share | 15.5p | 15.5p | 15.5p | 15.5p | 15.5p |
The shares gained almost 5% on the publication of the results: the market clearly liked what it saw. For despite almost unchanged headline figures, the underlying business seems in better shape than ever.
- The decline in revenues, for instance, is primarily explained by the disposal of its loss-making UK print operation in 2009.
- Net cash is up from £1.4 million to £3.8 million.
- Borrowings have been paid off.
- Printing has been centralised on a facility in Nashville, Tennessee, delivering production synergies.
- The adoption of digital technology now allows the company to extend the life of titles which, under traditional printing methods, would no longer be viable to hold in inventory.
Is it a buy?
The restructuring of a few years ago has undeniably paid dividends. Haynes today is leaner and more diversified, with loss-making operations in the UK and Europe closed down or sold off.
The result is a business that -- despite the recession -- has once again been able to demonstrate an enviable financial stability and tasty margins, with profits maintained, a strong cash flow, and a balance sheet free from gearing.
On the downside, there is a large pension deficit on £14m (up from £10m last year). There are also two types of share, the ordinary shares and 'A' shares. Chairman John Haynes owns all 9m 'A' shares, giving his family a controlling stake.
At 7%, the spread is a little high, but trading today on a P/E of 9, and offering a safe-looking dividend yield of 6%, Haynes looks to me to be a share that is priced well into bargain territory.
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