Haynes Publishing interims (HYNS)

Weakness in the dollar and US consumption mean flat results

Haynes Publishing (HYNS), which produces the eponymous do-it-yourself car maintenance manuals, came out with interim results today. Pre-exceptional net profit was down from £2.053m to £1.854m for the six-month period.

The main culprits are weak US revenues, down by 3 per cent in local currency terms, and the weak dollar, which meant that US revenues fell by 10 per cent when translated into sterling. That, along with an unusually high tax charge, accounts for most of the fall in profits.

There were some positives. Core UK trading was reasonable, and shutting down the French operation has had an immediate effect on net operating cashflows, which were strong at £3.44m.

The slight cut in the interim dividend, from 5.5p to 5p, is perverse given the £4.5m of net cash on the balance sheet. It can be read in two ways, neither of them good. One is that Haynes is severely worried about the economic outlook and wants to hoard cash. The other is that it plans to splash out on an acquisition.

Short-term, it is hard to get excited. The slight improvement in the dollar/sterling exchange rate should help the second half, but the outlook for consumer spending on both sides of the Atlantic looks poor. With EPS unlikely to exceed 25p for the full year, I won’t be surprised if the shares drift down into the 200-250p range.

Long-term, I am still attracted by the strong competitive position, and potential to make the balance sheet more efficient. Tangible assets of 147p per share and a 5.5 per cent dividend yield should support the shares.

I’ve sold a few shares in Haynes today to reduce my exposure to the US consumer. I still think Haynes is solid in the long-term so I’m inclined to hold the rest.

Disclosure: I own shares in Haynes Publishing 

January 31, 2008 | Filed Under Companies

 

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