Boys Toys
“Let’s pretend we own one” and so The Supermarine Spitfire Workshop manual is amongst Haynes best sellers way ahead of “Men’s Cooking” but J*, as he is known, to avoid confusion with John, the founder and Chairman, has great hopes that one day a manual for the Ferguson tractor (the little grey ones) may outsell it.
Boyhood Passion Created a Global Business
The history of Haynes, c£40m turnover, founded in 1956, is an entrepreneur’s dream, a fairy story, in which a schoolboy’s enthusiasm for rebuilding old cars grew into a global player in the DIY market. However by 2001 it was loss making and in debt. The printing works, vital in the 1970’s, could no longer compete on price, the synergy of a market move into France was failing for not foreseeing obstacles to distribution and mis-understanding the French attitude to hardback books –for the library and not the garage, the extension into Publishing with Sutton Publishing, bought 2000, was not working out, and paying for the design and manufacture of garage equipment at too small a margin to justify further investment to grow that business. However Haynes had one great strength, 85% of its books were still in print and demand.
Classic Exercise In Restructuring
“J”, ably assisted by James, for 150 minutes, gave a fantastic in depth analysis of the issues confronting Haynes in 2001 and how the management team progressively re-aligned the business such that by 2009 all parts were profitable, and debt free. France was closed, equipment disposed of, Sutton sold, the main Australian and US competitors purchased, which left the Sparkford Print-works which was 80% dependent upon printing for others, and what it did do for the group could be more economically done at their Nashville USA print shop. In 2009 it was sold on terms which secured employment for print team, released capital, and, in the coming months as guarantees expire, will lead to lower print costs by transferring UK print needs to the USA. The disposals generated cash and paid for acquisitions designed to reposition the firm. For example VIVID, a Dutch supplier in digital format of manuals to the vehicle maintenance and repair trade was acquired and so giving the Group the expertise to address all the modern alternatives to printed manuals.
c.67% Owned by the Chairman
and with only two market markers shares are hard to come by, have a wide spread but an above average yield. All that could be a disadvantage but overseas sales are over half the turnover and much more than half of profits, so sterling weakness is currently a benefit. Meantime “J” and the team are looking to new publishing partnerships, for example with the RNLI and a guide to rescue Helicopters, the Mirror group which has a huge sporting photo library, and the armed forces from Jeep manuals to those for Battleships, where products will have a long shelf life and the trusted, practical, authentic, reliable Haynes brand name gives added value.
© PT Wilson, 17.2.2010
This report is based upon analyst style meeting, held at the Haynes Motor Museum at Sparkford, Yeovil, February 17th 2010. A planned analyst/broker presentation of 60 or so minutes developed into a 150 minutes of probing questions and animated discussion about strategic opportunities which was finally forced to close late for lunch. On the day of that visit the share price was 242.5 and the projected yield a little over 6.5% c, with a PE of 7.85 On 4.2.2010 it was 244p, the yield was 2.66%, four times covered and the PE 7.22. The share price when Haynes was first visited in March 2005 was 377.5.
* “J (J Haynes, Gp Vice Chair) and I (James Bunkum, Gp. Co Sec and UK Finance Director) very much enjoyed discussing the Haynes business with you and your colleagues yesterday”
