Sadly, all the vibes are bad, especially the struggle to raise relatively small amounts of cash, combined with degrees of wishful thinking over future orders. I finally sold out early last week with much regret at a large percentage loss, since this is the type of company that I like to support, in most instances, successfully.
Yes, things are getting tougher and I am a little concerned that this is becoming a bit of a jam tomorrow situation. Most of the markets it serves are a bit unpredictable and HT has upped the ante by investing more in facilities to serve these markets, so I have decided to play safe and exit while I am still breaking even.
"While the main market races ahead again Tuesday, recapturing gains following yesterday afternoon's faded rally, I caught up with an exciting small-cap I've followed for ages. It's been a stunning performer, but things have got tougher recently ..."
Great to see a recent surge of buying ahead of next Tuesday's results. Perhaps an overhang has now been cleared.
Forecasts are for 8.2p EPS with a 1.4p dividend, which puts HAYT on a single-figure P/E despite excellent order books, a transformational acquisition, doubling of capacity, decent asset backing etc etc.
Considering that 88% of HAYT's revenues last year cam from overseas, and that HAYT specifically noted that their main exposure was to the US dollar, they may well benefit substantially this year from the now much weaker pound.
HAYT have been reviewed in Shares Magazine - subscriber-only though:
Hayward Tyler (HAYT:AIM), manufacturer of industrial pumps and motors, is expected to report (5 Jul) a 23% jump in full year underlying earnings per share. Earnings, should receive a kick from Peter Brotherhood, a steam turbine business acquired from Siemens (SIE:FRA) in ... "
"HTFH Transformation Project, East Kilbride, Scotland Phase 1
While HTG is investing in the development of a Centre of Excellence (CoE) in Luton, continuing support for its other global sites (Peter Brotherhood (England), HTFH (Scotland), HTInc (USA), HTK (China) and HTI (India) are being planned on a benefits/cost basis.
In order to future proof the HTFH facility in Scotland a degree of upgrading is required in order to bring its systems, processes, infrastructure and machinery to the desired ISO9 / Fit 4 Nuclear Group level. Using Lean Sigma techniques and processes HTGs Transformation Team have instigated a future proofing improvement project at its HTFH facility in Scotland, supported by the Scottish Enterprise.
The future proofing plan is to modernise the shop floor and systems first by way of consolidating all manufacturing into 2 bays, allowing the team to bring bay 1 & there after bay 2 up to ISO9 / Fit 4 N particulate level compliance, in order to be able to manufacture Subsea, Nuclear Power and Oil and Gas component parts to the same level of quality as the CoE in Luton.
Several events are being run throughout the year including a Mega 5s event, a Creative-Destructive event, clean lean certification events and site wide communication events. The first phase of the transformation was a Mega 5S event, attended by Rhona Alison, Head of Business Development at Scottish Enterprise."
Great to see that Christopher Mills' North Atlantic Smaller Companies trust have taken a £4m stake in HAYT.
CM is one of the most highly respected investors in the UK, and his comments in the trust's recent Annual Report reveal that he believes profitability will double in the short to medium term. The current share price is 8p cheaper than the November'15 90p placing price.
Here's a link to North Atlantic Smaller Companies' recent annual report, with the comments on HAYT to be found on p.15:
"The outlook for the business over the medium term looks highly favourable with profits capable of rising to £8 million to £8.5 million (EBITDA £9.25 million to £9.75 million) by March 2018 as the benefits of the new plant become apparent."
If so, the current £45m m/cap presents substantial upside over time, certainly a one-bagger and perhaps a lot more.
"Shares in Hayward Tyler (HAYT) rose 3 per cent in morning trading after the maker of pumps and motors reported a 47 per cent increase in order intake in the year to March. Peter Brotherhood, which was acquired last October, contributed Â£7.4m to this increase, while management also confirmed that the project to double capacity remains on track to be commissioned by the end of June. Buy."
Specialist pumps and motors supplier Hayward Tyler (HAYT) has performed well despite being exposed to the oil and gas sector. Acquisitions and a large installed base that generates strong aftermarket revenues will help the company to grow.
Hayward Tyler has a strong brand and good relationships with major customers in the power generation and oil and gas sectors. In power generation there are organic growth opportunities. Management expects a much stronger second half after reporting lower revenues and flat profit in the six months to September 2015, largely due to the timing of new orders and reduced demand from oil and gas customers.
Hayward Tyler supplies boiler circulating pumps (BCPs) for power stations and subsea motors for the offshore oil and gas sector. Although the company is small relative to larger rivals, such as KSB (KSB), because it has been trading for two centuries it has the largest installed base of BCPs in the world. That provides strong aftermarket income. Hayward Tyler also supplies subsea motors that enable more oil to be extracted from offshore fields.
The product range has been widened through the acquisition of Peter Brotherhood, formerly a subsidiary of Siemens (SIE), which makes steam turbines, gas compressors and Combined Heat and Power units, and has an installed base of 1,500 units in total. This is an earnings enhancing deal.
At the end of 2015, Hayward Tyler raised £8.4 million at 90p a share in order to reduce borrowings following the Peter Brotherhood acquisition and investment in the Luton facility.
The placing will dilute earnings but strengthen the balance sheet, with pro forma net debt expected to be £14.3 million at the end of March 2016. There is potential to sell and lease back the acquired company's 11.5 acre Peterborough site for around £6 million.
Oil and gas is around 5% of total revenues so it is unlikely to go much lower when maintenance spending is taken into account. In the full-year, underlying pre-tax profit is forecast to increase from £4.4 million to £5.1 million with an additional boost from a lower tax charge. A dividend of 1.4p a share is forecast.
Next year, the acquisition of Peter Brotherhood will boost profit. There is also a new deal with Ebara Corp of Japan which will help Hayward Tyler to access the Japanese market. A forecast 2016-17 profit of £6.8 million will put the shares on less than 10 times prospective earnings.
The business has a strong base and longer-term growth should be supplemented by recovery in oil and gas sector demand. "
Specialist pumps and motors supplier Hayward Tyler has widened its product range and boosted its earnings per share by acquiring the business of Peter Brotherhood, which became part of Siemens after it acquired Dresser Rand. Peter Brotherhood was a non-core asset and it makes steam turbines, gas compressors and CHP units, with an installed base of 1,500 units in total.
Hayward Tyler is paying $15m (Â£9.87m) for the acquisition, which is similar to net assets. In 2014, Peter Brotherhood made an underlying operating profit of $3.2m on revenues of $46.7m. Operating margins could be improved to 10% in the coming years. There is also scope to cross-sell to the two customer bases.
The deal is funded by debt so pro forma net debt is expected to be Â£22.6m at the end of March 2016. There is potential to sell and lease back the acquired companyâs 11.5 acre Peterborough site for around Â£6m.
The deal is forecast to enhance earnings by 14% to 10p a share in 2016-17 â the first financial year following the acquisition. That puts the shares on ten times prospective 2016-17 earnings.
Hayward Tyler holds a strong market position and it continues to prosper even though oil and gas markets are difficult. The construction of new test beds, which is part of the investment in the facilities at Luton, has just started and the project should be completed by July 2016.
Capacity should double and working capital requirements will be lower."
"Hayward Tyler is an engineering group that specialises in top-of-the-range electric motors and pumps, used in situations where failure is not an option.
Last January, the shares were 78p. Today they are 92.5p and supporters believe the stock should rise to more than 120p over the coming 12 months.
About 70 per cent of the groups customers are in the energy and nuclear sectors around the world, including in America, China and India. A Centre of Excellence is opening next year in Luton, Bedfordshire, to improve design and manufacture and double capacity.
The company also recently acquired Peter Brotherhood, a business whose products complement its own.
Brokers expect profits to increase by 15 per cent to £5.1 million in the year to March 2016 and by 33 per cent to £6.8 million the following year, as the Luton site comes on stream and Peter Brotherhood is integrated into the business.
Midas verdict: Hayward Tyler shares have done well but the best is yet to come. Hold."
There are truly staggering opportunities and figures involved in nuclear decommissioning:
- Western Europe has 150 plants to decommission by 2030
- the UK sites alone will cost £70 billion plus to decommission
- the NDA's current year expenditure is £2.91 billion
A big article in this week's Shares Magazine points to HAYT's opportunities in the nuclear sector, particularly as HAYT are involved in both the new build and decommissioning aspects of new and old facilities:
"NUCLEAR IS CENTRAL to the UKs energy policy over the years ahead because of its ability to provide solid base load power into the grid and help the country meet carbon emission targets.
Britains conservative-led Government pulled out all the stops during the visit of Chinese communist party chief Xi Jinping to get spades in the ground on a proposed nuclear plant at Hinkley. Enlisting Chinese financial firepower to get the estimated £18 billion project off the ground, as well as the offer of generous financial incentives, highlights the desperate state of the UKs energy situation.
All but one of the UKs 16 nuclear facilities across nine sites are due to shut down by 2023. Together, those plants generated around one-fifth of the energy consumed in the UK in 2014.
Years of under-investment and delays on energy infrastructure projects mean
progress on the Hinkley Point C facility is now a national imperative. Another two projects of roughly the same size as Hinkley would be needed merely to replace the nuclear capacity expected to go offline in the next decade.
Planned investment in nuclear plants at Hinkley and elsewhere should provide
investment opportunities in the years ahead."
at 90p a placing was always on the cards after the PH acquisition,
it is quite rare to see a placing be above the recent share price trading of the past few weeks.
it does confirm that the fall from the recent highs was not a reaction to 'disappointing results',
but more likely some leakage of a placing price at 90p so why hold in the market at 100p.
thus ironically, its puts the recent results in a better light and gives more confidence in mgt very positive forward looking views.
I also think it confirms what a great deal the PH acquisition was..
to tie into the vendors reporting timetable they had to act quickly...
thus it was some quick bank finance set up, with the placing to come in time...
1 - to me this means that vendor was a 'forced seller' thus good price achieved
2 - HAYT very highly regarded by banks for them to provide such a level of finance at a cheap rate
so regardless of what the RNS say these to me confirm that this is a growth business on a modest rating....
Britain needs a new generation of gas-fired and nuclear power stations, the energy secretary will say today as a leading think-tank warns of the growing threat of blackouts.
In her first major speech on energy policy, Amber Rudd will say that the new power stations will replace dirty coal-fuelled plants. New nuclear power plants at Wylfa in Wales and Moorside, near Sellafield in Cumbria, are expected to provide up to 30 per cent of low-carbon electricity bv the 2030s and create 30,000 jobs, she will say.
Also FYI, two interviews with Finncap's analyst and HAYT's CEO post-results and the acquisition. Interesting that the CEO is prepared to definitively state that the share price is undervalued at present:
Equity Develoment have upgraded to 8.5p EPS this year and 10p EPS next year:
"Hayward Tyler (AIM:HAYT)
This morning Hayward Tyler announced the immediately earnings enhancing acquisition of the trade and assets of the Peter Brotherhood business from Dresser-Rand Company Ltd, a Siemens-owned business, for a total consideration of US$15 million (cash). Peter Brotherhood is a UK engineering business specialising in steam turbines, reciprocating gas compressors and combined heat and power units for the power generation, oil and gas and marine markets. As a result of the acquisition, consensus EPS forecasts have increased by around 6% in the current year (year to March 2016) to 8.5p, and by 10%+ in the following year to around 10p."
" HAYWARD TYLER PLC. (LSE:HAYT) With an epic like HAYT, what's not to like?Â We often bang on about Glass Ceilings and Hayward Tyler have a cracker. Currently trading around 85p, if this lot manage to close a session above 95p then it's about ..."
Finncap have today released their Q3 Industrial Technology sector note. In it they review the entire sector, and highlight just three companies as key picks as "companies that can remain master of their own destiny", of which HAYT is one:
The business has been transformed over the past couple of years, with significant cost reductions and supply-chain changes to make the group more efficient and flexible. We see tremendous potential in HAYTs powergen markets as developing nations remain deficient of high quality electricity, and HAYTs leading-edge super-critical boilers are gaining market share. Its nuclear aftermarket exposure through safety regulation is non-cyclical.
For HAYT, the oil and gas market is a positive feature, not a negative one, with potential to gain traction in a huge customer base via its MOU with FMC Technologies. The groups recent AGM pointed to building momentum in order intake and the Luton Centre of Excellence project, targeting a doubling of capacity highlighting the medium-term upside."
WH Ireland have updated as follows, saying Buy with a 113p target:
"Hayward Tyler*: Luton update and new contract wins (CORP)
The group has won £13.5m of new orders in the first quarter across the nuclear, power and oil & gas sectors, including an agreement with GE Oil & Gas for the supply of a subsea motor. This solid level of order intake represents growth of 14% ahead of the same quarter last year. The second and final tranche of funding for the secured loan note has been issued, raising £1.4m (before costs) in order to support the development of the Luton Centre of Excellence. The development project is on track and on budget and due to complete by July 2016. Foundations have been laid and the construction of the test beds recently started. It will enable increased throughput, reduced lead times, lower working capital and enable a doubling of capacity. No change to forecasts.
We consider the shares have yet to catch on to the massive potential the recent MOU with FMC Technologies has to offer in terms of its scope to tap into FMCs own customer base and create a substantial new revenue stream in the oil and gas sector.
Once this potential is converted into new customer contracts, the shares should rerate to a significantly higher level.
We retain our conservative 1-year price target of 113p, based on a target P/E of 14x; compared with the current rating of 10.6x, this offers attractive upside"
- all on track at Luton
- large new orders received
- order book well ahead of last year
- in particular, a first order from GE for a subsea motor. These are presumably the ones that sell for £1m+, so repeat orders from the likes of GE would bring a step-change in revenues.
Hopefully this good news will see a breakout for the share price.
"when is this investment in the Centre of Excellence at Luton going to start to pay off?
To which the answer is: it is already starting to pay off, as can be verified by FMC Technologies, the global market leader in sub-sea systems, choosing Hayward Tyler earlier this year to manufacture permanent magnet motors for use in FMC's 3.2 megawatt sub-sea pump systems.
Each of these units is worth one-million-plus, which is around three to four times the normal cost of our units, so you can do the maths, Ewan Lloyd-Baker said in an interview with Proactive Investors.
The Hayward Tyler boss was confident other deals would follow the FMC hook-up and that, over the medium term, 20-30% of Hayward Tylers revenues would come from the oil & gas sector.
If hes right, that should put paid to any concerns about revenues from the oil & gas sector drying up. It is all a matter of being patient, which is apparently a lot easier to do when one is the boss of a 200-year-old company, though house broker finnCap has also got the message.
Against the difficult oil sector backdrop, the recent alliance with FMC offers the potential for a scale increase in production, the broker said in a research note on Tuesday.
In the meantime, Lloyd-Baker pointed to very healthy order intake of £9.8mln in the first two months of the current financial year, with the orders derived from a range of geographies and a variety of sectors.
Were becoming more competitive on the power side, Lloyd-Baker asserted, and that increased competitiveness opens up lots of possibilities, especially in India and China.
Now that the general election is out of the way in India and the economy is picking up, the company might start making more of a noise on the sub-continent, where weve been a bit quiet lately, Lloyd-Baker acknowledged.
By the afternoon, the shares had rallied to 82p, suggesting that the companys message was getting through.
House broker finnCap is forecasting earnings per share of 8.0p for the current financial year, putting the shares on a projected earnings multiple of 10.25, which finnCap says is a discount to its peers.
By finnCaps calculations, the shares should be on a multiple of 14.1, which would imply a price of 113p.
The improving market outlook coupled with significant internal enhancements potentially provides significant scope for earnings growth in the current year and upside to the current valuation, reckons finnCap analyst, David Buxton"
Should provide a nice boost, particularly on Friday:
"Hayward Tyler (HAYT) celebrated its 200-year anniversary by posting its best performance since listing in 2010. But despite original equipment and after-market revenues both growing 13 per cent due to strong power and nuclear markets, shares in the pump and motor manufacturer tumbled 5 per cent.
"It's been another year where we've exceeded expectations," says chief Ewan Lloyd-Baker, arguing the business was "marked down" for the market perception of its oil and gas exposure. At 8 per cent of revenues Mr Lloyd-Baker describes this part of the business as "small", and maintains that even a lower oil price is not enough to derail demand for the group's efficiency-boosting subsea and submersible motors. Nevertheless, delays in oil and gas infrastructure spending did hinder sales in Europe.
There were no such problems for the group's core markets. Nuclear profited from a big order to replace nuclear parts at two South Korean reactors, while Hayward's power operations enjoy a bulging pipeline of new power plants in China and India. While the development of a new centre of excellence in Luton is expected to expand capacity and vastly improve efficiencies.
Broker finnCap expects adjusted pre-tax profit of £5m in the year to March 2016, giving adjusted EPS of 8p (up from 7.5p in FY 2015).
HAYWARD TYLER (HAYT)
ORD PRICE: 81p MARKET VALUE: £37m
TOUCH: 80-82p 12-MONTH HIGH: 95p LOW: 63p
DIVIDEND YIELD: 1.6% PE RATIO: 12
NET ASSET VALUE: 34p* NET DEBT: 51%
Year to 31 Mar Turnover (£m) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)
2011** 32 -3.1 -12.9 nil
2012** 33 1.3 1.2 nil
2013 40 1.5 0.3 nil
2014 43 3.8 5.0 1.25
2015 49 4.4 7.0 1.32
% change +13 +15 +39 +5
Ex-div: 13 Aug
Payment: 28 Aug
*Includes intangible assets of £3.3m, or 7p a share **December year-end figures 15-month period
The shares are up 9 per cent on our buy tip (74p, 22 May 2014), yet trade on just 10 times forecast earnings. Given the strength of the business, and the exciting prospects of the new centre in Luton, we see no reason to change our tune. Buy."
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