Haynes Publishing Group (HYNS)


Haynes still worthy

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A belated check  I picked Haynes (HYNS) in July 2008 to be the first company profiled in a new column, Share Sleuth, for Money Observer magazine. Then, the shares cost £1.72. Luckily, as I hadn’t finalised the Thrifty 30 methodology then, it fits, so it was one of the first companies I included when I started the Thrifty 30 last September. Today the shares cost £2.15. The motor manual publisher’s interim results are due out tomorrow (See the ***Update below), so it’s a bit late for my review of the full year results, announced in September. But, I intend to review every Thrifty 30 member yearly on the publication of their annual reports to check that the companies are still sound. It would take some pretty dramatic news in Haynes’ interims to change that. The only news emanating from Yeovil since last September is that sales fell in the US and rose in the UK, its two largest markets, in the first quarter of this financial year, and John Haynes OBE is stepping down as chairman 54 years after he built an Austin 7 Special and wrote his first book about it. The new chairman is the current vice chairman, J Haynes, who I assume is his son. The two are related, and since John Haynes has a majority shareholding including 9m ‘A’ shares, 55% of the voting rights, which can only be owned by family members, he can anoint pretty much anybody his successor. Investors like a company’s management to own a meaningful stake but can be  leery when they are in control lest they vote through measures against the interests of smaller shareholders. If you worry about that, the chairman’s enthusiasm for the shares at their lows in 2008 and 2009 will be doubly disconcerting. Over the course of the financial year he bought nearly 400,000 of the ordinary shares taking his ownership to almost 800,000. I think It shows confidence (and a good sense of timing), and since the company was already controlled by the man who bears its name, it makes little difference. In any case, John Haynes has been a good steward of the brand he created, judging by the company’s performance over the last decade. The chart shows profit and the ratio of shareholder’s equity to assets, relative to their levels in 2000. In May 2009, the balance sheet date of the last annual report, the company was in good financial health. It had an F_Score of eight out of nine, and its ratio of equity to assets was 66%, meaning the value of the company’s liabilities, what it owed, was only 34% of what it owned. In 2001, Haynes made a small loss. It had bought Sutton Publishing in the UK and Chilton in the US but economic slow-downs on both sides of the Atlantic meant retailers were destocking its titles, just as Haynes had acquired more. Since then it’s jettisoned Sutton, which was a general publisher, and sought instead to make the most of its reputation in motors and DIY, taking the manual format into brave new territory like sexual health, fitness, and manuals for hardware you might only work on in your dreams. Destocking has re-emerged since 2007, and may explain the dip in Haynes’ performance over the last few years. Although Haynes thinks more people are buying its manuals and repairing their own cars because of the recession, so far it hasn’t been enough to offset the actions of retailers equally keen to conserve cash. An alternative explanation for declining motor manual sales is that cars are more reliable and complex these days, so we’re more likely to employ a mechanic than buy a manual and maintain our own cars. That’s why Haynes bought Vivid in 2008, a Dutch supplier of motor schematics and data to European garages and workshops over the Internet and on DVD. Vivid accounted for less than 10% of Haynes’ sales in 2008 but it gives Haynes an opportunity to augment Vivid with its own data and launch new electronic products in many languages, that may not be profitable as print publications. Meanwhile, it’s invested heavily in its digital printing presses in Nashville which should enable shorter print runs and keep relatively unpopular titles in print longer. The recession is officially over for now, so it will be interesting to see whether Haynes says there has been restocking since it last commented in October. Short of a disaster tomorrow, though, on a 10 year PE of eight, Haynes still deserves its place in the Thrifty 30. ***Update: The results are out, and there are no bombshells. My biggest concern, which I didn’t mention in the article, is the pension deficit which increased by nearly £5m to about £15m. The interims don’t mention the overall size of its pension obligation but at in May 2009 it was £25m so it must be creeping up towards the value of the company. If you value the A shares at the same price as the ordinary shares, that’s about £35m and for no better reason than you must draw the line somewhere, that’s the point at which I let the size of a pension obligation worry me. The best performing part of the business is general book publishing, mostly transport related, for example biographies of Stirling Moss, Ross Brawn and Jenson Button, and manuals on the Apollo 11 and Thomas the Tank Engine, but also books published under a license with the Daily Mirror using its picture archive, for example Jackson Unveiled. Sales were up 18% but Haynes doesn’t say how significant they are relative to the core motor manuals. There’s no restocking in America, but overall sales and profits are up on the first six months of last year. - Small print destroyed the free market  Dan Geldon says the heirs of Hayek and Friedman created a market free of government intervention so they could clog it up with complex legal arrangements that allowed them to maximise their profit. What’s the use of active fund managers in an efficient market? They reward good management with a high share price and punish bad management with a low share price. No wonder John Bogle’s angry. They haven’t even got that right. Don’t worry about the population time bomb, says Hans Rosling, we know how to stop population growth. Stop people in impoverished countries dying. It makes you laugh: Credit Suisse fined for not being in control of its own algorithms.


Hi Richard

I'm afraid I've nipped in and out of Haynes before you! I bought in January 2009 and sold in September, lucking into a great return thanks to the 2009 bull market (109% annualised). If they were cheaper I'd definitely buy again as I think they'll be around for a long time and remember using the car manuals myself way back when.

As for Hans Rosling, he and his Gapminder tool are just awesome. As a tool for interpreting data it is beautiful. What I'd most love to see is some value investing data put through its paces. P/B or P/E against next 5 years shareholder return, that sort of stuff.

Hi John, you timed that one very well :-) Unfortunately I managed to straddle the credit crunch with my Haynes articles and so had the pleasure of watching it go down and then back up.

Regarding Gapminder, that's a brilliant idea, and not beyond the whit of man: http://www.gapminder.org/upload-data/motion-chart/

Hi Richard

Good analysis of Haynes. I agree on the pension liability, it is a problem.

Also what I an still trying to figure out is how much the business has changed from publishing to digital technical information through the purchase of Vivid.

Thaks Tim. We just don't know. The company doesn't say much in its reports, except that the Vivid technology will allow it to sell foreign language products based on Haynes data, that wouldn't be viable as printed manuals. It's invested heavily in print plant in the US, so I don't think it sees itself as mainly a digital data provider just yet! Like everyone else its trying to make the most of all channels. Seems to me Vivid's expertise gives it options (and a profitable business in its own right) so it can't be a bad thing.

[...] development trends. A fellow blogger, to my knowledge the only other UK value investing blogger, inspired me to try and extract meaning from financial data with [...]

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