Chief executive Ewan Lloyd-Baker at Hayward Tyler (HAYT:AIM) says new contract wins mean the industrial engineer can still hit lofty investor expectations in the year ahead.
Analysts estimate Hayward can deliver £12m of operating profit in the second half of its financial year which looks like a stretch after the business lost £5.6m in the six months to 30 September.
Shares caught up with Lloyd-Baker earlier to hear his take on half-year results published today, which saw shares in the manufacturer of specialist pumps decline 5.8% to 81p:
Shares: Why are you confident of hitting the second-half earnings number?
Ewan Lloyd-Baker (ELB): 'On one of our slides we have in the presentation, I think it’s slide 17, what we do is outline the order book. In October we said we would have a first-half loss and we previously guided this financial year would be light on profits in the first half.
'So, the ‘hockey stick’ growth in the second half needs to be large. My confidence comes from, firstly, our ability to execute on the orders that we have won because of the investments we have made in the Centre of Excellence in Luton and, also, Peter Brotherhood [acquired in 2015] is now ready to go. So we are well set up operationally.
'Second, we have momentum in the order book. Second quarter orders were double first quarter orders. Our order intake of £11m in the last six weeks compares to £25m in the previous six months which gives you an indication of the direction of travel.
Shares: Given that analysts are forecasting a £12m second half profit, would you be comfortable with investors extrapolating that run-rate into the 2018 financial year?
ELB: I think the danger is if you look at last year, we had a strong second half ... it’s a dangerous game to play. We are looking to build the momentum of our order intake, that’s something we’re trying to drive, and we want to finish the year with a higher order book which clearly would underpin our trading performance.
Shares: Why was the Aftermarket business profitability weaker than a year earlier?
ELB: ‘We are starting our Aftermarket business from scratch in Peter Brotherhood so we are trying to build up that business. Aftermarket was quiet in the first quarter of our financial year in terms of order intake and that’s driven an erosion in operating margins which is volume driven rather than pricing driven as our revenue struggled to cover fixed overheads. We won some nuclear orders in the US which are ready to be shipped but they will now fall into the second half of the year. So part of it is also just down to a question of timing of the shipment of orders.
Shares: Previously, as well as the order book, you’ve talked about a £500m ‘pipeline’ of work - what does this refer to?
ELB: ‘The encouraging thing about the pipeline is it shows that there are huge opportunities in our existing portfolio. If you break it down to the short-term pipeline, which are jobs we are bidding for directly and which we would expect to close before the end of our current financial year-ending March, the total would be around £60m with conversion rates of anywhere between 35% to the 80% range.’
Note: This Q&A is an edited transcript of an interview conducted earlier today.
