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  • Writer's pictureMark Watson-Mitchell

Hunting – interim profits up 457%

As part of a wider programme to drive higher operational efficiencies and reduce future cost outflows, Hunting (LON:HTG) has commenced a further restructuring of its operating footprint, in addition to the disposing of its legacy non-core exploration and production assets held by its wholly-owned subsidiary Tenkay Resources, Inc..


CEO Jim Johnson stated that:


"Hunting is continuing to drive stronger internal operational efficiencies throughout its global footprint.


Management is making good progress in delivering key initiatives in support of the Hunting 2030 strategy, which includes locating manufacturing facilities in areas of high growth and merging operations to enhance returns and lower the cost base."


The Business


Hunting is a global engineering group that provides precision-manufactured equipment and premium services, which add value for its customers.


Established in 1874, the company maintains a corporate office in Houston and is headquartered in London.


As well as the UK, the company has operations in Canada, China, Indonesia, Mexico, Netherlands, Norway, Saudi Arabia, Singapore, the UAE and the USA.


The group provides tools and components for the oil and gas and energy industries.

The company operates through Hunting Titan, North America, Europe, Middle East and Africa, and Asia Pacific segments.


The Hunting Titan segment manufactures and distributes integrated and conventional gun systems and hardware-related products.


This segment also offers H-2 and H-3 gun systems, control fire switches, powerset charges, EQUAfrac-shaped charges, and T-Set tools.


The North America segment offers subsea equipment, intervention tools, electronics and deep hole drilling and precision machining services, as well as connections and oil country tubular goods.


The Europe, Middle East and Africa segment supplies threading, legacy pipe storage and related accessories.


The Asia Pacific segment manufactures connections, accessories, and intervention equipment.


Sales per Business and per Region


On a Sales per Business basis the group derives some 35.7% of its total sales from Oil Country Tubular Goods, Perforating Systems account for 34.7%, Advanced Manufacturing 10.3%, Subsea 9.5%, Intervention Tools 5.0%, with Others accounting for the balance 4.8% of group turnover.


On a Sales per Region basis North America takes 44.8%, Hunting Titan 35.5%, Asia Pacific 10.1%, the EMEA 4.8% and the UK handles a similar 4.8% of group turnover.


The Interim Results


The group has today announced its Interim Results to end June, showing a 63% increase in its order book to $529.7m ($325.9m), a 42% improvement in its revenues to $477.8m ($336.1m) and a 457% uplift in the adjusted operating profits at $26.2m ($4.7m).


These results confirm the positive trend of increased investment in the oil and gas industry following years of under-investment, driven by global energy demand and increased focus on energy security.


Hunting believes that the sector is in the early days of a long-term growth cycle which, coupled with its non-energy businesses, positions the company for increased revenue and earnings going forward.


All the group’s businesses performed well during the period.


It continued to secure major oil country tubular goods orders, which increased its sales order book strongly since year-end.


Management Comment


Management believes that this performance indicator provides good visibility of its trading outlook in the short to medium term.


Johnson stated:


"Alongside our core oil and gas businesses, Hunting has made good progress in positioning itself as a critical provider of technology, as well as a key supplier of important raw materials for the energy transition.


Management anticipates this market will provide strong growth in the long term as the world solves the challenge of energy security and low carbon.


Hunting will play a major role in this complex solution and we look forward to delivering on our objectives over the coming years."


The Equity


There are some 165m shares in issue.


The larger holders include JP Morgan Asset Management (6.70%), Huntin Investments (6.67%), GLG Partners (5.51%), BlackRock Investment Management (4.77%), Man Group Investments (4.37%), Schroder Investment management (4.29%), Franklin Advisers (4.07%), Rathbones Investment Management (4.04%), Hunting Employee Trust (4.01%) and Staley Investments (3.89%).


Brokers View – big return to growth


Daniel Slater at Zeus Capital has praised Hunting in its significant return to growth.


He has stated that overall, momentum clearly continues to build for Hunting, as global oil and gas activity continues strongly in what remains a healthy oil price environment, and new markets for the company’s quality products continue to be revived/opened up.


Zeus noted that gains are now appearing for the group across the whole of its business, including internationally and it continues to expect more of the same going forward.


Previous estimates for the full year to end December have suggested some $912.0m sales ($725.8m) with adjusted pre-tax profits leaping from $10.2m to $56.3m, while zooming its earnings from 5.8c to 25.7c per share.


For 2024 forecasts are for $1.1bn sales, $83.6m profits and 38.2c per share in earnings.

On a consensus view basis across six analysts who follow the group, the Average Target Price is 395p, the Highest was 448p, the Lowest was 353p.


My View – very good upside potential


The group has announced that it will be holding a Capital Markets Day on Wednesday 13th September, when more details of current year trading can be expected.


The shares of this £395m capitalised group, which were up to nearly 350p in early January this year, closed last night at around 235p, at which level they offer very good upside potential as the group’s resurgence continues.


(Profile 15.03.21 @ 275p set a Target Price of 350p*)


(Asterisk * denotes that Target Price has been achieved since Profile publication)

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