People are being a bit hard on this company. Underlying earnings...

People are being a bit hard on this company.

Underlying earnings were 7 million. That is not bad for a mining services company in what will probably be the worst year in mining services (most indications give improvements starting this year).
When you remove the delineation drilling unit, you get a net profit of 10,7 Million. Not bad at all.

But wait, it get's even better.

Hughes overcame quite a few problems this year, which it probably won't have to face again this year.
It lost plenty of contracts in it's east-coast business. That is why the utilisation dropped that much. Goonyella, North Dawson, Wilkie Creek and Mt Arthur closing, downsizing or being sold. Hughes had contracts at all of these mines.

http://www.dailymercury.com.au/news/over-400-jobs-go-goonyella-riverside-coal-mine/2286228/
http://www.miningaustralia.com.au/news/200-contractors-cut-from-anglo-s-dawson-coal-mine
http://www.theaustralian.com.au/bus...16419893?nk=2e03b77cba4005dea8fcdceddf84ce33#
http://www.miningaustralia.com.au/news/bhp-billiton-to-cut-163-jobs-from-mt-arthur-coal-m

So taking this into consideration, they recovered quite well from this. According to the August news release, they had 35 rigs contracted on the east coast.

JSW didn't really add much to this year's profit, but that was told in advance. It will just be earnings accretive starting this year. One nice example is the Carina contract. If what I see is correct, they will be employing 3 rigs at double shift. That should give JSW/Hughes about 3 Million in net profit if they can maintain the margins they have on the east coast on that contract alone. I'm pretty confident they could do this. Add to this the lower amount of leased rigs to owned rigs this year and the higher number of contracts (FMG f.ex) and this year could be a record year for them (maybe 5-6 million in NPAT?).

What we can blame the company is the overconfidence they had. This is indeed painful for investors, but given the situation I can understand. Don't forget that Bob Hughes still controls 35% of this company. And I don't think he will let the company bearing his name go down. I also get that Reichdrill revenues can be pretty volatile, considering it is more prone to variations in capex. But I am indeed more a fan of underpromising and overdelivering. Saves some harteache.

As an aside, here is a breakdown of H2 numbers by division. Doesn't look that bad does it.

H2 breakdown of earnings:

East-Coast: 5,7M NPAT (-0,7 compared to H1)
West-coast: 1,1M (+0,2M)
Reichdrill -0,3M (-0,7M)
Express Hydraulics 0,0M (-0,1M)
Delineation Drilling -2,2M (-0,7M)
Overhead -1,8M (-0,1M)

So you can see where the losses happened compared to H1. -0,7M at Reichdrill (which was more of a strategic acquisition anyways and still has to ramp up alongside Express Hydraulics), -0,7M at the East-Coast and -0,7 at Delineation. These 3 make up the largest part of the difference in earnings between H2 and H1.

All in all, I think this company has a lot of potential, especially for it's price.

You have an excellent management/board team (not only Hughes himself, but also Jeff Branson) with excellent reputations. Management is also heavily incentivised to perform (owns 50% of shares), they are busy paying down debt and it's cheap (5,5 times earnings, 0,6 times book).

What is there not to like?