This is investment research, not personal financial advice.
The market erased ten times the Kuwait hit
Hunting PLC (LSE:HTG) fell 14.47% to £4.05 on 21 August after its half-year report cut 2026 EBITDA guidance to $138m-$141m. The shares lost 68.5p. Applied to the market's closing share-count estimate, that removed about £99.6m of equity value in one session. Management put the delayed Kuwait Oil Company tender's 2026 EBITDA effect at roughly $10m (Hunting 2026a; LSE 2026).
That gap is the story. The market did not merely capitalise one missing order. It charged Hunting for the risk attached to a second-half recovery that now has to repair earnings, working capital and the balance sheet at the same time.
The numbers refuse a simple reading. Revenue fell 6% to $497.0m and EBITDA fell 12% to $62.1m. Adjusted profit before tax dropped 21% to $34.5m. Yet statutory operating profit rose 10% because the comparable period carried $13.1m of restructuring and acquisition charges. Perforating Systems revenue rose 44%, Subsea revenue rose 94%, and Subsea's EBITDA margin reached 22%. This was not a collapse across the product portfolio (Hunting 2026a).
Cash made the softer earnings harder to dismiss. A $58.0m working-capital outflow turned a solid operating contribution into negative $27.8m of company-defined free cash flow. Hunting then spent a further $54.3m on dividends, buybacks and treasury shares. Total cash and bank borrowings moved from a positive $62.9m at December to a $19.0m borrowing position in June. Including leases and a minority shareholder loan, net debt was $51.4m (Hunting 2026a).
The reaction therefore looks roughly proportionate to the combined execution risk, even though it is severe relative to the disclosed Kuwait earnings hit. At £4.05, the market is allowing some recovery, but no longer paying in advance for it.
A precision engineer with three different economic engines
Hunting describes itself as a precision-engineering group, but the label hides three distinct cash cycles.
Perforating Systems, led by Hunting Titan, supplies the charges, guns and switches used to complete wells. The products are safety-critical, technical and consumable. Qualification and reliability matter because failure below ground is expensive. This part of the business can earn repeat revenue without waiting for a single giant project. H1 revenue grew 44%, with market-share gains in North America and international sales into Australia, Argentina, Indonesia and Saudi Arabia (Hunting 2026a).
Subsea Technologies is more project-driven. It supplies hydraulic valves, stress joints, couplings and related equipment for offshore developments. Hunting added Flexible Engineered Solutions in June 2025, then secured $63.5m of titanium stress-joint orders for ExxonMobil's Guyana developments in April 2026. Subsea's H1 revenue almost doubled and its EBITDA margin rose from 13% to 22%. But the cash cycle is longer: $39.4m of the H1 increase in contract assets came from subsea work recognised before invoicing milestones were reached (Hunting 2026a; Hunting 2026b).
OCTG, or oil-country tubular goods, carries the clearest concentration risk. Hunting threads and supplies premium pipe for drilling programmes, including large tenders in the Middle East and Asia. H1 2025 benefited from Kuwait orders that completed in May 2025. With no repeat in H1 2026, OCTG revenue fell 46% and its EBITDA margin slipped from 19% to 15%. Kuwait then indicated that it would re-run a tender issued in April. Hunting expects the new process in Q3 2026, with any resulting revenue starting in 2027 (Hunting 2026a).
Advanced Manufacturing and Other Manufacturing complete the portfolio. Aerospace, power-generation and non-oil work provide diversification, but non-oil and gas revenue was only $38.0m, or 8% of the H1 total. Slower electronics and Dearborn deliveries helped pull Advanced Manufacturing revenue down 14%.
The business model is becoming less dependent on US onshore drilling, but it has not escaped cyclicality. It has exchanged some short-cycle rig sensitivity for project timing, contract assets and tender concentration. That is a better mix when projects arrive in sequence. It is a demanding mix when one tender slips while another division builds inventory for future delivery.
Five years repaired profit faster than cash discipline
Hunting's recovery from the 2021 trough is substantial. Revenue nearly doubled between 2021 and 2025, an 18.2% compound annual rate. EBITDA went from a $0.4m loss to $135.7m. Company-reported return on average capital employed rose from negative 4% to 10% (Hunting 2025; Hunting 2024; Hunting 2023; Hunting 2022; Hunting 2021). The machine-readable roic_pct field is a proxy label for that filed ROCE series, not an author-computed after-tax ROIC.
| Reporting year, US$m | Revenue | EBITDA | EBITDA margin | Reported ROCE | Net debt/(cash) |
|---|---|---|---|---|---|
| 2021 | 521.6 | (0.4) | (0.1%) | (4%) | (78.5) |
| 2022 | 725.8 | 49.3 | 6.8% | 1% | 10.0 |
| 2023 | 929.1 | 102.4 | 11.0% | 6% | 33.4 |
| 2024 | 1,048.9 | 126.3 | 12.0% | 9% | (70.7) |
| 2025 | 1,018.8 | 135.7 | 13.3% | 10% | (28.1) |
Parentheses denote net cash in the final column. EBITDA margins are author-computed from filed revenue and EBITDA. Hunting defines ROCE as adjusted operating profit divided by a 13-point monthly average of gross capital employed. It is not after-tax ROIC, but it is the most consistent filed measure of returns on the operating capital base.
Two details qualify the recovery. First, 10% ROCE is respectable rather than exceptional for specialised engineering exposed to energy cycles. The qualification network and intellectual property have restored profit, but the returns do not yet prove that customers have no alternatives. Second, the balance sheet has moved sharply in both directions. Net debt of $33.4m in 2023 became net cash of $70.7m in 2024, then net cash fell to $28.1m in 2025 before reversing to $51.4m of net debt at June 2026.
Working capital explains much of the movement. It was $278.0m in 2021, $415.9m in 2023, $335.9m in 2025 and $391.3m at June 2026. Relative to annualised revenue, the June figure was 37%, above the group's 35% long-term reference point. Inventory days improved slightly to 115, but receivable days rose from 78 at December to 89 in June. The current cash strain is therefore not one bloated stock line. It sits across inventory, receivables and subsea contract assets.
The $58m owner-cash bridge
The cleanest way to test management's second-half claim is to reconstruct the first-half cash bridge. Hunting starts with EBITDA plus the share-based payment charge, then deducts the cash absorbed before acquisitions and shareholder transactions.
| H1 2026 owner-cash bridge, US$m | Cash effect |
|---|---|
| EBITDA | 62.1 |
| Share-based payment charge added back | 7.1 |
| Working-capital movement | (58.0) |
| Property, plant and equipment | (14.0) |
| Intangible investment | (2.4) |
| Tax paid | (5.3) |
| Import-duty settlement | (8.7) |
| Interest and bank fees | (3.6) |
| Lease payments | (4.2) |
| Restructuring cash cost | (0.7) |
| Disposals and other movements, net | (0.1) |
| Company-defined free cash flow | (27.8) |
This is Hunting's reported free-cash-flow definition, reconciled from the half-year filing rather than inferred from EBITDA. It includes working capital and lease payments and excludes acquisitions and transactions with shareholders (Hunting 2026a).
There is a credible reason for part of the outflow. Titan and Subsea bought materials for secured H2 orders. Subsea contract assets grew because revenue recognition ran ahead of billing milestones. Management expects those balances to unwind and still projects $50m-$60m of total cash and bank at year-end.
But the burden of proof is now heavier for three reasons.
First, the group distributed cash before completing that conversion. It spent $32.7m repurchasing 5.18m shares for cancellation, $11.5m net on treasury shares for employee awards and $10.1m on the final dividend. Those payments were discretionary except for committed tranches. The issued share count fell from 157.72m at December to 152.54m in June, and the market-data snapshot implies a further reduction by August. Per-share economics improve, but fewer shares do not make the working-capital reversal automatic.
Second, H2 earnings are carrying more weight. The revised $138m-$141m EBITDA range implies $75.9m-$78.9m in the second half after $62.1m in H1. The lower end requires H2 EBITDA to rise 22% over H1. At the upper end, the increase is 27%. That can happen when subsea invoices and secured orders land, but the range leaves little room for another timing slip.
Third, cash recovery and EBITDA delivery are related but not identical. A project can support EBITDA before its invoice is collected. Conversely, selling inventory may release cash with little incremental profit. The March 2027 full-year filing must satisfy both tests.
The balance sheet can absorb a miss, not endless slippage
Hunting is not facing a near-term funding crisis. At June it had $89.0m of cash and cash equivalents, $108.0m of bank borrowings, a $200m revolving credit facility and a $100m term loan. The revolving facility runs to October 2029 after an extension. The term loan amortises through September 2027, when a final $25m falls due. Including $28.5m of lease liabilities and a $3.9m minority shareholder loan, net debt was $51.4m (Hunting 2026a).
Against guided EBITDA near $140m, that net debt is only about 0.4 times. Even without a full working-capital reversal, the balance sheet has room. The threat is not immediate solvency. It is the order in which cash is allocated.
Hunting has committed to a second $40m buyback programme through March 2028, after the first $60m programme. It also raised the interim dividend 13% to 7.0 cents and stated an ambition to keep annual dividend growth at 13% through the decade. At the same time, management is assessing bolt-on acquisitions, especially in subsea and intelligent completions.
Each use of capital can be defended alone. Repurchases reduce the share count after a session fall. Dividends impose discipline. Acquisitions can add qualified products and customer relationships. Together, they compete with inventory, contract assets and debt repayment. The H1 sequence shows why capital allocation belongs inside the operating thesis rather than after it.
A reasonable test is simple: shareholder distributions should follow conversion, not assume it. If year-end total cash and bank reaches the stated $50m-$60m, and leases remain near $28.5m with the minority loan unchanged, the broader net-cash measure would recover to roughly $23m at the midpoint. If total cash and bank finishes below $50m, the gap will reveal how much of the H1 build was tied to later milestones or slower collections.
Qualification is a moat, concentration is the toll
Hunting's moat is strongest where qualification costs and failure consequences are high. A customer choosing a perforating system, premium connection or subsea stress joint is not buying a generic component. Materials, tolerances, field performance and documentation all matter. The $63.5m Guyana stress-joint award and the rapid growth in Subsea suggest that Hunting can win specialised work against larger competitors (Hunting 2026a).
The order book also supports visibility, but only with caveats. It was $358.0m at December 2025, down from $508.6m a year earlier as Kuwait orders ran off. Subsea's portion rose to $120.7m from $72.5m, while Asia Pacific fell to $36.1m from $186.9m. That shift is the strategy in miniature: less reliance on one large OCTG contract, more offshore engineering. It is not complete.
Peer evidence argues against treating Hunting's result as a broad industry collapse. Halliburton's June-quarter filing showed North American revenue of $2.276bn against $2.259bn a year earlier, while Latin America and Europe, Africa and CIS grew more quickly. Activity is mixed by basin and product rather than uniformly contracting (Halliburton 2026). The EIA's August outlook expected Brent around $85 a barrel in Q3 2026 before averaging $69 in 2027, a backdrop that supports offshore spending but does not guarantee the timing of any equipment tender (EIA 2026).
The counter-evidence is the return profile. Hunting's reported ROCE was 10% in 2025 after years of recovery. A wide moat should eventually produce stronger returns or less volatile cash conversion. Subsea's 22% H1 EBITDA margin could mark that improvement. It could also reflect favourable project mix and revenue timing. The next full-year segment disclosure will show how much survived a complete billing cycle.
Management deserves credit for closing loss-making EMEA sites and capturing about $11m of annualised savings. A further $15m cost programme is scheduled by the end of 2027. Yet cost savings cannot fix delayed tenders or collect a contract asset. The moat is stable overall, widening in Subsea and Perforating Systems, and eroding where Kuwait still decides too much of OCTG's annual comparison.
At £4.05, the multiple is waiting for the cash
Hunting reports in US dollars and trades in pounds. On 21 August the ECB published USD/EUR at 1.1699 and GBP/EUR at 0.8567, implying 0.7323 pounds per dollar. The £588.99m market capitalisation therefore equated to about $804.3m (AJ Bell 2026; ECB 2026).
Adding June net debt of $51.4m gives an enterprise value near $855.7m. Against the midpoint of revised 2026 EBITDA guidance, $139.5m, that is 6.1 times EV/EBITDA. If the year-end total cash and bank forecast reaches its $55m midpoint, and lease and minority obligations remain near June levels, estimated net cash would be about $22.6m. On that basis the multiple falls to 5.6 times.
The multiple looks cheaper only if that $74m swing in net debt arrives. The quoted valuation looks modest only after the working-capital release is credited.
A reverse calculation makes the dependency clear. At a 6.0 times multiple and $22.6m of year-end net cash, the current equity value implies roughly $130m of EBITDA, below the revised range. At 5.5 times, it implies about $142m, close to guidance. The market can therefore be read in two ways: either it doubts the earnings range, or it applies a lower multiple because the cash and project timing have become less dependable.
The four scenarios use 2027 EBITDA because the Kuwait re-tender and the current subsea order cycle should then be visible. They value the business on EV/EBITDA, adjust for net cash or debt, translate at the stated pound-per-dollar range and divide by a lower share count where repurchases continue.
| Case | 2027 EBITDA | EV/EBITDA | Balance-sheet assumption | Implied value per share |
|---|---|---|---|---|
| Severe downside | $110m-$120m | 4.5x-5.0x | $60m-$80m net debt | £2.00-£2.70 |
| Bear | $125m-$135m | 5.0x-5.5x | $20m-$40m net debt | £2.85-£3.70 |
| Base | $145m-$160m | 6.0x-6.5x | flat net debt to $20m net cash | £4.30-£5.55 |
| Bull | $175m-$190m | 7.0x-7.5x | $30m-$50m net cash | £6.40-£8.10 |
The base range begins just above the £4.05 close because it assumes the H2 cash promise is substantially met and the 2027 portfolio grows beyond the cut 2026 base. The bear range captures a business that remains profitable but earns a lower multiple as project assets keep absorbing cash. The severe case requires another order delay, weaker margins and a return to meaningful debt. The bull case needs Subsea margins to persist, Perforating growth to continue, Kuwait to return and the cost programme to arrive without another working-capital build.
The main sensitivity is not a tenth of a turn in the multiple. It is whether normalized EBITDA is $130m or $160m and whether net debt becomes net cash. At 6 times, each $10m of EBITDA is worth $60m of enterprise value, about 30p per share after translation. A $50m swing in net cash is worth roughly 25p per share. Together, those variables can move the equity by more than £1 without changing the headline multiple.
What could make the fall look excessive
Inventory was bought for secured H2 work, not for an unspecified sales campaign. Contract assets rose as subsea revenue was recognised before billing milestones. Receivable days increased partly because Q2 revenue was stronger. If those items convert on schedule, June was the cash low point rather than a new normal.
The earnings cut was also contained. Management attributed about $10m to the Kuwait delay and still expects year-on-year growth in 2027. It expects the tender to be reissued in Q3 and decided within a month. Any award would start contributing next year. Meanwhile, Perforating and Subsea are already growing at rates that can reduce OCTG's weight.
There is also a denominator effect. The company cancelled 5.18m shares in H1 and continued repurchasing after June. The market-data capitalisation of £588.99m is lower than a simple application of the June issued count because the live estimate reflects further reduction. If owner cash recovers, a smaller share base will make each dollar of profit and cash more valuable.
Those points explain why the £100m loss in market value may be larger than the eventual economic damage. They do not prove it. A secured order can still carry a poor margin, an invoice can still collect late, and a tender can still be delayed twice. The October trading statement is the first checkpoint. The March 2027 accounts are the decisive one.
Three dates now carry the thesis
The first date is the Kuwait re-tender. Management expected the process in Q3 2026 and an outcome within one month of issue. A firm award, value and delivery schedule would narrow the $10m maximum risk to 2027 EBITDA. Another delay would confirm that OCTG concentration is not yet behind the group.
The second is the October 2026 trading statement. It should indicate whether Titan and Subsea orders are moving through production, whether EMEA returns to profit after restructuring, and whether full-year EBITDA remains inside $138m-$141m. A qualitative claim about progress will be less useful than evidence on cash, receivable days or the timing of subsea milestones.
The third is the FY2026 report in March 2027. Three numbers should be read together: total cash and bank, working capital as a percentage of annualised revenue, and Subsea EBITDA margin. Total cash below $50m would show that the H2 release was incomplete. Working capital above 35% would leave the 2030 efficiency plan behind schedule. A Subsea margin below 18% would suggest that the H1 result benefited from project mix or timing.
The 14.47% fall says more than "Kuwait is late." It says the market now wants cash before it credits the backlog, and it wants the balance sheet repaired before it rewards another round of distributions. If Hunting reaches $50m-$60m of year-end total cash while Subsea holds its margin, the session's £100m repricing will look too harsh. If it misses either test, the session fall will have anticipated a broader conversion problem rather than overreacted to one tender.
Source notes and confidence
Verification is partial because the Finance API exact resolver returned no instrument for LSE:HTG, so no fuzzy match was used. Identity was checked against the LSE, Companies House and the annual-report cover. The full half-year filing, presentation and five annual reports were retrieved and read, while the move from £4.735 to £4.05 was reconciled to the LSE close. The live share count is AJ Bell's implied closing estimate after continuing repurchases; the June filing reported 152.54m issued shares before later cancellations. That difference is the main missing point-in-time item. The Kuwait re-tender had not been issued by the article cutoff, so its value and final timetable remain unknown.
References
- AJ Bell 2026. Hunting PLC (HTG) market page and 21 August closing snapshot.
- Companies House 2026. HUNTING PLC company record, number 00974568.
- ECB 2026. Euro foreign exchange reference rates, 21 August 2026.
- EIA 2026. Short-Term Energy Outlook, August 2026.
- Halliburton 2026. Form 10-Q for the quarter ended 30 June 2026.
- Hunting 2021. Hunting PLC Annual Report and Accounts 2021.
- Hunting 2022. Hunting PLC Annual Report and Accounts 2022.
- Hunting 2023. Hunting PLC Annual Report and Accounts 2023.
- Hunting 2024. Hunting PLC Annual Report and Accounts 2024.
- Hunting 2025. Hunting PLC Annual Report and Accounts 2025.
- Hunting 2026a. Hunting PLC Half Year Report 2026.
- Hunting 2026b. Hunting PLC Half Year Results Presentation 2026.
- LSE 2026. London Stock Exchange company page for Hunting PLC (HTG).
- Proactive 2026. "Hunting shares plunge as company revises full-year guidance," 21 August 2026.