Shares dive after Speedy Hire sounds profits warning

SHARES in Speedy Hire lost more than 40% of their value today after it warned that profits will be lower than expected, as tough credit markets continued to hammer confidence in the construction industry.

The stock was down 44.56% or 42p to 52.25p  on the gloomy news.

Steve Corcoran, chief executive of Speedy Hire, which has already axed more than 200 jobs and slashed capital expenditure, said profits before tax and exceptional costs for the year to March 31 will come in between £33m and £38m. In the same period last year profits at the Newton-le-Willows firm were £48.1m.

In November, when the group revealed half year profits of £23.8m, Mr Corcoran was erring on the side of caution and said he would not be certain of its future position until after the Christmas shutdown of the construction industry.

However, ongoing uncertainty in the credit markets has resulted in confidence in the sector reducing further and despite a number of cost-cutting measures and falling interest rates and fuel prices, profits will be significantly dented at the group.

On a brighter note, Mr Corcoran added that spending on infrastructure-related projects continues to remain buoyant in both the public and regulated sectors and, as a result, revenues from the major contracting groups remains resilient.

The group is also continuing a close working relationship with its banking syndicate and a process has begun to establish appropriate covenants for the remainder of Speedy Hire’s £325m five year facility, which expires in June 2012.

Mr Corcoran added:”Speedy Hire continues to enjoy significant strengths in this challenging market.

“The business continues to win new contracts and remains cash generative, with an ongoing target to increase further its financial headroom by reducing net debt to below the starting position of £255.6m by the end of the current financial year.”