Speedy confident of prospects, despite turbulent conditions

Speedy Hire said it is insulated from any changes in market conditions, in a trading update ahead of its annual general meeting today.

The Newton-le-Willows-based tools and equipment hire group said the business is running to board expectations for the full year. In the five months to August 2022, hire revenues were around six per cent ahead of the same period the previous year.

Speedy has managed to secure new contract wins from major customers effective from October 2022, which are expected to offset some recent weakening in market conditions. Price increases implemented in April 2022 have not had a material impact on volumes, it said.

It revealed that improvements to operational efficiency, and the effective management of its supply chain are helping to control costs and mitigate inflationary pressures.

The group is also continuing to invest in its retail and trade offering through development of the customer proposition in both B&Q stores and on diy.com. A significant national marketing campaign is under way to promote these.

Speedy says it has a strong balance sheet with net debt, as at August 31, 2022, of approximately £95m and cash and unutilised facilities of around £85m.

The group has invested about £28m in the hire fleet in response to demand and to mitigate the impact of supply chain lead times and price inflation. In line with its strategic goals, the investment has been focused on sustainable products.

In January this year the board began a share buyback programme of up to £30m, reflecting the group’s cash generative ability and strong balance sheet.

To date, around £18m of shares have been purchased under the programme. The general authority for the programme expires at today’s AGM, where a resolution to renew the authority will be considered by shareholders and, subject to approval of that resolution, it is the board’s intention to continue the programme for the balance of the initial £30m.

As previously announced, Russell Down will leave the board and the role of chief executive on September 30, 2022. Dan Evans, currently chief operating officer, will join the board as chief executive on October 1, 2022.

The board said group trading is in line with expectations for the full year. While the macroeconomic outlook is uncertain and inflationary pressures remain high, the board said the business is resilient and well positioned to manage any resulting changes in market conditions due to its diverse end market exposure, broad customer base and strong balance sheet.

Chief executive, Russell Down, said: “Revenue for the first five months of the financial year has remained strong, with new contract wins effective from the second half also secured.

“Whilst the continuing macroeconomic uncertainty and inflationary pressures may impact trading performance, our diverse end market exposure, broad customer base and strong balance sheet provide resilience against changes in market conditions.”

Speedy’s interim results are set to be announced on November 15, 2022.

Adrian Kearsley and Robert Plant, analysts with broker Panmure Gordon, maintained their Buy recommendation and target share price for Speedy of 113p. The stock closed last night at 39.50p, valuing the group at £195m.

They said: “The UK economy is slowing and construction is not immune from this downward trend. However, the group’s ability to take share from its peers should mitigate this disruption.

“The forward Price/Book (ex-IFA) is at a seven year low. Back then the business was fundamentally challenged. It had made a series of operational and strategic errors that threatened the survival of the group.

“Today Speedy Hire is in good health and well placed to thrive. We maintain our Buy recommendation and 113p target price, which assumes that the Price/Book returns to historical sector averages.”