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Speedy Hire reports jump in adjusted pre-tax profits as SME strategy bears fruit

Published: 09:47 16 May 2018 BST

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Revenues excluding disposals climbed 6.4% to £371.6mln during the year

Speedy Hire Group PLC (LON:SDY) has reported a jump in adjusted pre-tax profits for its full-year as a renewed focus on small and medium enterprise (SME) clients began to bear fruit.

The tool and equipment rental company reported an adjusted profit before tax of £25.9mln, up nearly 60% from the previous year, while revenues excluding disposals climbed 6.4% to £371.6mln.

READ: Speedy Hire shares zip higher as it upgrades profit forecast

Pre-tax profits before adjustments stood at £18mln, up 25% from the previous year.

The results are unlikely to come as a surprise to the market following a trading update in March where the firm upgraded its full-year profit forecasts and expected revenues before disposals to rise 6%.

The company also reported that its return on capital employed (RoCE) had increased to 11.5%, while its weighted average cost of capital (WACC) stood at 10.9%, the first time RoCE has exceeded WACC in a decade.

Asset utilisation rates rose to 55.4%, compared to 51.5% last year as the firm invested in higher demand products and disposed of less well-used inventory.

The group’s dividend for the year was up 65% to 1.65p, compared to 1p the year before.

In its outlook, Speedy Hire’s chief executive Russell Down said: “The current year has got off to an encouraging start with revenue ahead of the comparative period on a like for like basis.

He added: “Whilst we are early into the new financial year, and some of the benefits from the acquisitions have been realised, we are confident of delivering further progress in the year ahead in line with our current expectations.”

In a note to clients, analysts at Liberum commented: “Speedy’s focus on fleet optimisation and improving its relationships with SME clients has seen it deliver financial returns that exceed its cost of capital for the first time in a decade. We have long argued that this cross-over should act as an important catalyst for the shares, and continue to believe that management remains well placed to add significant shareholder value in the coming years.

They added: “Although we acknowledge the uncertainties created by Carillion’s recent liquidation, we believe that the upside from the execution of its existing strategy is yet to be fully reflected.”

In early morning trading Wednesday, Speedy Hire shares were up 1.3% at 59.8p.

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