The UK’s largest tool hire company has warned that building companies are placing too much emphasis on public sector spending cuts and should instead be looking at renewed interest from outside investors.
Speedy Hire, which narrowed its losses and halved net debt during the year to April, also said the backlog of shelved construction projects would provide a much needed boost to the industry.
“The pipeline from concept to delivery has shortened as there is a huge backlog of work which was due to start, had gone through the time consuming design and planning processes and just needs to be given a green light,” said Steve Corcoran, chief executive.
“When the confidence returns a lot of work is likely to come to the market very quickly,” Mr Corcoran added.
Weakness in the commercial and residential sectors meant the bulk of Speedy’s revenue came from large-scale civil engineering projects, such as work on the 2012 Olympic developments.
Revenue at the group fell 27 per cent from a year earlier to £351.1m. Pre-tax losses narrowed, meanwhile, by almost £50m to £22.8m due to lower impairment charges and restructuring costs.
The Haydock-based group also took costs out of the business, reducing headcount by 312 to leave it just over 4,000 staff, and closed 37 depots across the UK. The move helped it to bring its net borrowings to £119.3m, down from £248.4m a year earlier.
Speedy said that although it expected the building market to improve throughout the remainder of the year it would not start restocking until it was clearer what the demands of the sector would be.
Shares in the company fell 2p to 30p.
● FT Comment
The contraction in the UK construction industry last year, the sharpest in four decades, coincided with Speedy Hire’s share price falling to a paltry 10p, a low for the century. Now with signs that the market is easing, highlighted by the return of high profile projects such as the Cheese Grater, the company has reason to be upbeat. And while Speedy is unlikely to see a sudden jump in demand, it looks to have weathered the worst of the storm. Priced at 0.6 times net asset value, the group’s shares look cheap next to rivals Ashtead and Lavendon, both of which trade at multiples closer to NAV. The shares look better value still when Speedy’s dominance of the tool hire market and the scope this gives it to cash in on a rebound are factored in.
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