Speedy Hire suffers widening losses

Speedy Hire reported the departure of its finance director and widening losses, after restructuring costs and weather-blighted construction activity hit the UK’s largest tool hire group.

The company, which disposed of its portable accommodation rental business last month, said, however, that demand had bounced back during the second half of 2010 and that the worst was over for the building industry.

“There were some great big holes we could have fallen down during the past three years and broken our neck. We didn’t and now it is just a question of seeing out a few bumps in the road,” said Steve Corcoran, chief executive.

Speedy Hire’s shares fell 8 per cent on the news but recovered to close flat at 32 1/2p.

Speedy has been closely tied to the fortunes of the UK construction industry and has suffered from the harsh decline in building work during the recession. In addition to the problems of low utilisation of its fleet, the Lancashire group has been hit by rising fuel costs.

In a bid to mitigate the slowdown, the company has focused on winning contracts from large, stable suppliers and recently sealed a two-year supplier agreement with Tesco to provide the retailer with tools and plant for all construction work on its store expansion programme.

Speedy fell to a pre-tax loss of £27m for the 12 months to March 31, compared to £22.8m a year earlier. The weaker performance reflected one-off costs associated with the sale of the accommodation business, refinancing and a £1.7m write-off in associated with the collapse of Connaught, the maintenance specialist.

Sales of £354.2m during the period were slightly ahead of £351.1m achieved during 2009, while a final dividend payment was maintained at 0.2p, bringing the total for the year to 0.4p.

Meanwhile, Speedy announced the departure of Justin Read, finance director, to join Segro, the FTSE100 industrial landlord. His exit comes as the group nears the completion of refinancing talks with its lenders.

“It is a good time for a finance director to leave, if there is such a thing. He has obviously gained a good reputation as someone who can pull a few rabbits out of the hat when it matters,” said Paul Jones, a construction and support services analyst at Panmure Gordon.

FT Comment

Speedy’s dominance of the UK tool hire market has put it in the unenviable predicament of having an oversized equipment fleet in a shrinking market. On the other hand, it means it is well positioned for what many are predicting will be a gradual recovery in the sector’s fortunes. After deducting the impact of one-off costs, the group also returned to profit in the second half of the year, suggesting the push to serve larger clients is starting to payout. On this basis, the shares look cheap, trading at 0.7 times 2011 prospective net asset value, below peers’ 1.25 times.