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City News: STOCK MARKET MAYHEM Catherine Stratton reports on a share price hammering, Speedy’s purchase of LCH and Andrews Sykes’ results. The 2005/2006 ‘bull market’ has come to a precipitous end; investor disquiet over inflation and interest rates on both sides of the Atlantic has caused shares to take a severe hammering in the middle of May. On 22 May, the FTSE 250 Index experienced its biggest ever fall and the FTSE 100 hit a six month low. It seems unlikely that shares will return to their recent high levels for some time, as investors have taken refuge in safer havens such as government bonds. The decline in equity has been across the board and the leading hire companies are now trading considerably below the levels of a month ago. Just ahead of the Stock Market mayhem, Speedy had announced that it was purchasing LCH Generators, one of the largest and fastest-growing companies in the generator hire market. Speedy has paid a total consideration of £59m, including debt of £13.5m. The payment consists of £54.4m debt and £4.5m satisfied by the issue of 512,626 Speedy shares (at a price of 878p per share; the shares had opened at 880p on the day the deal was announced). In the year ended 30 September 2005, revenues at LCH grew by over 41% to £21.1m and pre-tax profits rose 19% to £1.9m, after charging non-recurring remuneration and interest charges of £2.1m. Gross assets were £30.6m. Speedy states that since September, LCH has sustained its significant growth of recent years. Measured against the pre-tax profit level the price looks high, but Speedy Finance Director Neil O’Brien points out that the accurate measure is against the £4m before the non-recurring items referred to above. Furthermore the company has grown at approximately 20% per annum for the past five years. This is strategically a highly important acquisition for Speedy, which has the stated objective of expanding to be either first or second in all the segments of the hire market in which it operates. LCH operates 2,400 generators with an average age of between two and three years, a similar profile to that of Speedy Power. The combined fleet of Speedy Power and LCH will be in excess of 4,000 machines, which are mostly the standard units used on construction sites. Neil O’Brien anticipates that the fleet will have expanded to 4,600 units by the end of the year. LCH is highly rated as a very professionally-run company by its competitors, with an excellent reputation for customer service. The merger with Speedy Power is a considerable step forward for Speedy’s position in the temporary power market, where it is mounting an increasing challenge to long time leader Aggreko. The one company that appears to have escaped the share massacre is Andrews Sykes, which announced its 2005 results in late April. The shares had been under some pressure a month or so ahead of the figures but they staged a partial recovery subsequently; they are, however, quoted on AIM and Chairman JG Murray holds almost 85% of the shares in issue. Pre-tax profits at Andrews Sykes were boosted by the disposal of non-core businesses Accommodation Hire Ltd In May and Engineering Appliances Ltd in October 2005. Turnover from the company’s continuing hire activities rose by 1.3% to £34.5m. Strong trading in the second half of the year had enabled Andrews Sykes to make good the shortfall it experienced in the interim period when turnover from continuing activities had declined by nearly 12% and operating profits by 40%. Chairman JG Murray concludes his statement by indicating that the ‘colder weather’ in the first quarter had given the Group a good start to the financial year. • Executive Hire News › Archives › June 2006 › City News › Stock Market Mayhem
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