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City News: Speedy keeps up the pace Catherine Stratton’s assessment of the latest financial results includes Speedy’s continuing high growth and signs of expansion at Hire Station. Speedy’s latest results illustrate the company’s ability to produce a consistently high level of growth in both revenue and profitability (the company has achieved a compound growth rate in excess of 20% per annum over the past five years). Investors have been reassured and the shares have recovered well from the mauling they (and most others) had in May, although they are still approximately 10% below their all-time ‘high’ in March. Both the tool and the equipment hire sides of the business have expanded strongly in the past year; tool hire achieved 9% like for like growth (i.e. depots that have been opened for two years or more), against an overall growth rate in that market estimated at 4% by Speedy. This has not come at the expense of margins, which improved to 16% from 15.7% last year. The company continues to develop its tool hire network; in the year it added 22 locations, of which 17 were greenfield sites, to take its total to 229. The only significant acquisition was Delyn Hire Centres, which has given Speedy a presence in north Wales. It has, of course, also moved further west, opening up in Belfast and Dublin in recent months. Other new initiatives include the opening of Speedy’s first distribution centre at Heathrow to service west London, and the extension of its product range to include some items of compact plant. The expansion of the less mature Equipment Division (Space, Power, Lifting, Survey and now Pumps) continues at an impressive rate. It is noteworthy that this business contributed profits before corporate costs of £19.6m, the same figure as Speedy’s tool hire operations last year, underlining the growing strength of the newer businesses. The 33% revenue expansion is a mixture of organic growth and acquisition (there were five acquisitions last year). The number of depots has grown to 85. Despite the expansion, the Speedy Equipment division improved utilisation levels from 67% to 70% and margins improved from 18.3% to 19.2%. The year also saw the establishment of Speedy Pumps. This is now operating at three locations and is another example of Speedy capitalising on knowledge and connections forged through a product that originated as a part of its Hire Centres portfolio. Capital expenditure at Speedy last year reached just over £100m; £44m went on replacing its existing fleet, while £21m fuelled the growth of existing depots. Over £23m went on acquisitions. Since the year end, of course, Speedy has made its largest ever acquisition with the £59m purchase of LCH Generators (see last month’s City News). Chief Executive Steve Corcoran states that this move has taken Speedy Power to a position it anticipated reaching by organic growth in two years’ time. All the signs are that both sides of Speedy’s business will continue to outpace their markets. The tool hire side looks set for a gradual expansion on the other side of the Irish Sea and there is clearly strong potential in the equipment division as Speedy looks to exploit the opportunities for cross-selling amongst the customer bases of its individual businesses. Steve Corcoran believes that Health & Safety concerns remain the primary driver for growth in the hire market; he also contends that environmental concerns will be an increasing spur to future growth. With its young fleet, Speedy is well placed to benefit. Hire Station set to advance In recent years, Vp has developed a good range of specialist businesses, most of which have performed well, with the under-performance of its tool hire operation, Hire Station being the main exception. For the past year, however, there have been strong indications that the reorganisation strategy implemented by Hire Station Managing Director John Singleton was beginning to bear fruit. The recent results show that, not only has Hire Station moved back into profitability, but that it is also now in a position to advance further in the market place, as the 20% increase in revenues indicates. Vp Group Managing Director Neil Stothard states that Hire Station has achieved a significant profit turnaround and, while margins are lower than the company would like, he is confident that they will improve and that the benefits of restructuring will continue to enhance the performance. The Hire Station division encompasses the tool hire operation itself, which is described as having “contributed a very solid profit performance”, Lifting Point, which added a further 13 satellite locations to take its network to 20, and ESS Safeforce. In July 2005 the loss making Pivotal Services Group was acquired from Babcock; it has been restructured and integrated with the original Vp safety operation, Safeforce, to trade as ESS Safeforce. The Vp statement indicates that Hire Station achieved organic growth of just under 10% and that the tool hirer has gained some “strong key account wins.” Nearly 40% of its revenues are now transacted through its national hire desk in Manchester. Hire Station is described as entering the new financial year “in good shape”. It plans to add another eight to ten locations to take it to a total of approximately 80, which the company believes will give it “the optimal geographical infrastructure” for its service offering. It also intends to expand Lifting Point operations into all its outlets. The re-branded ESS Safeforce is claimed to be the UK market leader in hire, sales and servicing of safety equipment. Like Vp’s other businesses, it now operates a centralised transaction system through a national hire desk, based in Wellingborough and supported by a national distribution infrastructure. The share price of Aggreko has been bolstered by the company’s recent statement, announcing that trading in the first half of this year had been very strong and that recent contract wins indicated that the underlying performance in the second half would be strong (last year’s second half benefited from additional revenues resulting from the severe hurricanes in North America). Aggreko concludes its statement by saying that it anticipates the full year outcome will be ahead of the company’s previous expectations. Aggreko is due to announce its half year results on 14 September. • Executive Hire News › Archives › July 2006 › City News › Speedy keeps up the pace
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