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City News : Speedy shares plummet

Catherine Stratton assesses Speedy's recent trading statement.

The Stock Market reacted swiftly to a Speedy trading statement issued on 20 January, sending the shares to a new low of 46p, a fall of 51% on the previous day’s closing price of 94.25p, and valuing the UK’s largest hire business at less than £50m.

The Speedy statement makes it clear that its trading environment has deteriorated significantly since its interim results. At that time it announced a 22% growth in revenues in the half year to 30 September, but indicated that October’s revenues had fallen 6% below expectation. Speedy is now seeing a further erosion of its market as private development continues its precipitous decline. The company describes infrastructure spending as “buoyant”, but “ongoing uncertainty in the credit markets continues to impact overall activity and further reduce confidence in the general construction market.” Speedy now expects its revenues in the final quarter of its financial year (i.e. January to March 2009) to be “significantly below’ those of the same period last year, and full year revenues to be ‘broadly in line with the prior year” (£465.5m).

As a result, the Speedy Board now expects profits before taxation, and before amortisation and exceptional costs, to be between £33m and £38m (compared with £48m last year). This is after “the substantial contribution of the cost reduction initiatives”, which Speedy has been implementing over recent months. It is estimated that the full implementation of these programmes will save £42m in costs next year.

The deterioration in trading and Speedy’s high level of gearing (112% at 30 September) are the major factors in the City’s treatment of the shares. The company’s statement affirms that it has “a supportive and continuing close working relationship with its banking syndicate and a process has commenced to establish appropriate covenants for the remainder of Speedy Hire’s £325m five year facility which expires in June 2012.”

CEO Steve Corcoran remains confident, emphasising Speedy’s very strong market position with “the biggest network” and the “widest range of tools and equipment” making the company “better placed than its competitors to see this recession through.” •