Executive Hire News › Archives › July 2009 › Forum : All in this together
Forum : All in this together
The gyrations of the Stock Market may seem remote from the day-to-day activities of family-owned and run tool hire businesses, but the outcome of such matters as Speedy’s £100m rights issue are far from irrelevant. Business - whether it be undertaken by the multiple branch public company or the single depot enterprise - is about confidence. As we go to press (25 June), this morning’s dealings in Speedy shares reflect the agreement of shareholders at yesterday’s EGM to the rights issue. They have, therefore, opened at an ex-rights price of 34p. This is about the level one would have expected based on recent trading.
Now we have to wait to see the level of acceptances that the issue receives from its shareholders. This will not be known until 9 July. Current indications from City sources suggest that over 90% of the new shares will be taken up. As Speedy’s £100m is already securely underwritten, does the level of acceptance matter? Yes, it does. Shares left with the underwriters would have a further depressing effect on the share price.
Some of you will say, so what? Some might even be pleased to see the market leader humbled. The unprecedented severity of this recession has caused pain throughout our industry but, as EHN continues to highlight, well-run independent hirers have come to terms with conditions and are exploiting opportunities such as the departure of national players from their patch. However, almost without exception, national and local hirers alike need the support of banks and finance houses. Financiers will be looking carefully at the overall state of our market and the progress of the Speedy rights issue will undoubtedly affect sentiment. In that way, it concerns us all.
This month’s City News is able to report some positive results. The overall results from diversified hire group Vp are sound, with its tool hire operation Hire Station achieving improved profit margins, while the specialist Andrews Sykes has put in a record performance. These will not only boost the individual companies, but will help to instil confidence in the market.
Also in this issue, we have continued to take our industry’s pulse, talking to independent hirers throughout the country to ask them how they are faring in these challenging times. In our article on Ormskirk-based Hodgson Tool Hire, the company reports, “We have invested a lot on new equipment already this year, and we are certainly not holding back.” Tool-Time of Bishop Auckland observes that “contractors are beginning to tell us that they are quoting for work,” suggesting that “contracts will eventually be placed and demand for equipment will pick up.” And we visit Alloa Hire Centre where “We are certainly busy at the moment. In fact, last month was on of our best on record.”
Nevertheless, we always try to present a realistic, not an over-pessimistic, view of the economic situation. We must acknowledge that things are likely to remain tough throughout this year and into next, but there will be further challenges and opportunities. Concern is now mounting over the state of government finances. There will be enormous pressure on public expenditure, whoever wins next year’s General Election and this must have adverse implications for construction, which is currently so dependent on public funding.
Where can hirers turn? As the recession continues, repair and maintenance activity will grow, as will DIY business, as individuals seek to cut costs. With major hirers’ continuing enthusiasm for supply agreements with national contractors, these are two areas to which local hirers should be directing their attention and their services. Indeed, our analysis suggests that many already are. Miles Hire of Swansea says its 15 mini excavators are “in steady demand from DIY customers who are levelling ground for garden makeovers or preparing for foundations for conservatories. They are doing as much work as they can themselves.” Similarly, Bright Acres Tool Hire of Suffolk believes that “Just like during the downturn in the 1990s, homeowners are improving and extending their properties rather than moving,” and adds “We know there is a lot of business to be had from the sheer number of planning applications being made.”