Speedy Hire Share Discussion Threads

[davius] 15/4/2024 19:27

Optimism that struggling Speedy Hire shares are about to turn a corner has been given boardroom support after three directors made investments worth £63,000.

The purchases by finance boss Paul Rayner, chair David Shearer and non-executive Shatish Dasani were made after the Merseyside-based tool and equipment hire company said results for the year to last month would be towards the lower end of expectations.

The update left shares near a decade low at 24p, despite Speedy’s confidence in a better year ahead given recent contract wins and the support of its five-year transformation programme.

It pointed out that it had secured additional annual turnover in excess of £40 million across multi-year contracts with new and existing customers.

Whilst these have been slow to mobilise and only provided marginal benefit in the 2023/34 financial year, they improved the growth outlook for the current year and beyond.

Speedy added: “This new business has been secured with continued pricing discipline and demonstrates the attractiveness of Speedy's customer offering.”

Broker Peel Hunt responded by cutting its profits forecast by £3.5 million to £16.5 million for June’s annual results and trimming its forecast for the current year by 7% to £25 million.

However, it reiterated a price target of 60p and said that shares trading on 6.3 times forward earnings and a 35% discount to asset value offered “substantial value”.

The broker said 2024 was always likely to be a challenging year given market headwinds and Speedy’s focus on price discipline. It added: “This returns discipline, valuable contract wins and strategic actions to differentiate provides increasing optimism for growth and returns.”

The FTSE All-Share company, which operates from 180 fixed sites and selected B&Q stores, is currently in the efficiency phase of a programme aimed at building a sustainable hire business.

In recent months, however, the company has been impacted by a drop-off in activity in its regional bases, as well as slower demand for seasonal products due to the mild winter. This left revenues for the year down by about 5% to £420 million.

Joint broker Liberum cut its target price to 47p from 54p following the update but said the valuation looked to be attractive given the recovery outlook. It has stuck by its forecast for a reduced full-year dividend of 1.7p a share, leaving the shares yielding about 8.6%.

Liberum is encouraged by the potential of green energy initiatives, such as battery storage units and the hydrogen power joint venture with AFC Energy, and notes the opportunity for Speedy’s testing inspection and certification business to double revenues.

The broker adds that the company is highly operationally geared, which should start to work in Speedy’s favour as the backdrop improves.

The shares closed last week at 25.2p, having fallen from 75p three years ago. It opened its first depot in Wigan in 1977 and listed on the London stock market more than 30 years ago.

[fenners66] 15/4/2024 10:21

Mrsimmons "Re exceptionals. It’s nothing to do with accounting standards."

Let me clarify , the use accounting standards I was referring to, are the actual statutory accounts.
These are done without adjusted deductions and splitiing out of anything that makes a company look bad.

However since these stat accounts are quite often buried on page 142... etc.. they are "ignored" if you like by the companies choosing to publish their adjusted figures on page 1 and then constantly referring to the * adjusted numbers until they finally have to cough up to losing a fortune further down the document.

Some seem to accept that if the company has "adjusted " the figures then there view must be "right" , its a one off, or its a non cash cost , or its reorganisation cost ( perhaps reorganising the reorganisation they did last year).

All explained away as if it does not matter - that was last year , that was out of our hands , nothing to do with me gov.

I am not sure to what extent the "city " buys this - certainly seems it pulls the wool over some peoples eyes. For me it smacks of desperate management - unable to get it right first time and so frail in their position that they cannot take responsibility. It does not stop there being a good company underneath but often needs a management overhaul to find it.

[chriss911911] 15/4/2024 10:00

Mrsimmons, yes good point, the answer is on the balance sheet already which they issued in November, but I take trade creditors, and debtors, along with change in capital hire fleet, being the key operational bits, that is money they owe, are owed, and what they have left over in operational assets so in effect normalise working capital including operational fixed assets (hire fleet of 200m) you can get same thing from cash-flow statement.

The answer gives 2m credit, so in other words, 10m, becomes 12m on a sustainable basis, so I'm happy with the "timming" of those elements did not overall give them an advantage, what the end result was.

[mrsimmons] 15/4/2024 08:34

We need to understand how they have generated that 10m in h2. If it’s just through lower capex (ie not investing at the rate they should) then that is a problem going fwd.

Ebit (pre Ifrs 16) less capex. That’s all you need to look at (assuming nwc keeps relatively constant) for this business.

Re exceptionals. It’s nothing to do with accounting standards. Ifrs doesn’t define exceptionals. There is some ESMA guidance on apms but that’s it. They pretty much can do what they want as long as they disclose it.

The ceo is 38? Too young imo to be running a p and l of this size.

[chriss911911] 12/4/2024 14:40

We know the cash its factual, there is not the room for debate or "spin" on that one, unless the only thing that matters is headlines, which in my book is not the case.

The analyst at ED put it across very simply and convincing so, if you want to convince on higher number , I can either ignore it, or if convincing accept it in which case the answer is higher, so doesn't change a thing.

As for listed companies spinning their results, and quoting adjusted EBITDA and exceptional what else is new, will not change, but the approach to it, can.

Its not mandatory to read the "spin" or place the emphasis of matter on it, it's a choice in the end, and I made my choice.

[fenners66] 12/4/2024 12:35

You will have to wait for the "separately reported at the year end "
as to whether the auditors believe its exceptional - but regardless, the cost will be OUT of the
"adjusted numbers"
And it will be the adjusted numbers that will be headlined and trumpetted

look we made this much cash £ xxx *

* as long as you ignore the cost of all our previous failings - those costs being rolled up after previously being ignored and not fixed

Too easy - there are accounting standards - but most companies just bypass them in their headline numbers and say everything is rosy.

[chriss911911] 12/4/2024 11:51

They cannot gloss over the cash, earnings, well its always an opinion, if they have saved ongoing, and it's a material one time cost that consumed cash which we see already in net debt. Better to see any reorg one time costs, it adds to the understanding what constrained cash, but still net overall they generated +10m in H2, so don't see how showing it hinders it.

Would be audit opinion if accessed as exceptional, so needs to be real, for me showing it gives more info, not less, if they dint show it, we have no idea that they are glossing over.

[fenners66] 12/4/2024 11:09

I wonder just how much management time was sitting in a room coming up with the word.....

Velocity.

Reminds me of the Apprentice tv show sitting around arguing about a name instead of getting on with stuff.

No one seems to have picked up on

"The investment in implementing our strategy and executing our transformation programme represents a significant cost to the business and will be reported separately at the year end"

In other words after years of inept management we are going to charge a massive one off cost and presumably seperate it out as an exceptional or "adjusted" so we can all forget about how much the incompetance has cost...
This will be then touted as a good thing....

No doubt they will take the opportunity to dump any marginal stuff in there to try and package it as a one off too.

Fantastic what an opportunity. Sorry sarcasm does not come over well in text. That was sarcastic.

I think its shocking what management think they can gloss over if they call it a one off !

[chriss911911] 12/4/2024 09:51

they generated 10m+ in cash in H2, the new business wins did much to impede cash, and little to add to it so far, the prospects for a bounce back is high, and downside risk very limited. The valuation is on the floor already. I don't see the asset exposure or otherwise to warrant any further meaningful weakness, if there is, it will be short lived, if it ever arises, which i doubt it will.

[tenapen] 12/4/2024 07:33

The past is poor - the future is clean air and bright.

B&Q never made sense - but if they had not tried to drive sales and expend .... the usual suspects would be on here bemoaning company inactivity.

[sidam] 11/4/2024 22:21

Nice one pager from Equity Development. If their numbers are correct, the shares would be on pe of 6.5 and yield of 8 for the year we are now in and a pe of just over 5 and a yield of 12 for March 2026. That is a possible double in my view. Hope the numbers are correct.

[clocktower] 11/4/2024 15:57

It is a surprise that the share has no dipped below 20p as prospects are poor.

[chriss911911] 11/4/2024 09:49

The whole UK rental market was impacted in 2023 especially second half, per ONS, so Speedy was 2% above average per last trading update. Prior to that speedy had gained 14% FY23 on FY22 in sales, again slightly above average growth per ONS.

The Velocity strategy was set out end of 2023, for 5 years, bit early after 5 months to imagine it has failed.

What we are told by company..

" the Group has secured additional annual turnover in excess of £40m across multi-year contracts with new and existing customers"

What we are told by Office for Budget Responsibility (OBR)

"expected inflation to hit an average of 2.2% over the course of 2024, and 1.5% over the duration of 2025"

What the S&P Global UK Construction Purchasing Managers’ Index (PMI) says:

"UK construction companies indicated a renewed increase in total industry activity during March 24, thereby ending a six-month period of decline"

The green business is tiny v group and profitable, so I doubt that will make a difference any time soon to the direction of travel which appears to have move things pointing favourably than not, not least infrastructure spend morphing into a period of unprecedented levels of capex spend, amplified no doubt by rate cuts come the autumn.

This business converts cash at 80%+, with debt having fallen despite a downturn year, and is well placed to recover strongly, with modest leverage below 50% of enterprise value with leverage under 1x to EBITDA, based on historic earnings. I see every reason that they can reproduce performance in FY25, which coincidentally is same as current market cap 0.1m. Risk/reward seems appealingly strong, with a price that has little scope to go any lower, unless something dramatic new emerges, but every chance to go back to levels seen in 2021.


...that directors have acquired additional shares since the FY24 pre-close statement was announced

[edmonda] 11/4/2024 09:28

"Building a robust platform for growth" (FY24 pre-close statement)

Against a tough trading background in FY24, Speedy Hire has taken steps to build a platform for long term sustainable growth through the launch of its Velocity strategy. While progress has been more strategic than financial in the year – although we note positive underlying cash flow was achieved - new business wins, the acquisition of Green Power Hire and a transitioned B&Q model all suggest that profitability is likely to move ahead again from FY25 onwards.

Speedy’s FY24 pre close statement echoed January’s trading update, pointing to successful new business wins with National customers but also some mobilisation and adverse seasonal effects. Stated group revenue of c.£420m infers that H2 was slightly ahead of H124’s reported £208.5m. While closing year earnings expectations are likely to nudge down further, the prospect of year-on-year progress from FY25 onwards appears to be intact.

The launch of Speedy’s Velocity strategy in FY24 laid out clear group financial (FY28 revenue of £650m, EBITDA margin 28% with conservative gearing metrics) and operational ambitions (to deliver sustainable growth from an efficient digital and data-driven platform). The primary enabling actions are expected to be in place by the end of FY26, though there is clear capacity to accommodate an earnings recovery and growth beginning in FY25.

Notwithstanding market conditions, the company has taken clear strides in FY24 towards achieving its five-year targets, investing accordingly.

Link to research note:

[rumbers2] 11/4/2024 07:50

Never a truer word said Smithie. Just wait until you see the size of the one off 'green' charge that will impact the share price come mid June. It's going to be massive.

[smithie6] 10/4/2024 22:41

The mess up with the B & Q arrangements.

Yet another screw up by this bod.

The dirs really do seem to be completely useless imo.

[baddeal] 10/4/2024 17:14

And you think speedy will take that market with a few generators!

[sidam] 10/4/2024 13:02

The past is now unimportant. It is the prospects which will matter and on that the tone appeared positive.

[smithie6] 10/4/2024 12:34

So, you recommend to buy AFC shares, not SDY ?

[halfpenny] 10/4/2024 09:20

Need to look at direction and Huge market in Green Energy Supply from AFC. This will be Transformative for SDY.

Demand for Green Energy is now Top of Management Agenda and Success.

Future bright BUT at these levels are a Takeover Target Value 95p.

[creditcrunchies] 10/4/2024 09:14

This is an easy business to run where this management just blow it all up

[smithie6] 10/4/2024 09:14

Had a quick look.

Two words come to mind.

"Complete incompetence"

(eg. the B&Q screw up & loss, & "Velocity"
& turnover down despite notable inflation)

[wigwammer] 10/4/2024 09:06

Good post Chris, and I agree in the main. But management do seem to have made a few unsettling decisions - purchase of the nascent green power business for £20m, the confusion and naivety of the b&q strategy, the consequent increase in leverage. I find a lot of the rhetoric around "velocity" to be babble rather than showcasing experience and grip on the underlying business. Am sure the reaction from 35p is overdone, but management do not feel like an asset here. Fingers crossed they buy a few shares soon and demonstrate some conviction.

[my retirement fund] 10/4/2024 08:55

Feel sorry for you guys. Calibre of management here must be truly shocking. Many of these folk aren't fit to run a bath, but they alwayd seem to be in the right circles to be given these positions. In the bigger picture, it's just another symptom of basket case Britain. Along with things like Brexit, high taxes, low productivity, uncontrolled government spending, and public debt balanced on a perpetual precipice.

[chriss911911] 10/4/2024 08:44

Not sure why the lack of balance in perspective, debt fell as expected, trading in the range previously advised, if anyone was expected something different when most of last year was known already, is just repeating the same things.

Debt less than 50% of enterprise value as today's lower price so not heavily levered, debt has fallen despite tough trading, cash generative, had a tough couple of years, but growing new streams of revenue.

The outlook is more bullish than before, and they give a clue, indicating latest comparatives are positive, I see it as an opportunity, rather than a risk, and reasons to imagine new things that are so bad the price should fall further which will likely be short lived, more likely range bound for a while, but still a good opportunity to invest at low price.