Sell overvalued Speedy Hire

The trouble began back in November, when just weeks after announcing first-half results, Speedy said that accounting irregularities had been unearthed in its international unit. While the international division is relatively small - accounting for only 5 per cent of sales in the last financial year - it is expanding rapidly and is viewed as an important growth driver for the group, so the reputational damage is unwelcome.

Chief executive Steve Corcoran said he would stand down and the shares, which had been chased up on UK recovery hopes, plummeted. But Speedy still had its fans. So when in late February the group drew a line under the issue confirming the financial impact at £4.8m plus fees, the shares rallied hitting a multi-year high of 83p in March.

But then came another shock announcement, this time on trading. Speedy announced that its adjusted pre-tax profit for the year ended 31 March 2014 would be in the region of £14.5m, which was some 19 per cent off the City's consensus profit forecast at the time. Speedy outlined three main reasons for the shortfall. Firstly, asset sales were running at a lower pace than anticipated. Secondly, the international division was impacted by bigger trading losses in the Middle East than expected and adverse currency movements. And lastly, UK hire revenues for February and March have been below forecast.

The profit warning is unfortunate timing for new chief executive Mark Rogerson who only joined the group in December. It also injects a certain amount of uncertainty into future profit expectations, particularly given that the previous trading update in February, just seven weeks before the end of Speedy's financial year, gave no hint of any difficulties and said the board was confident of hitting full-year expectations. The City now expects Speedy to report an earnings drop for the financial year just ended.

The question is whether the earnings miss is a matter of timing or something more fundamental. Analysts at Investec, whose forecasts are shown in our table, are taking the more bullish view. Following the profit warning, they downgraded their forecasts for the financial year just ended, but left future year forecasts unchanged. The upshot is that they expect profits to jump next year as the recovery in UK construction gathers steam.