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Speedy slows

RESULT: The outlook for Speedy Hire is getting worse
December 1, 2008

Speedy Hire's first-half numbers broadly met analysts' expectations, but the detail behind the figures - along with news of recent trading - is a cause for major concern.

IC TIP: Hold at 184p

Indeed, strength in the infrastructure and utility markets masked serious problems in the commercial and private sector building industries. What's more, the group's smaller customers are now having real problems getting credit, and revenues in October were 6 per cent below expectations. That's particularly worrying given the company's high debt level, which has the potential to exacerbate trading disappointments.

So management is taking steps to try to deal with the worsening conditions. It plans to push through a further £18m-worth of cost savings on top of the £24.4m worth of cuts already in the pipeline. The group should benefit to the tune of £16.1m this year from the cuts being made. In addition, capital expenditure for the year is being reigned in from £100m-£110m to £75m. Management believes this will be enough to help it meet full-year forecasts, but also admits that it's particularly hard to predict demand.

Broker Altium Securities forecasts full-year pre-tax profits of £51.5m and EPS of 76.4p (£48.1m and 72.7p, respectively, in 2008).

Speedy Hire (SDY)
ORD PRICE:184pMARKET VALUE:£93.8m
TOUCH:180-182p12-MONTH HIGH:955pLOW: 165p
DIVIDEND YIELD:10.8%PE RATIO:4
NET ASSET VALUE: 485p*NET DEBT:112%

Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Net div per share (p)
200721018.228.76.40
200825619.428.06.40
% change+22+7-2 

Ex-div:07 Jan

Payment:23 Jan

* Includes intangible assets of £137m or 268p per share

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