Following the conclusion of equipment hire specialist Speedy Hire’s (SDY) high-profile run in with activist investor Toscafund, improving efficiency has been at the core of its turnaround story. The green shoots of recovery were beginning to show at the time of the group's full-year results in May, but it now looks to be in full swing.
Management’s strategy focused on improving asset utilisation – the revenue earned as a proportion of assets owned – and improving return on capital employed by encouraging cross-selling among sales teams. The results have been impressive, sending adjusted cash profit up 11 per cent year on year during the first half and the return on capital employed to 9.4 per cent from 5.1 per cent.
Utilisation was improved by stripping out underused assets, reducing the size of the hire fleet by 3 per cent. This led to utilisation improving to 55 per cent from 49 per cent and the expansion of its operating margin to 6.6 per cent from 4.5 per cent, in spite of increased price competition.
Management now expects its performance for the full year to be above market expectations, prompting analysts to raise their earnings forecasts. Peel Hunt increased its pre tax profit forecast by 7 per cent to £23.5m for the year to March 2018, giving EPS of 3.6p (from £16.2m and 2.5p in 2017).
| SPEEDY HIRE (SDY) | ||||
| ORD PRICE: | 57p | MARKET VALUE: | £296m | |
| TOUCH: | 56.5-57p | 12-MONTH HIGH: | 60p | LOW: 36p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 26 | |
| NET ASSET VALUE: | 36p | NET DEBT: | 33% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 187 | 5.4 | 0.81 | 0.33 |
| 2017 | 186 | 6.0 | 0.79 | 0.50 |
| % change | -1 | +11 | -2 | +52 |
| Ex-div: | 14 Dec | |||
| Payment: | 26 Jan | |||
