Speedy Hire (SDY) was firing on all cylinders through the first half, with hire volumes on the rise due to the growth of the group’s small-and-medium-sized-enterprise (SME) customer base. SMEs are a key focus for management – bringing benefits such as risk diversification and higher margins. And within the dominant UK and Ireland business, SME sales underpinned a 0.5 per cent uptick in like-for-like hire revenues – offsetting the blow of outsourcer Carillion’s liquidation.
Further down the P&L, strong cost control facilitated a 9.5 per cent rise in group cash profits to £37m. Meanwhile, reported profits benefited from the absence of any exceptional costs, against £4.7m a year earlier. That said, Speedy’s key yardstick is return on capital employed (ROCE), which increased from 9.4 per cent to 12.3 per cent – taking the group within touching distance of its 15 per cent target. Moreover, this puts the metric well ahead of its weighted-average-cost-of-capital (WACC) of 11.3 per cent – evoking the point within our tip article that “Speedy is actually creating value rather than destroying it”.
Free cash flow climbed from £11.7m to £13.8m, while net debt declined from £69.4m to £62.7m. Speedy’s robust balance sheet – fortified by careful management of its hire fleet – underpinned a considerable dividend hike.
Broker Peel Hunt forecasts adjusted pre-tax profits of £30m and EPS of 4.6p for the year to March 2019 (from £25.9m and 4p in FY2018).
SPEEDY HIRE (SDY) | ||||
ORD PRICE: | 58.8p | MARKET VALUE: | £308m | |
TOUCH: | 58.2-59p | 12-MONTH HIGH: | 66p | LOW: 47p |
DIVIDEND YIELD: | 3.0% | PE RATIO: | 15 | |
NET ASSET VALUE: | 39p | NET DEBT: | 31% |
Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2017 | 184 | 6.0 | 0.8 | 0.5 |
2018 | 195 | 13.2 | 2.0 | 0.6 |
% change | +6 | +120 | +156 | +20 |
Ex-div: | 13 Dec | |||
Payment: | 25 Jan | |||