26.11.2008

Speedy up 22%

Speedy, the UK’s largest general rental company has reported first half revenues of £256 million, an increase of 22 percent. The company says that just over half of the increase comes from acquisitions. Pre tax profits increased four percent to £22.8 million.

Speedy breaks its revenues down between Tools and Equipment rental, with a rough 50/50 split. Equipment rental totalled £131 million an increase of 29 percent on the first half 2007. While earnings before tax and interest climbed 17 percent to £18.6 million.

The company spent £53 million on new rental equipment during the first half but is scaling back its full year spend to £75 million, half what it was in 2007/8 and may reduce this level for 2009/2010 to adjust to the market demand. In the first half all of the reduction was in tool spending, while equipment spending increased.

The first half ended on September 30th, the company says that October revenues came in six percent below its forecasts and as such it implemented a series of cost saving actions including:
- Reducing headcount by 492
- Reducing the number of vehicles by 260
- Closing 38 locations

Chairman David Wallis said: “Our clients are experiencing very different conditions, depending upon the particular markets which they serve. On the one hand, infrastructure spending by Government and regulated industries remains strong. The Group’s 50 largest clients are most active in these areas and they now account for approximately 30% of Group revenues. Our business with these major clients has progressed extremely well, producing a 36% increase year on year, with activity around the London Olympics starting to make an impact.”

Steve Corcoran, chief executive added: 2The current market turmoil demands that we respond to the short term situation. Therefore our current priority has to be to reduce costs, capital spending and bank debt. These activities will be supported through the establishment of a Shared Service Centre (SSC) that will ensure that Speedy is easier to do business with. The SSC will provide Service Excellence in our back office and administration processes as well as facilitating the ability to present ourselves to customer as “One Speedy”, removing the costs associated with duplication of process and improving cash flow efficiency.”

“We will take the necessary action to ensure that our business remains appropriately structured for the downturn. We will drive down costs, restrict capital outflow and apply an unremitting determination to reduce debt. Whilst this will delay some of our long term ambitions, we are convinced that the current economic turmoil will remove some of the weaker players and facilitate further consolidation. We are determined to be fully positioned to benefit from this position on the return to more normalised market conditions.”

Vertikal Comment

Speedy has had a remarkable track record over the past few years and has grown rapidly both organically and through frequent acquisitions. The company is quite highly leveraged, although well within its capabilities. It is clearly looking to rapidly reduce its debt in case of a steeper downturn.

The problem with Speedy is that tool hire remains the largest part of its business, the company has shifted its focus towards equipment and larger customers and this will serve it well over the next 18 months. Unlike companies with larger equipment though, it cannot continue with large capex spending reductions for too long, tools and small plant ages rapidly and does not justify rebuilding.

Saying this, the company is very well managed and is likely to come through the slow down in good shape.