MARKET WATCH
Positive start
EHN’s financial analyst Nick Spoliar of WH Ireland, kicks off the New Year with a punchy review of the latest news from Speedy, HSS, Ashtead and Vp. He also considers that the Government’s recent housing initiatives are good news for our industry.
New Year, new margin enhancement. That is the message from Speedy Hire, at least, which acquired the 200-year old Lloyds British Testing business from the administrator four days before Christmas. This followed on from the interim results presented in November 2016 when Speedy disclosed that results would be ahead of expectations. There is not such a positive picture from HSS, which cut it forecast in late November, subsequently raising £13m to bolster its balance sheet the week before Christmas. Where this leaves the tie-up much discussed in recent months is anybody’s guess.
Beyond these two players, up the market capitalisation scale, Ashtead continued to shine, announcing that it was trading above market views in early December. At the end of October, its share price was 1278p. In recent weeks, Ashtead’s shares have been trading around 1600p, a 25% increase. Given the 18% exchange rate boost since June, this may not be surprising, though the shares are an impressive 60% up since late June, with reflationary hopes in the US the main driver.
Across the country to Vp’s command control in Harrogate, this company proved to be the centre of a virtuous circle again, delivering a 12% increase in the dividend at the half year stage and flagging results ahead of expectations for the full year. One point to note is that the former negative in the eyes of the Stock Market - a business linked to the oil sector - may now be seen as a positive, given the recovery to $US50-plus in the oil price.
Moving from the micro to the macro, the key economic news (backwards-facing) has been the relative strength, surprising to many, of the UK economy - and the impressive mountaineering feats of the FTSE, standing as I write at 7,245. Looking forward, the Trumpist boost to the US economy will need to be carried through - a lighter tax regime, maybe action on
employment costs, a boost for old-style energy and building that wall.
A striking feature of the early days of the year in the UK is the parade of Government announcements on the housing market. First up, it highlighted funding for ‘garden villages’ - 14 new developments intended to deliver 48,000 houses in England. A day later, the first wave of local authority partnerships were announced under the £1.2bn Starter Fund, which will build homes for 23-40 year old first time buyers to be sold below market value. May-ism, if it is anything, will need to deliver new homes. All this has to be good for the hire industry.
Last, but not least, on the company front, we note the bidding war that has erupted for Lavendon. As ever, the Support Services sector is nothing if not a bazaar.
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*Not under formal research coverage, with the exception of Vp.
WH Ireland states that this is not an offer or a solicitation to buy or sell any security. Estimates contained herein are sourced from already published information (Bloomberg). See
http://wh-ireland.co.uk/website-policies#disclaimer for full disclaimer. WH Ireland Ltd is authorised and regulated by the Financial Conduct Authority (Financial Services Register number: 140773)
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