Coming out fighting in uncertain terrain

EHN’s financial analyst, Nick Spoliar of WH Ireland, assesses the outlook for the hire sector in Q2.

Sometimes, Brexit seems to be everywhere. Well, perhaps not absolutely everywhere, but (1) the shrinking pound, (2) the consequent re-balancing towards exports, and (3) hence manufacturing relative growth - the trail for all of these leads back to Brexit.

Following this thought, let’s look at equity issuance, i.e., capital raised by new or existing companies in 2017. With the data recently available, it is clear that 2017 was a year that saw a major bounce after absorbing a big punch in June 2016 - an extra £35bn-plus, or +39% year-on-year (YoY) (source: Bloomberg / WH Ireland calculations). The AIM (Alternative Investment Market) turns out to have had its best year for raising money since 2010 (£6.4bn raised). Thrills and spills indeed, as confidence returned, supported by that lower exchange rate (and the accompanying ‘lower for longer’ interest rates).

Resilient commercial property market

Wearing a ‘hire’ hat, what jumps out? Well, no. 1, the resilience of the UK commercial property market was marked - REITS (Real Estate Investment Trusts) raised 120% more YoY (just shy of £5bn) (source: Bloomberg / WH Ireland calculations). Secondly, in terms of AIM, the disastrous IPO (initial public offering) of HSS in 2015 will doubtless have continued to weigh on private hire firms contemplating an IPO.

Thirdly, what goes up must come down - so no surprise that the Construction Products Association is forecasting the sharpest decline for construction in 2018 in the commercial sector, and particularly in offices: they expect office construction declines of 15% in 2018. The crumbling of Carillion is a reminder that, while infrastructure may be the great hope for UK construction (and our hire companies on

Vp reports its integration of Brandon has started well.

the back of this), the terms of trade can be very challenging for the weaker players - or those lacking decisive and effective management.

Plenty of fight

On which note, new news from the three quoted companies that make up the small/mid-sized hire market cap within the wider Support Services quoted sector suggests there is still plenty of fight in the leaders. Starting with Speedy Hire, its update to the market on 26 March was short but sweet. Notably ROCE (return on capital employed) has been pushed over the 10% mark to around 11% YoY (7.7% last year). The situation of the company seems virtually unrecognisable from around two years ago when CEO Russell Down took over. Surprisingly, but perhaps reflecting more general market uncertainties, the share price has drifted of late despite some nimble footwork around the Carillion mess.

Secondly, Vp’s update in April last month was inline, but the company says the integration of Brandon Hire started well - this is the key news ahead of results scheduled for 5 June and the shares have reacted well.

Thirdly, HSS: final results for the year to December 2017, published on 5 April, showed improving trends in Q4, and management cut costs by an annualised £13m (against a £10m-14m target range) after closing the former head office and 55 branches, and reconfiguring the network / blitzing the supply chain.

WH Ireland disclaimer: WH Ireland states that this is not an offer or a solicitation to buy or sell any security. Please refer

to and Speedy continues its turnaround. 11 for WH Ireland’s research disclosure and disclaimers and conflict management policy regarding Non-Independent Research. WH Ireland Limited is authorised and regulated by the Financial Conduct Authority (Financial Services Register number: 140773)

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