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Economy weakens, Speedy strengthens

EHN’s financial analyst, Nick Spoliar of WH Ireland, gives his assessment of the hire sector’s performance in Q2 and considers Speedy’s recent results.

The reporting season has been keeping us all busy on this side of the tracks. As ever, a cascade of information and fresh perspectives - the job of the equity analyst is never boring. However, one does need from time to time to stand back and assess the over-arching situation, and with the UK rental market in mind, the weakening UK economy must be the No. 1 consideration.

As previously flagged, Q1 GDP growth was virtually invisible at 0.1% - below forecast and well below Q4. Lower inflation is helpful to the consumer, but how much of that will feed into the spending which drives rental businesses?

Speedy’s same-day delivery on its top 50 products, launched in London in January, has now been rolled out nationally.

Perhaps a silver lining is that the Bank of England, while possibly viewing Q1 weakness as ‘noise’, has nonetheless taken the obvious step of keeping rate rises on hold. Taking this all in all, the implication for corporate is that self-help will be the order of the day.

Despite Speedy spending over £20m on acquisitions (the push into platforms), it managed to reduce net debt. The focus on customer service highlighted in the statement seems symptomatic of where the new team is looking to take the business.

Same day delivery on the top 50 products if ordered before 3pm, launched in London in January, can only burnish these customer credentials. Other thoughts: Return on capital employed at 11.5% is now ahead of the cost of capital, but the company is targeting 15%, which seems very plausible given time. This in turn, together with earnings progression marching forward, doubtless has the potential to drive the shares.

Prolift Access was acquired last year as part of Speedy’s ‘push into platforms’. Double digit rises

This leads us on to Speedy Hire, which published its results for the year to end March 2018 on 16 May. A relaxed presentation from the company, as well it might be, since this was a very pleasing set of results with modest, single digit, increases in revenues, but punchy, double digit rises in profits.


Next up will be Vp - its results are on 5 June - and a welcome update on its progress with the Brandon Hire deal, which seems to offer so much potential.

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