Speedy Hire - the corporate recovery continues

Speedy Hire: More like Speedy Lower as it powered into the 2007/8 banking crisis with too much debt and an ill-advised expansion plan into the Middle East. That resulted in a near death experience for the group and a near total wipeout of shareholders equity. For a business that concentrates on the relatively uncomplicated job of hiring out kit to builders and constructors it was a mighty fall from grace. Anyway, that was then and this is now, with a new management team in place, led by Mark Rogerson, who has senior roles at Costain and Serco on his c.v. Ummm. Oh well. The retreat from the Middle East is well under way, whilst the UK business is being re-structured. In these finals, to 31^st March 2015, the revenue is up 7.2%, with over 90% being in the UK and Ireland. Of total revenues, just over half are big accounts as opposed to “Bob the Builder” with a van. Pre-tax profits were £21.9m, up sharply from £14.6m with a corresponding 57.6% leap in eps to 3.23p. Off the back of this an annual dividend of 0.7p (+14.8%) is proposed.

At this stage the language is all about recovery, including a new IT and management information systems being rolled out. It is helpful that the general UK economic backdrop looks supportive at the moment and for a business like Speedy the early protestations of the new Government should be more of a help than a hinderance. Whilst, the ROCE was 8.0%, up from 7.0%, but clearly there is more to be done here. Investment in the business looks healthy and net debt to EBITDA has only ticked up slightly to 1.45x, with debt facilities now re-financed out to 2019. For FY2016, the consensus eps forecast is 3.5p for a recovery style PE of 21.4x at 75p. A conservative dividend of 0.8p would be a yield of 1.1%. So, on a quick overview, it is not one for dividend growth investors to re-visit just yet, but might be worth keeping an eye on all the same. (Neil Cumming^, 12^th May 2015)

These comments are not a personal recommendation to deal. Any investments can fall as well as rise in value, so you could get back less than you invest. I may have a financial interest in some of the stocks written about. www.dividendpower.co.uk or e-mail at info@dividendpower.co.uk  Twitter:  @DividendPower