UK tool and equipment rental firm Speedy Hire (SDY) saw growth across all of its key business metrics in the first half and raised its interim dividend by 17%, lifting its shares by 2% to 55.5p.

Underlying revenues were up 5.9% to £204m while pre-tax profits were up 21.5% to £16.4m thanks to higher margins from an increased share of service revenues.

Return on capital employed (ROCE), chief executive Russell Down’s preferred performance measure, increased to 12.7% from 12.3% a year ago and is well on the way towards his medium-term target of 15%.

The firm took a decision following the collapse of Carillion to focus more on the small and medium (SME) business segment to spread its revenue base and this has paid off handsomely.

HIGHER-MARGIN BUSINESS

‘I am particularly encouraged by the growth in higher-margin SME customer revenues and progress with our digital roll out where we have continued to make significant investment’, commented Down.

A younger fleet of equipment and much-improved customer service, through the introduction of apps and artificial intelligence which can predict levels of demand, have helped boost utilisation rates, while service revenues – which have higher profit margins – have grown to 40% of group turnover from 30% a few years ago.

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As well as the training business, which was boosted in the first half by the acquisition of Gleason, service revenues come from re-hires, fuel supply and the Lloyds British testing and certification division.

Lloyds British is a hidden gem within Speedy Hire, growing revenues at a 20% clip as it wins more contracts from competitors and cross-sells into key customers from the core hire business who typically need their equipment and facilities inspected and certified.

Although there is a nod to the ‘uncertain political backdrop’, there was no change to the firm’s full year sales or earnings guidance in today’s update.

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Issue Date: 13 Nov 2019