Tools and equipment hire company Speedy Hire (SDY) released a trading update for the first half to 30 September, reporting revenues up 6% with a stronger second half expected, giving the shares a 2% lift to 52.5p.
The company’s drive to increase the higher margin services business, which includes consumables, training and testing, seems to be paying off. In the first half, service revenues lept by 13%, dwarfing the 1% rise in hire revenues.
This was driven by a 25% increase in the number of small and medium sized (SME) clients which attract higher margins. That bodes well for the company achieving its medium-term return on capital employed (ROCE) target of 15%.
Improved asset utilisation is being enhanced by better management information and the use of artificial intelligence.
Net debt is expected to be around £86m compared with £89.4m at 31 March 2019 reflecting increased investment in the hire fleet, but is predicted to reduce in the second half.
A number on contract wins and extensions were won in the period including CALA Homes and Peel Ports which give management confidence in the second half and delivering full adjusted profit before tax in line with the board’s expectations.
House broker Liberum said, ‘SMEs account for 18-19% of revenues. Speedy achieved growth of 25% with this segment in the full year 2019 (to March), so continuing at this pace is impressive.’
