11th Nov 2014 14:18
LONDON (Alliance News) - Shares in Speedy Hire PLC gained ground on Tuesday after the company said its pretax profit for the first half jumped on the back of a rise in revenue in the period, providing confidence it will meet full-year expectations, and as analysts cheered its exit from the Middle East general and spot hire market.
Speedy shares were up 4.1% to 70.50 pence in afternoon trade, making it one of the best performers in the FTSE All Share. The stock is near the top of its 52-week range of 48.34p to 83.00p.
The equipment and plant hire company said its pretax profit in the half year the end of September was GBP5.3 million, up from the GBP3 million posted a year earlier.
Revenue in the period was up to GBP190.8 million from GBP168.7 million last year, driven by an 11% rise in UK & Ireland Asset Service revenue to GBP176.3 million. Revenue also was boosted by a 31% increase in International Asset Services revenue in the period to GBP13 million. The company said its revenue mix in the first half continued its shift to services as the fall in hire revenue seen in the second half of last year continued.
On the back of the stronger results, the company hiked its interim dividend to 0.30 pence per share from 0.26 pence last year.
"This has been a positive first half of the financial year. Whilst these results primarily reflect our self-help measures and the delivery of early efficiency improvements, we have also begun to benefit from an improving market environment in the UK, thanks to a focussed and disciplined approach to our strategic accounts and re-engagement with our regional customers," said Chief Executive Officer Mark Rogerson.
Rogerson said the actions taken in the Middle East have stabilised its business, but said it has not yet delivered the expected improvement in performance. The Middle East arm has been hit by a legacy cost base and weak demand for general and spot hire services, Speedy Hire said.
Speedy has now completed a review of its Middle East business and said it will exit the general and spot hire market in the region as existing contracts come to an end. It expects to complete the exit from the business no later than the end of the first quarter of its 2016 financial year and will aim to speed up the process wherever possible.
In addition to the exit from that market, the company will complete the mobilisation of its oil and gas services contracts and seek to capitalise on further opportunities in recently-signed services contracts in order to build short-term value for the Middle East business, while also considering other strategic options for the oil and gas services operation.
The group opened four superstores in the UK during the half year and said its programme for new sites is on track to be completed in the second half with the opening of a National Distribution Centre in Tamworth, Staffordshire and three remaining superstores.
"We are on-track to deliver results for the full year in line with the board's expectations and our confidence for the future is underpinned by an increased interim dividend," Rogerson added.
Investec reiterated its Buy recommendation and 100 pence price target on Speedy Hire, saying the results have started to show signs of the emerging recovery in the UK and adding the Middle East exit looks to be a positive move.
The broker said the recovery in the UK construction market should provide a boost to the company in the medium term, with major infrastructure projects such as Crossrail, HS2 and the Thames Tideway Tunnel to boost demand for equipment.
Important, in Investec's view, is the decision by Speedy Hire to exit the general and spot hire market in the Middle East, which it described as "a positive development".
Investec said the past 18 months have been "turbulent" for Speedy, with a consistent improvement in the UK offset by the Middle East. But the statement Tuesday should provide some reassurance, with a concrete plan now in place for the region, the broker said.
"Whilst there is still much to do, with the benefits of an improving UK market only just starting to flow through, the upside potential from here could be significant," it said.
By Sam Unsted; [email protected]; @SamUAtAlliance
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