12.10.2011

Yields improve at Speedy

Speedy, the UK's largest equipment rental company has issued a very positive interim trading statement for the six months to the end of September.

Revenues improved by 4.1 percent compared to the same period last year while profitability grew at a strong pace thanks to improved yields from the rental fleet.

In the second quarter of the period UK and Ireland revenue growth was slower at 2.1 percent, with all of the growth coming from an improvement in yields, driven by an increase in rental rates by an average of 7.8 percent, although ‘volume’/utilisation fell by 2.9 percent – partly due to turning some business away on the grounds of price. The net result was a 5.5 percent improvement in overall yield.

The company says that it expects the current climate to continue and that it remains confident that it will meet or beat its full year forecasts.
Speedy has also announced that it has formalised a five year partnering agreement with the major contractor Morgan Sindall.

Net debt continues to fall and is down from £79.5 million in March to £77 million at the end of September.

Speedy’s fledgling International business saw a “significant increase in revenue and a substantial reduction in operating losses “the details of which were unspecified.

The company says that business in the UK continues to improve steadily in line with its expectations, although there is still uncertainty in the overall outlook economic outlook. However it adds that the order books of its major contractor customers gives cause for confidence.
This together with improving margins is encouraging it to step up investment in its fleet.

Vertikal Comment

Although this is a relatively modest trading statement it is all positive and provides some encouraging news for others. While the second quarter appears to have grown at a slower rate than the first – something we have seen with numerous other results this year – it is highly encouraging to see that Speedy has managed to substantially improve its rental rates and overall yield from its fleet. In fact the steep rise in rates probably reflects most, if not all of the slow-down in the growth rate.

A significant improvement in the yield should flow through to a substantial improvement in margins, profitability and cash flow.
All too often the ‘bottom feeders’ in terms of rates, are also the worst payers and the ones most likely to ‘go under’ before paying. Hopefully others will take cheer from this result and take action to cut some of the sillier rates. With rising equipment prices and a shortage of used machines this is essential for the health of the industry.