28.05.2009

Speedy upbeat in spite of £70 million loss

Speedy Hire, the UK’s largest equipment rental company has issued its preliminary year end results which are relatively upbeat in spite of a loss of £70 million.

The company managed to increase its revenues by 2.3 percent to £476 million although this reflects a strong first half and slower second half. Pre-Tax profits plunged from a profit of over £30 million last year to a loss of £70.6 million this year.

The main cause of the loss was £95.3 million of write offs/write downs including non-cash impairment costs plus the cost of laying off almost 1,000 employees - 17 percent of its workforce, the closure of 82 depots and the returning or selling of around 470 vehicles.

Speedy says that the resulting cost savings will have an annualised benefit in excess of £42 million and are in place for the start of the new financial year;

Capital expenditure in the second half of the year was £22 million, roughly 59 percent down on the level of the first half. with a focus on investing “in assets necessary to maintain the operational integrity of the business, essential IT and property investment, together with judicious support of customers, projects and sectors.”

HSS also engaged in a disposal programme of under utilised and older machinery which, together with reduced capital expenditure, has resulted in the net book value of rental assets falling by £51.4 million – 15 percent - over the second half of the year.

Total proceeds over the year from the sale of slow moving or older assets, was £39.4 million.

Chairman David Wallis said: “Speedy is dealing effectively with the short term challenges which it faces. Its immediate priorities are fourfold: maximise revenues, optimise costs, generate cash and reduce bank debt. The actions taken by management on all four counts have positioned the business well to deal with current market”

“However, it is important not to lose sight of our longer term strategy. The Group aims to extend key customer relationships through its alignment with the major contractors and industrial groups, and their supply chains, which should enable the business to offset some of the current wider construction sector downturn.”

There will be further opportunities to acquire customer in-house equipment fleets, an area where Speedy has developed a lead position in the market, and to provide fleet management support for customers on an international level."

"We will also seek to increase market share through natural consolidation as smaller competitors cease to trade, with the aim of maximising our competitive advantage and emerging from the current trading environment in a stronger
position.”

The company also says that it is considering a rights issue to reduce debt by effectively converting it to equity.