28.05.2009

Speedy rights issue

Speedy Hire, the UK’s largest equipment rental company has announced a fully underwritten 9 for 1 rights issue to raise £100 million, through the issue of 458,658,900 New Ordinary Shares at 23 pence each.

The issue is subject to approval by shareholders at an Extraordinary General Meeting to be held on the 24th June.

The new share offer price represents a discount of 39 percent after allowing for the final 2008/9 dividend that will not be paid on the new shares. Or an 86 percent off of yesterday’s 176p closing price. As well as reducing its debt and improving its balance sheet the issue will shave a full two percent off of the company’s main interest rate cost.

David Wallis, chairman of Speedy, said: “The rights issue will strengthen the group’s balance sheet during an unprecedented period of challenging trading and limited visibility over future revenue streams. By reducing leverage we will have greater operational and financial flexibility to trade through uncertain economic conditions. Combined with the recently announced covenant amendments and amended bank facility agreement this Rights Issue will allow Speedy Hire to emerge from the current market conditions in a position of greater strength.”

Vertikal Comment

Speedy looks to be in good shape based on yesterday’s results release, it has managed to increase revenues while continuing to generate a reasonable operating profit.

It almost certainly sees opportunities on the horizon and smaller ….or even larger…competitors run into difficulty or owners simply loose the appetite to continue during these challenging times.

Interestingly enough George Burnett, founder and former chief executive of Ashtead (owner of Sunbelt and A-Plant) made a recommendation to delegates at the European Rental Association’s (ERA) annual convention yesterday.

The last point to around 200 rental attendees was “ My advice would be to do a rights issue and reduce bank borrowings to eliminate onerous covenants, reduce costs and put yourself in a strong position to take advantage of opportunities that will emerge during these challenging times.”

Speedy’s directors clearly share his views and have taken a leaf from Ashtead’s experiences in earlier recessions.