Speedy returns to sales growth

Speedy Hire said its tools and building equipment hire business returned to sales growth in the final quarter of 2010 despite the contraction in the construction industry.

The Merseyside-based company, which operates from 325 sites, reported an 8.8% increase in revenues excluding equipment sales compared to the same period the previous year, while equipment sales increased 23%.

Output in the snow-hit construction industry fell 3.3% in the quarter but Speedy achieved growth by focusing on resilient sectors, such as water, waste, energy and transport.

Although Speedy’s sales growth slowed to 2.1% in January it said it could return to profit at an underlying level in its second half, providing that it continues to trade well in the next few weeks. It made a £4.6 million underlying loss in the first half of its financial year to the end of September.

Shares in Speedy were up 3% after it said its focus on growth markets and previous efforts to restructure the business left it well placed to benefit from any recovery in the market.

Increased rates meant the company lifted revenues despite a 6.2% reduction in the volume of equipment on hire compared to the previous quarter.

Wayne Gerry, an analyst at Investec Securities, described the update as “mixed but encouraging”.

He added: “Although Speedy has still to trade through two important months, a third consecutive quarter of rate improvement bodes well for the UK business.”

However, he downgraded his profits forecast to take account of losses from earlier in the year when two of Speedy’s customers – social housing group Connaught and building firm Rok – went into administration, wiping a combined total of £1.9 million from its revenues. Its international arm is also growing less quickly than expected, he added.

He forecast that the business will make a pre-tax loss of £800,000 in the year to March 2011, whereas previously he had estimated pre-tax profits of £1.8 million. But he still expects Speedy to return to making a pre-tax profit in 2012.