Speedy Hire's upbeat update sparks new HSS merger talk

Speedy Hire reassured investors that its turnaround strategy was gaining traction and that full year profits will be ahead of target as services revenues rise, sparking renewed talk of a merger with embattled rival HSS.

Profit before tax is now expected to be "well ahead" of last year and "slightly ahead" of management's expectations.

Ahead of results for the half-year to end-September that are due in November, the fully listed group reported revenues, excluding disposals, were roughly 7.5% ahead of the prior year.
Speedy said this was largely due to growth in services revenues, while utilisation rates were up 6% to 54.5% and costs were flat.

While overheads will remain flat, savings of at least £3m will be made in future years from a reduction in the number of operating divisions and distribution centres, though this will result in £4.5m in one-off costs this year.

Net debt has fallen to below £70m from £85.4m a year ago.

Shares in Speedy Hire were up 4.6% to 53.42p by late morning on Tuesday.

“Who’d run a tool hire company? Over the last couple of years it’s been nothing but profit warnings and a revolving door of CEOs at HSS and Speedy," said analyst Neil Wilson at ETX Capital.

"Last’s month’s warning from HSS (see note of 30/08 below) was the latest chapter in the saga. But today’s numbers for Speedy confirm that at least one firm’s turnaround strategy is working."

He noted that Speedy shares are up more than 50% in the last 12 months, while HSS has fallen by 50%.

"The divergence in performance is stark and undoubtedly raises the prospect of a tie-up again after first being looked at in 2015… Sooner or later a merger has to be discussed, particularly as HSS is now worth a fifth of what it was floated at, when talks of a merger were first mooted.”