Speedy Hire slumps as it issues another profit warning

In a trading update ahead of its first-half results, the company said that due to legacy issues, core hire revenue in the UK and Ireland is expected to be around 10% below last year, while profitability will be weighted towards the second half and materially below current market expectations.

The tools, equipment and plant hire services company said that following a disappointing start to the current financial year, it has implemented a number of remedial actions to the address legacy issues. These include a programme to increase engineering resources, redistribute assets throughout the depot network to improve asset availability, and optimise stock levels.

In addition, Speedy said it has realigned the sales function to better address the needs of the SME market and implemented a more effective operational structure and overhead base. The company also pointed to improvement to the IT system.

However, it said the benefits from these actions will be realised from the second half of the year onwards. Overhead costs across full-year 2016 are expected to be around £13m lower than the prior year and around £10m of this saving will be realised in the UK and Ireland business.

Speedy Hire said net debt at 30 September is expected to be at a similar level to last year’s £104.4m. It added that the group is operating well within its banking facilities of £180m, which expire in September 2019.

Chief executive Jan Astrand said: “Following the extremely disappointing start to the year, we have taken action to grow revenue and cut costs. Whilst these actions will take time to come to fruition, we believe they will deliver material benefits over the medium term."

Investec downgraded its rating on the stock to ‘hold’ from ‘buy’ and put its 100p price target under review following the profit warning.

“This is another disappointing update and underlines the scale of the task faced by the new management. Given the scale of the downgrades and level of uncertainty, it is difficult to ascribe a target price at present,” it said.

At 1000 BST, Speedy Hire shares were down 13.1% at 32.16p.