Speedy Hire is displaying the strains of an uncertain economy. The company is heavily reliant on a healthy construction sector and falling revenue for the year ended March is symptomatic of what the company called ‘macro-economic challenges’.
Revenue for the period fell 1.2% to £416.6m, and profit before tax slid 40% to £8.7m.
Shares were down 3% on Wednesday after a strong run in the stock from April lows. Although falling profits and revenue will be a concern for investors, there are some positives to take away from today’s update.
Much of the decline in revenue can be attributed to the lower pass-through cost of fuel as wholesale prices fell. Service revenue, excluding fuel, actually increased 4.5%. Hire revenue rose 0.6%. The rates of increase are small, but not disastrous.
However, the upticks in revenue were a result of price increases. Volumes for key national customers declined during the period.
Inflation is particularly damaging for Speedy Hire as it increases their cost base and forces them to increase the prices they charge customers who are horribly price sensitive. Speedy Hire outlined actions to control costs, but a slow economy is out of their hands.
“It’s been anything but a smooth ride for Speedy Hire. Grappling with spiralling costs and softening demand, the tool and equipment rental firm has found itself under mounting pressure as challenging economic conditions have pushed the business close to its limits. With both revenue and profit falling short of estimates, Speedy Hire’s full-year results will have done little to shore up investor confidence,” said Mark Crouch, market analyst for eToro.
“The broader trend of businesses tightening their belts is already troubling, but Network Rail’s decision to delay spending on its £45.4 billion five-year infrastructure programme has delivered yet another hammer blow.
“Now, Speedy Hire is stuck in a classic catch-22. To win new contracts, it needs to ramp up capital expenditure, fuelled by debt. But with the economy on shaky ground and delays in government spending weighing on major projects, taking on more debt could end up fixing one problem while wrenching open another.”