Speedy Hire Plc (SDY)
Against a tough trading background in FY24, Speedy Hire has taken steps to build a platform for long term sustainable growth through the launch of its Velocity strategy. While progress has been more strategic than financial in the year – although we note positive underlying cash flow was achieved - new business wins, the acquisition of Green Power Hire and a transitioned B&Q model all suggest that profitability is likely to move ahead again from FY25 onwards.
Speedy’s FY24 pre close statement echoed January’s trading update, pointing to successful new business wins with National customers but also some mobilisation and adverse seasonal effects. Stated group revenue of c.£420m infers that H2 was slightly ahead of H124’s reported £208.5m. While closing year earnings expectations nudged down further, the prospect of year-on-year progress from FY25 onwards appears to be intact. Flagged net debt of c.£102m (pre IFRS16) compares to c.£92m at the end of FY23; as c.£20m cash consideration was paid for Green Power Hire, this suggests that underlying net cash inflow was in the order of £10m (ie after c.£12m cash dividends). By inference, most of this underlying cash inflow was generated in H2, suggesting good cash collection in the period and especially from a flagged end Q3 £117m net debt position.
The launch of Speedy’s Velocity strategy in FY24 laid out clear group financial (FY28 revenue of £650m, EBITDA margin 28% with conservative gearing metrics) and operational ambitions (to deliver sustainable growth from an efficient digital and data-driven platform). The primary enabling actions are expected to be in place by the end of FY26, though there is clear capacity to accommodate an earnings recovery and growth beginning in FY25. Notwithstanding market conditions, the company has taken clear strides in FY24 towards achieving its five-year targets, investing accordingly.
Speedy’s ESG credentials have been in evidence for some time and with an accelerating emphasis since 2020 as reflected in industry recognition. Sustainability is embedded within Velocity and visible actions taken during FY24 have focused in this area. These include an exclusive supply partnership with Niftylift (hydrogen-powered access equipment), the acquisition of Green Power Hire in October (battery storage units) and establishing a new JV with AFC Energy (hydrogen-powered generators). Speedy’s scale and presence puts it in a clearly favourable position to be an early adopter of sustainable equipment technologies and a facilitator of construction supply chain de-carbonisation.
Valuation: Conventional valuation metrics show Speedy Hire on a single digit PER multiple for FY24, which is expected to represent the earnings trough for this cycle. Expectations are for earnings to rise above FY22 (and back towards FY20) over the next couple of years, compressing Speedy’s PER further. Expected dividend payouts track earnings, but this still represents a FY24 yield above 7%. Speedy’s share price is also trading on a c.27% discount to its reported H124 NAV. Lastly, we note that directors have acquired additional shares since the FY24 pre-close statement was announced.
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