21 July 2009
Speedy Hire Plc ('Speedy' or 'the Company' or 'the Group')
INTERIM MANAGEMENT STATEMENT
At the Annual General Meeting to be held at 11:00am today David Wallis, Chairman, will give the following update on the Group's progress since the start of the current financial year:
"The Group reported to shareholders, both in its May annual results announcement and in the rights issue prospectus sent to shareholders in June, that the difficult conditions which were prevalent in Q4 FY09 had continued into early FY10, with activity being more subdued than anticipated largely due to contracts being delayed or deferred. Since those communications, the challenging conditions faced by the Group have remained, although in recent weeks there have been some signs that trading is beginning to stabilise.
The scale of the challenge is particularly demonstrated by the quarter on quarter comparison for Q1 FY10 against Q1 FY09. In the prior year period, the Group was experiencing substantial growth, with revenue up by 36%. The subsequent decline in revenue from this record quarter has been 30%, although the decline in revenue from Q4 FY09 to Q1 FY10 has been a more modest 10%, despite the fact that the Easter holidays fell within Q1 of this financial year.
With continuing uncertainty around future construction activity, the Board remains cautious about the Group's short term outlook. Costs continue to be monitored closely and will be managed to a level which ensures that they remain appropriate for forecast activity levels. In addition, capital spending and equipment disposals are being carefully controlled to ensure that utilisation levels are optimised and that growth opportunities in the more resilient sectors of the economy can continue to be pursued and judicious support of key clients and markets maintained.
The focus on cash management has led to a £48m year on year reduction in net debt to £247m at 30 June, 2009 and Speedy continues to operate comfortably within the headroom and covenants of its £290m committed bank facility (which does not mature until June 2012). Following the receipt last week of the £100m net proceeds of the Group's recent rights issue, net debt has been further substantially reduced and currently stands at c.£140m. This is underpinned by net assets of £267m (at 31 March, 2009 and adjusted for the rights issue). Additional improvement in the Group's financial position is anticipated over the remainder of the financial year as we use our cash generation to reduce bank debt further. As a result, it is currently anticipated that the interest rate margin over LIBOR paid on outstanding debt will decrease from the current rate of 4% to 3% at the end of July 2009 and to 2% at the end of January 2010.
The bulk of our major national contracting customers continue to report strong order books on the back of on-going infrastructure and regulated sector investment, particularly in the areas of energy (including the burgeoning nuclear sector), water and waste. In addition, non-construction related activity with major industrial groups, such as those within the petrochemical, pharmaceutical and rail sectors, continue to provide further opportunities.
However, the wider construction market, in particular contractors dependent upon the private sector, continues to find conditions very difficult. Notwithstanding this, we have continued to win significant new business with key UK customers. For example, this week Speedy was awarded a two year preferred supplier position to the privately owned development and construction business, Headcrown Group, which encompasses all of their operating activities (Browns, Cruden, JF Finnegan and Gee). Also this month we have been awarded a three year sole supplier contract by Works Infrastructure for the provision of the full range of our products and services in support of their rail and other infrastructure activities.
We have also announced today a Memorandum of Understanding with Al Futtaim Carillion (Carillion's long-standing joint venture in the Middle East) for Speedy to provide equipment, asset management and site support services to Al Futtaim Carillion's operations in the Middle East region. Over time, we expect this fuller outsourcing initiative to provide an excellent platform to extend our services to other customers across the Middle East and to demonstrate the value in Speedy's strategy to develop closer ties with our larger clients.
With new opportunities opening up to the business both in the UK and the Middle East, together with a strong balance sheet and a flexible cost base, the Board believes that the Group is well placed to deal with the conditions that are projected to continue over the short to medium term in construction. Whilst acknowledging that challenges remain and that further management action will be required, the Board retains its confidence that, despite the uncertainty surrounding many of our markets, the outlook for the year remains in line with its expectations."
Speedy will announce its interim results on 25 November, 2009.
Contacts
For further information please contact:
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Speedy Hire Plc |
Tel: +44(0) 1942 720 000 |
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Steven Corcoran, Chief Executive |
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Justin Read, Group Finance Director |
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Hudson Sandler Nick Lyon / Wendy Baker / Kate Hough |
Tel: +44(0) 207 796 4133 |
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