In line H1 update, with positive revenue and ROCE trend continuing
Today’s trading update confirms that the positive trend in both revenues and ROCE have continued throughout H1. Group revenues for the period to 30th September are anticipated to be c.6.5% ahead of the prior year, with services revenue growth of c.8.0%. UK and Ireland core hire LFL revenues are broadly flat, with strong growth in the higher margin SME market which has offset lost revenue following the liquidation of Carillion. Trading remains in line with expectations and we make no changes to our forecasts, with adj. PBT anticipated to increase by 17% in the current year. We believe that Speedy’s growth trajectory, upgrade momentum, its strong and improving balance sheet and its in line dividend yield justifies a sector EV/EBITDA rating (5.6x). We maintain our Buy recommendation and 70p TP.
25 Sep 18
Small Cap Breakfast
Green Man Gaming—pure play e-commerce and technology company in the digital video games industry. revenue CAGR growth of 26.7% in the last three years to £47.5m. Due 28 Sep. EBITDA Profitable. Offer TBA Crossword Cybersecurity PLC* (NEX:CCS)—the technology commercialisation company focusing exclusively on the cyber security sector is exploring its options in relation to a potential move to the AIM market of the London Stock Exchange which, if it were to proceed, would likely take place over the next few months. Path Investments—an oil and gas company focused on the acquisition of production, or near production, oil and gas assets looking to join AIM. Offer TBC, expected early October 2018.
SDY SSTY SDI SYM WAND ORPH PTD TGL BOD TILS
25 Sep 18
Be Heard (BHRD LN) H1 shows strong revenue growth, but profit shortfall | dotdigital Group (DOTD LN) Another year of strong growth & cash generation | EKF Diagnostics (EKF LN) Manufacturing agreement with Oragenics Inc | Goals Soccer Centres (GOAL LN) Profit warning | LiDCO Group (LID LN) UK distribution deal with Maicuff Technology | Nichols (NICL LN) Solid interims with a 3% PBT beat | Speedy Hire (SDY LN) In line Q1 update, with ROCE continuing to move forwards |
SDY BHRD DOTD EKF GOAL LID NICL
19 Jul 18
Recovery delivered; Returns improving
We update our forecasts for the recent FY18 results and introduce a new forecast year for FY21. We nudge our FY19 and FY20 EPS forecasts up by 1%, with growth of 18% and 11% expected in each year. Our FY21 EPS forecast implies growth of 14%. We do not assume significant end market growth and expect earnings growth and improvement in ROCE (towards the Group’s 15% target) to be primarily driven by management initiatives (margin improvement, asset efficiency and growth in Services revenue) and M&A. A change in the prospects of the construction market could present upside to our forecasts, with a number of large infrastructure projects in the pipeline. We have increased our target price to 70p (sector average cal. ’18 EV/EBITDA of 5.6x).
14 Jun 18
1Spatial (SPA LN) Capital markets day highlights growth potential | Abzena (ABZA LN) Monetising the Abzena Inside portfolio | Consort Medical (CSRT LN) Prelims in line – another setback with Mylan | Gym Group (GYM LN) Positive corporate and premium pricing newsflow | N Brown Group (BWNG LN) In line update but number of moving parts might leave investors cold | Rathbone Brothers (RAT LN) Acquisition of Speirs & Jeffrey, no EPS accretion until FY20e | RhythmOne (RTHM LN) FY18 results show execution, EBITDA to almost quadruple in FY19 | Speedy Hire (SDY LN) Recovery delivered; Returns improving
SDY ABZA CSRT GYM BWNG RAT RTHM SPA
14 Jun 18
Augean (AUG LN) Consultation on Colt; group trading in line | Brewin Dolphin Holdings (BRW LN) Solid outturn, margin maintained in H1 | Itaconix (ITX LN) Joint marketing effort defined with AkzoNobel | LiDCO Group (LID LN) Trading update points to increased US traction | Marston’s (MARS LN) Broadly in line interims | Speedy Hire (SDY LN) Earnings momentum continues with results ahead of expectations | Zotefoams (ZTF LN) Placing to invest in (even more) new capacity
SDY AUG BRW ITX LID MARS ZTF
16 May 18
Value screen refresh and 10 focus stocks
We have completed another refresh of our value style screen, first established as of 12 May 2015. As usual the screen selected the 25 stocks exhibiting the most extreme value characteristics from our universe, and we have chosen 10 stocks to focus on. Since the last refresh, two days before the last general election, which resulted in a hung parliament, the screen has performed a little better than the small-cap index with our focus stocks outperforming by about 500bps. The weighting to UK consumer stocks noted last time detracted from performance, which came as little surprise given our cautious stance, much discussed in our other strategy work this year. One might have expected more consumer exposure in the refreshed screen given this year’s severe underperformance, but it appears forecasts have been similarly downgraded, keeping much of the sector outside our value criteria
SDY AUG EHG GOAL MMH RTHM TEF VANL
23 Apr 18
Confident of sustainable UK earnings growth
Speedy Hire has signalled that it is fully through a transformation process and clearly focused on profitable growth. H1 revenue (ex-disposals) was almost 7% higher, at £183m, and management flagged that it expects to exceed previous adjusted PBT expectations for the full year by c 6-7%, which will form the base for future years. The positive results, benefiting from the recent operational restructuring, two recent bolt-on acquisitions and positive demand, point to sustained investor support.
30 Nov 17
N+1 Singer - Speedy Hire - Earnings momentum continues
We are upgrading our forecasts for the recent acquisitions and for the underlying progress reported at the interims. Our adj. EPS forecasts increase by 8%, 18% and 14%. Since initiation, we have cumulatively upgraded our FY18 and 19 EPS forecasts by 84% and 59% respectively to reflect underlying recovery in the business. We upgrade by a further 2% and 8% for the recent acquisitions. Management has done a commendable job to turn the business around, not least strengthening the balance sheet. We expect trading to continue to improve against a positive market backdrop and potential for further self help, cross selling and M&A. We upgrade our target price from 63p to 68p and remain at Buy.
29 Nov 17
N+1 Singer - Morning Song 29-11-2017
Brewin Dolphin Holdings (BRW LN) Solid FY17 outturn, positive strategic progress | Cineworld Group (CINE LN) Joining the sector consolidation | Clinigen Group (CLIN LN) Quantum to add multiple growth opportunities | Findel (FDL LN) Digital transformation gaining momentum | Futura Medical (FUM LN) Good progress in Eroxon® licensing discussions; PK trial underway | Photo-Me International (PHTM LN) Snap it up | Raven Russia Ltd (RUS LN) Completion of Sever logistics park acquisition | Redcentric (RCN LN) Solid interim results | Speedy Hire (SDY LN) Earnings momentum continues | Wilmington (WIL LN) New CFO appointed
SDY STU WIL RAV BRW CINE RCN FUM CLIN PHTM
29 Nov 17
N+1 Singer - Morning Song 24-11-2017
Future (FUTR LN) Results underline change and opportunity | IndigoVision Group (IND LN) Trading behind expectations; Chief Exec leaves | James Fisher & Sons (FSJ LN) Outlook unchanged; Offshore Oil recovery delayed | Sanderson Group (SND LN) Scaling up the Enterprise division | Speedy Hire (SDY LN) Earnings enhancing acquisitions | Vernalis (VER LN) Reduction in cough cold forecasts | WYG (WYG LN) UK challenges prompt further downgrades
SDY VER FSJ IND WYG SND FUTR
24 Nov 17
N+1 Singer - Speedy Hire - Delivering further upgrades in today’s interims
Interim results were well flagged in the H1 update on 19th September. We upgraded our PBT forecasts by 6%, 5% and 3% in each forecast year on 2nd October. Today’s results deliver further upgrades, with management confident of delivering a full year result ahead of expectations. We expect to upgrade our PBT forecast by around 6% in the current year, with outer years also moving up. The Group achieved PBT of £10.8m in H1, up 58.8% year on year. Speedy trades on an FY’18 EV/EBITDA multiple of 5.2x (c.4.9x after upgrades) vs. the peer group on 5.5x. Solid progress has been made to turn the business around and trading continues to improve. We see potential for continued earnings momentum as the strategy is executed and for further progress towards the Group’s 15% ROCE target (H1’18A: 9.4%). We remain at Buy and retain our 63p target price.
14 Nov 17
N+1 Singer - Speedy Hire - Forecasts upgraded after solid H1 update
We are upgrading our forecasts after the recent H1 update. Our PBT forecasts increase by 6% to £21.7m in FY18, and by 5% and 3% in FY19 and FY20. Our dividend forecasts increase in line with the PBT upgrades. Upgrades reflect strong H1 revenue growth (up 7.5% YoY exc. disposals) and further cost saving initiatives. Revenue growth was primarily driven by the lower margin, non-hire business. With this in mind, we are leaving our target price unchanged, whilst acknowledging the solid progress management has made in turning the business around. We see potential for continued earnings momentum as the strategy is executed and for further progress towards the Group’s 15% ROCE target (FY17A: 8.0%, FY18E: 9.8%).
02 Oct 17
N+1 Singer - Speedy Hire - Focused on restoring profitability
FY’17 was focused on stabilising the business after a difficult trading period. Trading has improved, with all metrics ahead of expectations in FY’17. Accordingly, we have upgraded our forecasts (PBT up 8% in FY’18 and 4% in FY’19). Now, the focus turns to the Group’s ability to drive sustainable, profitable growth. Our revenue forecasts imply growth of 2.0%-2.5% across the forecast period. Growth is already said to be coming through after a good start to the year. Management has introduced a mid-teens (c.15%) medium term ROCE target (FY’17: 7.7%), a sign of confidence in Speedy’s prospects. With net debt/EBITDA falling towards 1x, we expect earnings enhancing M&A opportunities to form part of the ongoing strategy. Overall, we believe the risk remain to the upside, with potential for further upgrades as the year progresses. We therefore move from Hold to Buy and increase our target price from 56p to 63p.
18 May 17
N+1 Singer - Speedy Hire - Solid performance in FY’17 confirms turnaround plan is complete
Today’s results confirm a solid performance in FY’17, with the Group outperforming on revenue, PBT, dividend and net debt. Adj. PBT was ahead of our expectations at £16.2m vs. our forecast of £14.4m and £5.0m last year. This was primarily driven by a better than expected revenue performance, with some margin improvement in core hire also contributing. This year has been focussed on stabilising the business and trading has successfully turned around. Now, focus will turn to the Group’s ability to drive sustainable profitable growth and its ability to win market share. We will review our forecasts and valuation after the analyst meeting this morning, but initially we anticipate upgrading our FY’18 PBT forecast to just over £20m vs. £19.1m currently.
16 May 17
N+1 Singer - Speedy Hire - Forecast upgrades after a solid Q3 update
Tuesday’s trading update was positive and confirmed solid progress in retaining key accounts, alongside growth in the SME customer segment. We have updated our forecasts as below, with PBT upgrades of 10%, 9% and 8% respectively in the three forecast years. Whilst the Group continues to make progress in delivering its recovery plan, returns in line with the sector are, in our view, a long way off for Speedy (current operating margin forecast of 5% -7% across the forecast period vs. a Cal. ‘17 peer group margin of c.14%). At present, we do not see operating margins exceeding single digits until c.FY’20. Given this, we believe that our 56p target price (5.6x FY’18 EV/EBITDA) implies fair value for the shares. However, for those who believe that Speedy will achieve superior margin enhancement within the forecast period, the shares look good value.
09 Feb 17
N+1 Singer - Speedy Hire - Trading update highlights further progress
Today’s trading update highlights further progress in the SME space, addressing one of our longstanding concerns. The update highlights that the revenue trend continues to improve with better operational efficiency and that, as a result of solid trading in Q3, full year PBT is expected to be ahead of expectations. We anticipate upgrading our current year revenue forecast by 10% to £14.3m (from £13.0m). Speedy still has a long way to go in terms of delivering profit margins in line with the sector (current operating margin forecast of 5% - 7% across the forecast period vs. a Cal. ‘17 peer group margin of c.14%). However, recent progress has strengthened the Group’s recovery potential. We therefore increase our target price to 56p (5.7x March ’18 EV/EBITDA, a c.10% discount to the peer group multiple), but keep our Hold recommendation unchanged.
07 Feb 17
N+1 Singer - Small-cap quantitative research - Momentum screen refresh + 10 focus stocks
We have refreshed our momentum style screen for the first time since inception on 26 July 2016. As before, the screen selects the 25 stocks exhibiting the most extreme momentum characteristics, according to our measurement method. From these we have selected 10 to focus on. Since inception the screen has underperformed both the main small-cap and micro-cap indices against a background of generally rising momentum. We have noted a subset of the basket, where decelerating momentum at the time of measurement appears correlated with significant share price falls since selection. We shall monitor this factor with the new screen, albeit there are only two such stocks showing this pattern, namely Lamprell (not rated) and Gear4music (not rated).
SDY IQE SUN ERGO NETD G4M GFIN ULS FUTR
12 Jan 17
N+1 Singer - Speedy Hire - Further cost cuts and a better revenue performance drive upgrades
Today’s H1 pre-close statement highlights that after a slightly better revenue performance and further costs (>100 employees laid off), PBT is now expected to be ahead of full year expectations at c.£11.0m vs. our forecast of £9.8m. We will reflect this in our forecasts in due course. With a number of self help measures now executed, trading is continuing to stabilise. However, whilst Speedy’s revenue trend is positive, it is still undergoing significant operational changes, implying further exceptionals this year. The outcome of the recent EGM, with Jan Åstrand to remain as Chairman (63% in favour) and David Shearer to join the Board as a NED (53% in favour), may yet prove to be a difficult compromise. We remain at Hold, awaiting further clarity on the Group’s medium term strategy. The shares are optically expensive on a P/E basis and in line with the peer group on an EV/EBITDA basis. However, we believe a sensible price floor is Speedy’s 35p tangible book value where we have set our target price (unchanged).
30 Sep 16
N+1 Singer - Support Services - Week ahead – Caution ahead of updates from Lavendon and Speedy
We are expecting news from both Lavendon (half year trading update – 14th July) and Speedy (AGM statement – 13th July) next week. Having highlighted our concerns on 27th June regarding the outcome of the EU Referendum, we are cautious ahead of next week’s announcements. We expect both Speedy and Lavendon to signal that it is too early to predict the full repercussions of Brexit, in line with recent statements from many construction and housebuilding companies. Despite this, recent data suggests that the construction market is already beginning to feel the impact of Brexit uncertainty, with the Markit UK Construction PMI registering its weakest reading for seven years in June (46.0 vs. 50.7(F) and 51.2 last). The construction market accounts for c.49% of Lavendon’s sales and c.48% of Speedy’s. Both Lavendon and Speedy have customers across all tiers (major contractors down to SMEs). The outlook for both UK businesses is therefore highly uncertain and whilst we leave our forecasts unchanged, earnings risk is clearly to the downside. Negative sentiment towards both companies’ shares is likely to persist in the short term, but we believe that tangible book value should provide a sensible share price floor. We therefore set our price targets accordingly (FY1 tangible book values: Lavendon – 114p, Speedy Hire – 35p) and remain at Hold in both cases.
Speedy Hire Lavendon Group
08 Jul 16
N+1 Singer - MS - Support Services - Chaos and uncertainty cloud sector view
It is still clearly too early to predict the full repercussions of the vote to leave the EU. The events of the past couple of days have been seismic enough with the resignation of the Prime Minister, the prospect of another Scottish independence referendum and the disintegration of the Shadow Cabinet. There is no timetable for Brexit and there is speculation that a compromise deal may be sought or even that the Scottish Parliament could veto the whole thing. None of this is likely to be resolved quickly and there is a threat of UK recession. Some are even anticipating a structural rather than a cyclical downturn. We sincerely hope that these concerns are overdone but the current uncertainty does somewhat undermine our sector view of a benign economic backdrop. As a result, we retire our BUY recommendations on Speedy Hire and Northgate, given the historic cyclicality of both businesses. If we were to look for safer havens, we would highlight Restore and Vp, both of which we would expect to outperform peers.
SDY NTG VP/ RST
27 Jun 16
Reassuring numbers; strategy on track
As flagged in the pre-close update, Speedy’s full year results are in line with expectations, with PBT at £5.0m. The Company is beginning to see a positive impact from the actions taken by the new management team. It has successfully renewed its strategic accounts, with no major account losses throughout the year, and the SME accounts are starting to turnaround. The restructuring programme is now complete and no further exceptional charges are expected. The International division saw a return to profitability, with operating profit of £0.6m (2015: loss of £5.6m). This is an encouraging set of results and the business is now well placed for recovery. We continue to believe Speedy’s shares are undervalued, trading close to its tangible book value of 36p. We retain our Buy recommendation and 50p target price and expect to retain our PBT forecasts.
17 May 16
Chemicals Consumer and FX bright spots lifting the gloom | First Derivatives (FDP LN) Consensus beat highlights strength of sales momentum | Hill & Smith Holdings (HILS LN) Strong trading again; more upgrades | IDOX (IDOX LN) Strong trading update | Lookers (LOOK LN) Strong trading in all divisions and cashflow running ahead of budget | OMG (OMG LN) Record H1, strength on multiple fronts | Raven Russia Ltd (RUS LN) Conditional issue of convertible preference shares | Speedy Hire (SDY LN) Reassuring numbers; strategy on track | Ten Alps (TAL LN) Trading Update | Victrex (VCT LN) Restoring investor confidence | Zytronic (ZYT LN) Trading in line; Mix improving
SDY FDP HILS IDOX LOOK OMG RAV ZIN VCT ZYT
17 May 16
Anticipating reassuring numbers tomorrow
As flagged in the pre-close statement, tomorrow’s results (17th May) should be in line with expectations at the PBT level. We expect the commentary to focus on the strategic changes that have been made within the business and the operational improvements that these changes are delivering. In the current year (FY’17), we are forecasting PBT of £7.6m, assuming only marginal underlying growth plus the benefit of the identified cost savings. Speedy’s share price is trading close to its tangible book value of 36p. We believe that the following three factors should support a higher share price: top line stability, delivery of strategic improvements, and an end to exceptional restructuring costs. The prospect of consolidation within the equipment hire subsector should also provide support to the share price. We retain our Buy recommendation and 50p target price.
16 May 16
FY’16 concludes in line with expectations
Speedy’s pre-close trading update confirms that full year results are expected to be in line with expectations at the PBT level. The statement also highlights further strengthening of the Board. FY’16 marked a challenging year for Speedy, with two profits warnings, a management overhaul, and a large hit to the share price. However, the remedial actions put in place by the Group’s new CEO, Russell Down, are taking effect and trading appears to have stabilised. Our FY’17 PBT forecast of £7.6m assumes only marginal growth in PBT plus the benefit of the identified cost savings (c.£6m of people costs). The outlook for Speedy’s core end markets is supportive. We therefore remain confident in our forecasts. Trading close to its tangible book value of 36p, we continue to see value in Speedy’s shares. We reiterate our Buy recommendation and target price of 50p.
31 Mar 16
Bolt-on rail acquisition; trading in line with expectations
Speedy Hire has this morning announced a small bolt-on acquisition of OHP Limited, a specialist rail hire business, for an initial consideration of £1.5m, along with the assumption of net debt of c.£1.7m. The acquisition strengthens Speedy’s offering in rail and is expected to be slightly earnings enhancing in the first year following acquisition. Speedy has also confirmed it is trading in line with expectations. This is encouraging and suggests that the turnaround measures put in place by management are taking effect.
08 Feb 16
Interims confirm early signs of improvement from remedial measures
This morning’s interim results highlight a very challenging period for Speedy but confirm that the remedial actions taken by the company’s new CEO, Russell Down, are beginning to benefit the Group. Now, the company has a clearer understanding of the SME market and is putting in place more targeted initiatives to win business here. The network is increasingly better resourced with the correct types and quantities of assets. Cost cutting is on track to deliver the c.£13m reduction in administrative costs for FY’16. The results are in line with our forecasts and as expected, revenue declined 12.8% to £165.0m in the period. As we expected, PBT in the first half stood at £2.0m. Whilst the full benefit of remedial actions will be realised over the medium term, we continue to think Speedy Hire’s very significant discount to net assets (42p at the interim stage) is unwarranted.
10 Nov 15
Liontrust Asset Management (LIO LN) On track to hit FY expectations | Mobile Streams (MOS LN) Trading update | Oxford Instruments (OXIG LN) Guidance reiterated | Redcentric (RCN LN) Steady as she goes | Speedy Hire (SDY LN) Interims confirm early signs of improvement from remedial measures | Trifast (TRI LN) Strong H1 growth; guidance reiterated | UBM (UBM LN) Trading update
SDY LIO MOS OXIG RCN TRI UBM
10 Nov 15
Remedial actions underway; discount unwarranted
After two profit warnings this year, a management overhaul, and the share price falling below tangible book value, we believe that Speedy’s shares are undervalued. Speedy has a strong asset backing and a manageable debt position, and there are no imminent signs of a downturn in its core end markets. We set our target price at 50p based on an FY’17 price/book value of 1.1x. This is a 27% discount to the Group’s historic multiple and represents c.72% upside to the current price. A number of measures are now in place to drive improvements in performance. We expect the interim results on 10th November to confirm that the company has begun to see the benefit of these measures going into H2.
06 Nov 15
Equipment hire shakeout presents opportunities
It has been an exciting couple of weeks for the equipment hire subsector. Recent IPO HSS Hire warned, blaming the weather and the General Election. Northgate hit a wall of depreciation and currency headwinds while also flagging internal issues in its UK business. Worse still, Speedy Hire collapsed for multiple company-specific reasons, prompting the resignation of newish CEO Mark Rogerson. It is unlikely that recent profit warnings from Speedy and HSS are entirely unrelated but the common theme is most likely to be a temporary General Election effect. Despite the strong performance of the past few years, in our view the cycle has further to run with recent share price movements creating some attractive opportunities. We are strong supporters of Lavendon (Initiated as Buy), Northgate (Hold to Buy) and Vp (Corporate).
SDY LVD VP/ AHT HSS NTG
14 Jul 15