Good morning!
Speedy Hire (LON:SDY)
Share price: 31.75p (up 9.9% today)
No. shares: 522.0m
Market cap: £165.7m
(at the time of writing, I hold a long position in this share)
Interim results to 30 Sep 2015 - the shares are trying to rally this morning, although (so far) on little reported volume. Mind you, larger orders are often being worked in the background, and are reported later, on a delayed basis. So tracking the small retail trades during the day only gives you part of the overall picture.
I've held this share for several weeks, as a potential turnaround situation. So far, SDY has had a dire 2015 - with 2 profit warnings, in Jul and Sep. It's still not entirely clear what went wrong, but from what I can tell, it seems to just have been the basics of running the business that went haywire. There could be an element of sector problems, as HSS Hire (LON:HSS) also warned on profit around the same time.
The nice thing about SDY is that it has a solid balance sheet, so it shouldn't have any solvency issues whilst it sorts things out. Whereas the same cannot be said for HSS, which has a terrible balance sheet, and is hence not a stock I would go near.
The highlights box (below) from today's interim results demonstrates the operational gearing. So although EBITDA is down by a third, adjusted PBT is down by over 80%, since the big depreciation charge and financing costs are effectively fixed costs, so the impact of top line underperformance becomes more marked the further down the P&L you go.
So a lousy half year, but the market already knew that was coming, so it was priced-in.
It's all about looking for signs of recovery. In that regard, I find today's results moderately reassuring, in particular that full year expectations are confirmed;
...confirms that the Group expects to deliver a result for the full year in line with the Board's expectations, as detailed in the Company's trading update published on 28 September 2015.
Clear actions to remedy underperformance seem in hand;
Remedial actions to address legacy performance issues are starting to deliver results;
o Reductions in administrative costs expected to deliver full year savings of c.£13m from prior year
o Redistribution…
