Speedy Hire collapses after fresh warning

Sacking the last chief executive and devising a turnaround plan was supposed to address major issues at Speedy Hire. They haven't, and fixing the tool hire firm will clearly take much longer than expected. It's why a second profits warning in less than three months has plunged the share price to a three-year low, and why City forecasts have halved. Valuing Speedy is becoming increasingly difficult.

We already knew the first half of Speedy's financial year would be poor; the company said so in July. We'll see the numbers on 10 November. Remedial actions have been implemented - assets are now better distributed around the store network, sales staff are focusing more on smaller companies, costs are being cut, and the IT system improved.

That will slash overhead costs by about £13 million in the year to March 2016 - £10 million in the UK and Ireland, and £6 million from job cuts. But it's not enough, and management admits that resolving problems is taking longer than expected. Full-year core hire revenue in the UK and Ireland will be about10% less than last year, and profitability will be weighted towards the second half and be "materially below" market expectations.

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Chairman Jan Åstrand still thinks his actions will "deliver material benefits over the medium term". They might, but for now the outlook is bleak.

Investec Securities analyst Andrew Gibb has found his largest red pen to cut pre-tax profit estimates for the year by 58% to £7 million on reduced revenue of £336 million. Forecasts for March 2017 profit are down 55% at £10 million. Expect earnings per share of 1p and 1.5p respectively.

"This is another disappointing update and underlines the scale of the task faced by the new management," he says. "Given the scale of the downgrades and level of uncertainty, it is difficult to ascribe a target price at present. However, focusing just on the [book value] of the hire equipment (inc international) points to an NAV per share of c.41p. Until we get more clarity on the turnaround, we move to a HOLD rating [from buy]."

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