Speedy Hire just keeps on growing

Not many companies can boast sales and profit growth of an annual 20% every year for the past five years, says The Independent on Sunday. But such consistency and progress is "the mainstay" of tool hire firm Speedy Hire. The business - supplying everything from drills, ladders and power generators to the construction industry - may not "sound very exciting", but Speedy Hire does seem to have found a winning formula in its high quality - yet price competitive - rental business. It plans to expand from 250 to 400 depots over the next five years, and its simple strategy has been so successful that this will be funded from its own cash flow.

Speedy Hire has recently spent £1.3m on two acquisitions, pushing the total increase in first-half sales to 14%, says Stephen Foley in The Independent. But not all the news is good. Margins at the newest depots have been "a touch disappointing" and insurance costs are holding back profit too. These issues have held analysts back from raising their full-year forecasts. One more concern for investors is that Speedy Hire is over-reliant on a strong housing market, says The Independent on Sunday. But this really shouldn't be a major concern. While a slowdown in house building would of course have an effect, around 40% of Speedy's customers are working on public sector projects. And given the Government's commitment to investment in this area, demand will continue. Other worries may stem from the "sketchy" past of the market's other participants. HSS, part of Davis Service Group, Ashtead and VP have all had problems of their own.

But these unsubstantiated worries leave the company's fans "unperturbed".Paul Jones at Numis Securities is expecting profits to grow by 16% this year and 11% next year, a forecast that is "by no means over-optimistic" given the company's track record. Yet at 405p, the shares are trading on a p/e of just 11 times for this year and ten times for next. "The price just looks wrong", says Jones.

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