Speedy Hire gets public sector construction boost

LONDON (Reuters) - Tool hire company Speedy Hire (SDY.L) said it made an encouraging start to its financial year, helped by rising demand from contractors working on public-sector building projects.

In a trading statement, Speedy Hire said revenue for the first quarter to June 30 was up 36.4 percent compared with the same period a year earlier.

Merseyside-based Speedy Hire said the increase reflected a 53 pct increase in sales to major building contractors whose workload is expanding thanks to steady government spending on new schools, hospitals and prisons.

That outweighed a downturn in business from smaller contractors in the non-food retail construction, commercial office development, and housebuilding sectors, the company said.

Speedy Hire shares, which have fallen 52 percent since the beginning of the year on worries that a slowing economy will dampen demand from its customers, were down a further 3 percent at 402.75 pence by 2:25 p.m., while the FTSE 250 share index was 2.6 percent lower.

"The market is focusing on the negatives, which include a more challenging environment in not only house building but now commercial office development and non-food retail," said Altium Securities analyst David O'Brien.

The stock was also weighed by concerns that Speedy Hire's growing dependence on rental contracts with big building firms could erode its profit margins.

"They have very sensibly aligned themselves with the bigger players, but the problem is that bigger players will demand a slimmer margin," said Panmure Gordon analyst Paul Jones, who cut his profit forecast for the current financial year to 63.3 million pounds from 69.2 million pounds.

Speedy Hire reassured on debt, saying it remained "comfortably" within its 325 million pound bank facility with net borrowing of 294.7 million pounds at June 30.