When Dan Evans was a young man,he had ambitions to make it as a top-flight rugby union player with Saracens. However, as is the way of the sport for ruffians played by gentlemen, a serious leg injury and dodgy shoulders put paid to that.
There are parallels with his 15 months running Speedy Hire. All the appendages haven’t quite been working properly and the company, as sports coaches like to say these days, is not presenting the best version of itself. Its latest warning took 25 per cent off the share price and the stock is trading at a 12- year low.
Speedy Hire hires out tools, plant and equipment mainly to the construction industry, although recently it has opened what it hopes will be a new strategic front with a relationship with B&Q, the DIY chain.
As such Speedy, which employs 3,300 people, is inextricably entwined with the state of the economy and more specifically with the construction sector, which has remained doggedly in contraction and suffered thousands of businesses going bust.
At a recent unscheduled trading update, Speedy caught out investors with a couple of twists in the tale: delays in infrastructure projects, including gas and green energy, mean that business Speedy had expected to book has not materialised; and the relatively mild winter has led businesses that typically might rent out Speedy’s heating apparatus have not been doing so. It warned that these issues would combine to drive a miss in profit expectations of between 8 per cent and 10 per cent.
Stephen Rawlinson, an independent analyst of the sector, called it “an unscheduled update that tests the loyalty of investors. The problem now for Speedy is that it needs a long period with no surprises, as it may be seen as accident-prone.”
As it happens, Rawlinson is a fan of the business, believing it to be better run than ever before and that investing in the green transition, such as hydrogen powered equipment, will hold it in good store. In short, the fundamentals are in place for when the wider economics change.
Therein lies the rub. The message from the industry and from within Speedy itself is that there is not expected to be any upturn in this calendar year.
Evans has drawn up a five-year plan, codenamed Velocity, which isn’t much different to any other corporate powerpoint presentation: grow revenues, grow margins, transition to net zero, specialise, digitise etc.
But at the end of that five years, he is promising £650 million of revenues and margins of 28 per cent, which should give underlying operating pre-tax profit of about £180 million. For context, that is a business about 50 per cent bigger by sales and 80 per cent by earnings.
For further context, that projected £180 million of earnings compares with a present market capitalisation of only £125 million. That might indicate that the sell-off in Speedy’s shares is overdone.
Aberforth, the investment manager, thinks so and has nearly doubled its stake to more than 10 per cent, a little behind the 12 per cent owned by Schroders. As house brokers, they might say this anywaym but Liberum and Peel Hunt cannot see why the shares aren’t double today’s price.
The chief executive’s sporting roots run deep. His grandfather Dennis Evans was a left back for Arsenal back in the 1950s, noted for his constancy and consistency. Those are virtues that Speedy Hire will aspire to.
Advice Buy
Why Selling is overdone. It will be a long haul, but the recovery, like that of the economy, will come.
Chapel Down
The North Downs of Kent may not bear much resemblance to the Champagne region, but the sparkling wine created there by Britain’s biggest winemaker continues to win awards, collecting 28 wine industry gongs last year alone (Dominic Walsh writes).
Chapel Down, based in Tenterden, is also making waves in the City after joining Aim, the junior stock market, in December. The shares, having kicked off at 53p, quickly jumped to 79½p, but have since dropped back after Dry January to 57½p.
The company is not yet at the point of paying a dividend, putting all its profits back into the business, but it makes up for that with shareholder perks. Investors with 2,000 shares get a 33 per cent discount on all wines, as well as discounted tours around its winery in Tenterden, which welcomed 60,000 visitors last year.
While Chapel Down does make still wines, its biggest sellers are its “traditional method sparkling”, which last year increased revenues by 25 per cent to £12 million, from selling 887,000 bottles, up from 789,000 in 2022. It is also winning fans overseas, with export sales to 14 markets including the United States, the Nordic countries and the United Arab Emirates and duty-free sales in Heathrow, Gatwick and London City airports.
Its British sales remained the bedrock, however, in both supermarkets and off-licences, where listings are accelerating. According to Andrew Carter, 55, the chief executive, one in seven households had a bottle of Chapel Down English sparkling wine on the table over Christmas.
The company has 906 acres planted with vines, which will increase to 1,023 acres in March. While it has small vineyards in Essex and East Sussex, 95 per cent of its vineyards are in Kent, mostly on the North Downs.
As well as adding land, Chapel Down is planning a larger £32 million winery on the outskirts of Canterbury to cater for its ambitions. Although the project has twice been approved by the city council, it is facing a judicial review. Nevertheless, Carter remains confident of the outcome.
Advice Buy
Why According to Wine GB, the UK has 209 wineries and 943 vineyards, but despite the competition Chapel Down is keeping ahead of the game
