19/06/2024 - Speedy Hire plc: 2024 ANNUAL RESULTS STATEMENT

Speedy Hire Plc

("Speedy Hire", "the Company" or "the Group")

19 June 2024

Audited results for the year ended 31 March 2024

Transforming to drive sustainable growth

Speedy Hire Plc, the UK and Ireland's leading provider of tools, specialist equipment and services, announces its audited preliminary results for the year ended 31 March 2024.

Financial Highlights

• Revenue of £421.5m, down 4.3% against a challenging market backdrop; o Resilient UK Hire performance, down 1.7% versus FY2023
• • Significant contract wins and renewals including a promising pipeline of further opportunities
  • Positive performance with our National customers, mitigating softening with Regional

customers

• 1. Service revenue (excl. Fuel) down 1.6% versus FY2023
  2. • Strong performance in Customer Solutions
     • The decline in the wholesale price of fuel impacted our pass through revenues, however margin improved
• Adjusted EBITDA1 was down 6.8% versus PY but margin held broadly flat, the result of tight cost control and pricing discipline mitigating the revenue shortfall
• Adjusted PBT1 down 52.1%;
• 1. Impacted by high operational gearing

1. Increased interest costs

• 1. Normalised performance of our Kazakhstan JV, following a record FY2023.
• EPS3 impacted by the decline in profit before tax
• Significant free cash flow4 generation of £23.5m, more than double FY2023 (£10.6m).
• Net debt5 at £101.3m, increased by £8.9m, due to the acquisition of Green Power Hire Limited ('GPH'), funded in part by £23.5m of free cash flow4; leverage6 of 1.5x
• Proposed final dividend of 1.80pps, resulting in full year dividend of 2.60pps (FY2023: 2.60pps)

Executing well on our Velocity transformation and growth strategy

• Continued investment in transformation of the business despite challenging market
• Investing in specialist business growth engines, supporting clean energy transition and commercial sustainability for our customers:
  o £2.5m in hydrogen electric powered access with NiftyLift
  o Acquisition of GPH, trading well with a strong pipeline of future opportunities
  o Formation of Speedy Hydrogen Solutions Limited ('SHS') joint venture, showcasing the first H- Power Generator at our Speedy Hire Live Expo in March
• Launched our low cost-to-serve online home delivery tool hire proposition on DIY.com and Trade- point.co.uk
• Advanced our People First initiatives and invested £7.2m into base pay for our people

Outlook

• The new financial year has started well and is marginally ahead of last year
• Overall performance in line with Board expectations
• Operational efficiencies and supply chain optimisation expected to deliver further benefit in FY2025
• The Group expects a second half weighting to its revenues and profits as we mobilise the significant contracts won in FY2024
• Contract wins and extensions, alongside key sector opportunities, give us confidence for FY2025.

Commenting on the results Dan Evans, Chief Executive, said:

"Speedy delivered a resilient financial performance, making positive strategic progress over the year, despite the challenging macro-economic environment.

We continue to improve our customer proposition, investing in technology and AI capabilities, sustainable products and our people, to position the Group strongly for profitable growth. I am particularly pleased with our progress building the foundations for growth, executing the 'Enable' phase of our Velocity strategy, which is focused on transformation and operational efficiency.

The new financial year has started well with performance in line with Board expectations and I am pleased that since the year end, we have also secured further contract wins and renewals with key customers."

Notes:

Explanatory notes:

The Group believes that the non-GAAP performance measures presented in this announcement provide valuable additional information for readers. Further details can be found in notes 7, 9 and 13.

1. See note 9.
2. Revised, see note 17.
3. See note 7.
4. Free cash flow: Net cash flow before movement in loan balances and returns to shareholders.
5. See note 13. This metric excludes lease liabilities.
6. Leverage: Net debt5 covered by EBITDA1. This metric excludes the impact of IFRS 16.
7. From underlying performance; excludes non-underlying items.
8. Return on Capital Employed: Profit before tax, interest, amortisation and non-underlying items divided by the average capital employed (where capital employed equals total equity and net debt3), for the last 12 months. See note 9.

Inside Information: This announcement contains inside information.

Forward looking statements: The information in this release is based on management information. This report includes statements that are forward looking in nature. Forward looking statements involve known and unknown risks, assumptions, uncertainties and other factors which may cause the actual results, performance or achievements of the Group to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Except as required by the Listing Rules and applicable law, the Company undertakes no obligation to update, revise or change any forward looking statements to reflect events or developments occurring after the date of this report.

Notes to Editors: Founded in 1977, Speedy Hire is the UK's leading provider of tools and equipment hire services to a wide range of customers in the construction, infrastructure, industrial, and support services markets, as well as to local trade, and retail. The Group provides complementary support services through the provision of training, asset management and compliance services. Speedy is certified nationally to ISO50001, ISO9001, ISO14001, ISO17020, ISO27001 and ISO45001. The Group operates from c.180 fixed sites and selected B&Q stores across the UK and Ireland together with a number of on-site facilities at client locations and through a joint venture in Kazakhstan.

Future

We have a resilient business with an ambitious sustainable growth strategy which has been embedded into our business by our experienced senior management team. As the Velocity strategy rolls out, it puts us in a strong position to meet customer needs and accelerate sustainable profitable growth despite any macroeconomic challenges. Having committed to this multi-year strategy, the Board looks forward with confidence as we start to deliver the benefits and capitalise on opportunities in the year ahead.

David Shearer

Chairman

During the year we won and extended major contracts with key National customers. These contracts represent attractive growth opportunities but have taken longer to mobilise, due to contract specific delays. Therefore, we anticipate the benefit taking effect during FY2025.

Regional customers

We serve thousands of Regional customers through our Regional Account Management team located across the UK. These customers operate in Non-residential Construction, Infrastructure, RMI ('Repair Maintenance Improvement') and support services that include Facilities Management, Manufacturing and Production, Environmental Services, Engineering Services, Defence and Media. Many customers operating in these areas have been negatively impacted by the challenging economic environment, high interest rates and increased material costs, and as a result our revenues from this customer segment reduced by 6% on the prior year through a softening of volume sales, offset marginally by increased rates.

Trade and Retail

We support our Trade and Retail customers through our national network of Service Centres, by phone, online through our click and collect service, and through an in-store digital model in B&Q stores nationally, delivering a unique 4-hour delivery service in the process. During Q4 we successfully evolved our Trade and Retail business in partnership with B&Q. Our tool hire model is now an in-store digital offering in B&Q's c.300-strong store network nationally, so that customers can now hire our products seamlessly as part of their wider B&Q transaction at the B&Q tills, as well as online through B&Q's website diy.com and trade-point.co.uk for home delivery and collection. The Trade and Retail consumer market remains an attractive opportunity for the business. As an already established hire provider in the trade market, the industry-first partnership model with B&Q will penetrate a new consumer market opportunity. This low cost-to-serve combination of in-store and online hire, combined with our existing digital propositions and Service Centre network, will accelerate our strategic aim of increasing share within the Trade and Retail markets.

Operational efficiency

Operational efficiency continues to be a key part of our Velocity strategy and cost control remains key to delivering long-term sustainable profitable growth. The significant macro-inflationary pressures continue to impact our business, in common with most UK businesses at present. To mitigate the effects of this, we continue to control costs and focus on initiatives to improve operational efficiency and the effective management of our supply chain. By controlling costs, we will enable continued investment in the transformational aspect of our Velocity strategy, supporting the delivery of our stated targets of sustainable revenue and profitable growth. Our industry-leading utilisation of Artificial Intelligence ('AI') through our strategic collaboration with PEAK supports decision making through enhanced management information that links our Service Centre network with our logistics and asset intelligence. AI assists in predicting which products to invest in, which will further enhance the optimisation of our asset holdings, and through dynamic forecasting enable us to continue to achieve strong asset utilisation rates.

By activating these technologies, we can further ensure that we have the right products, in the right place, at the right time, in the most efficient way to meet customer demand. This is key to delivering for our customers on their key priorities of quality, availability, speed and receiving a first-class customer experience. The use of technology, combined with our service-led people culture makes this differentiating value proposition possible for our customers, enabling them to reduce time and cost on site. We will be digitally, and data driven to ensure our Service Centre network, our logistics and our assets are optimised to continue playing a vital role in our customers success.

Throughout FY2024, we continued to strengthen our partnership with PEAK AI, providing further automation and insight around the optimisation of our fleet holding, replenishment and informing our pricing strategy. These developments contributed to a 1.8pp improvement in utilisation rates across targeted assets. In FY2025 we will be deploying a further suite of initiatives, including a predictive capital expenditure model and a new price optimisation solution to dynamically adjust our pricing offered to customers. In addition, we will also launch PEAK's Audiences app, utilising the latest machine learning technology, to drive greater insight and understanding of our customer behaviour and segmentation to better inform our sales and marketing strategies.

Creating a modern workplace is a strategic pillar in achieving our growth ambitions, and fully integrating our ERP ('Enterprise Resource Planning') system is a foundational building block to enable this. Throughout the year we have further developed our longstanding collaboration with Microsoft by upgrading our ERP system to the cloud-based Microsoft Dynamics 365 Platform. The Platform is simplifying some of our key business processes and significantly improving the user experience, resulting in increased productivity through efficiency, and in the process improving the customer experience. Further to this, we invested in our digital capabilities surrounding our hire fleet management. We have developed a stock counting application to simplify and standardise the asset count process, which will be used in our periodic asset counts.

We continue to develop our future state property programme, to modernise our network with energy efficient, low carbon facilities that optimise efficiencies and reduce operational costs whilst creating better working environments for our people and a market-leading experience for our customers. During the year we rationalised and consolidated a number of older, less efficient properties into new Service Centres, including in Hull, Southampton and a new flagship centre servicing the Capital; London Gateway, a state-of-the-art 33,000 sq ft facility located in East London.

ESG

We are committed to becoming a net zero business by 2040; ten years ahead of the UK Government's target. Our carbon emissions** in the UK and Ireland have reduced by 21.4% from 361,361.42 tonnes in FY2023, to 283,947.52 tonnes in FY2024. This reduction has been achieved through the continued procurement and organic generation of renewable energy, investment into a greener property network, a more efficient vehicle fleet and the use of HVO fuel in our larger vehicles.

To minimise our carbon footprint, we actively procure more commercially sustainable assets into our hire fleet including those with solar, hybrid, electric and hydrogen technology. During FY2024 we invested £42.5m in our hire fleet, of which 63% was on commercially sustainable equipment, in the process bringing a world-first hydrogen powered access lift to market. We have a target to ensure that eco products account for 70% of our itemised equipment fleet by 2027.

During the year we acquired sustainable power solutions specialist, Green Power Hire Limited ('GPH') to supply Battery Storage Units ('BSU') to the UK rental market, enabling customers to achieve both financial and environmental savings compared to alternative systems available. We continue to experience strong demand from our current and potential new customers for eco products and sustainable power solutions and are seeing an increasing number of tenders specifically requiring BSUs. The acquisition has performed in line with our business plan and since purchase we have procured further units to enlarge our battery storage unit fleet and satisfy customer demand.

We also entered into a Joint Venture with AFC Energy plc, a leading provider of hydrogen powered generator technologies to form 'Speedy Hydrogen Solutions Limited'. This collaboration is providing the UK construction and temporary power market with AFC Energy's sustainable, zero emission temporary power solutions designed specifically for off-grid power. Through the JV we are providing an exclusive full-service hire model for an initial three-year period and are working with our National customers on their demand needs, signifying the growing demand for zero emission power solutions.

Further initiatives to reduce our carbon emissions include investing in modernising our Service Centre network. We installed building management systems into a number of trial locations with a view to reducing our energy consumption. During FY2024 these locations, on average, have achieved an annualised energy consumption reduction of 63.5%, representing c.£40k of efficiency per property.

We were proud to be awarded Gold Standard by EcoVadis, a leading provider of business sustainability ratings, which puts Speedy Hire in the top 5% of sustainable businesses globally. We were also named as a European Climate Leader for 2023 by the Financial Times and attained the RoSPA Presidents Award for achieving the RoSPA Gold standard for ten consecutive years.

People

We recognise that our people are the most important component of our business, and our ambition is to become a Times Top 100 place to work. Our People First strategy prioritises personal and professional development, wellbeing and equality, diversity and inclusion within the workplace. During the year we have invested in our people to provide fair pay, reward and development opportunities. We have introduced flexible working, and improved systems and processes to make it easier for them to work in their everyday roles.

We have introduced a series of initiatives to enhance our colleagues' experience and encourage loyalty, in the process reducing our voluntary attrition rate to record low levels. Examples include an investment of £7.2m in base pay for people working at our lower grade levels, improved colleague wellbeing through the roll-out of

Speedy Hire Work Life Balance to over a third of our colleagues and implementing the UN's Women Empowerment Principles to encourage more women into the business.

We are also preparing for the future by upskilling existing colleagues and attracting new talent to ensure we have the right levels of capability in future skills needed to achieve our Velocity strategy.

In addition, our Emerging Talent Development Board is a group of 11 from our brightest 'emerging talent' colleagues in our business. They are charged with developing themselves personally and professionally while working alongside the Executive Team in contributing to the strategic plans and delivering on complex business projects with female Chief Executive and Chief Financial Officers in position.

I would like to take this opportunity to thank all our colleagues for their resilience and relentless dedication to the business, whilst continuing to deliver a first-class service to our customers.

Outlook

We continue to make good progress with implementation of our Velocity strategy which is embedding a solid foundation for growth opportunities in the medium to long-term which will benefit our customers and people whilst enhancing shareholder returns.

The new financial year has started well with performance in line with Board expectations. After the year end, we have continued positive momentum, securing further contract wins and renewals.

As we implement a more efficient and streamlined service through enhanced AI driven data and system digitisation, keep close control of costs, and maximise growth potential through our strong visible pipeline in our core end markets, we look forward to delivering on these opportunities in the year ahead.

Dan Evans

Chief Executive

• Source - Glenigan Limited
• Scope 1, 2 & 3

Financial review

Our financial results for FY2024 demonstrate resilience in the face of cost inflation and well-documented macroeconomic uncertainty. Throughout all, we have maintained our commitment to our people, excellent customer service and progression of our Velocity strategy.

Revenue from our National customers was up marginally year on year, whilst our Regional customers traded 6% down in FY2024. We have observed some encouraging signs in the new financial year to date, with total revenues in line with expectations.

The contract wins achieved in FY2024 are encouraging, with the business securing additional annual turnover in excess of £40.0m across multi-year agreements with new and existing customers. This new business is underpinned by disciplined pricing and is a clear demonstration of the attractiveness of Speedy's customer proposition. Since the year end, further new contracts and extensions have been secured. As with prior periods, the Group expects a second half weighting to its revenues and profits in FY2025 as we mobilise these significant new contracts.

Our services business has performed well, although its pass-through revenues were impacted by the effect of a decrease in wholesale fuel prices. Margins were maintained in this segment.

Free cash flow4 is a key metric for the Group and in the year this increased to £23.5m (FY2023: £10.6m) following active working capital management.

In October 2023, the Group acquired the entire issued share capital of sustainable power solutions specialist, Green Power Hire Limited ('GPH') for an enterprise value of £20.2m. The acquisition has resulted in goodwill and other intangible assets of £10.9m. Since its acquisition, the GPH business has contributed £2.0m of revenue and £1.6m of EBITDA1 to the Group, which includes acquisition synergies of c.£0.8m. This trading performance is continuing to build as we target rate increases and invest further in the fleet to satisfy growing customer demand. More detail on the acquisition is provided in note 3.

In addition to the acquisition, in November 2023 Speedy Hire formed a joint venture, Speedy Hydrogen Solutions Limited ('SHS'), with our partner, AFC Energy Plc.

Net debt5 has increased to £101.3m as at 31 March 2024 representing leverage6 of 1.5 times (FY2023: £92.4m, 1.3x leverage). This follows the acquisition of GPH, which was funded from the Group's existing debt facilities.

Group financial performance

Total revenue for the year ended 31 March 2024 decreased by 4.3% versus FY2023 to £421.5m. Revenue (excluding fuel) decreased by 1.9% to £381.4m and revenue from fuel was £40.1m (FY2023: £51.9m). Hire rate increases and performance with our National customers have mitigated some of the softening of revenues with our Regional customers.

Gross profit7 was £230.0m (FY2023: £239.4m), a decrease of 3.9%. The gross margin7 increased to 54.6%

(FY2023: 54.3%), reflecting the lower proportion of pass-through fuel sales and our commitment to pricing discipline.

The share of profit from the joint venture in Kazakhstan returned to expected levels at £2.9m (FY2023: £6.6m), following a reduction in scale of the significant temporary power contract that gave rise to a record performance in FY2023.

Adjusted EBITDA1 decreased by 6.8% to £96.8m (FY2023: £103.92), however margins were held broadly flat at 23%.

Adjusted profit before taxation1 decreased to £14.7m (FY2023: £30.7m2), due to the decline in revenue and the impact of operational gearing on the business. Higher interest costs and reduced performance from our joint venture also contributed to the year on year decrease. ROCE8 declined to 9.9%, impacted by lower profits in the year.

The Group incurred non-underlying items before taxation of £9.0m (FY2023: £28.5m), further detail on which is given below.

After taxation, amortisation and non-underlying items, the Group made a profit of £2.7m, compared to £1.2m in FY2023.