Last week’s AGM Statement from 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, was very encouraging.
However, the AGM news was that the business had performed well in the year to date, despite continuing challenging conditions in some of its end markets.
The group is encouraged by the new government's plans, although at an early stage, to support residential housing market growth, and it looks forward to long-term infrastructure projects continuing to be supported.
Hire revenue is in line with this time last year, with expectations that there will be a second-half weighting to revenues and profits as it continues to mobilise its significant contract wins.
Steps to mobilise the group's new contract with Amey are in hand and it is anticipated that this will generate revenue in the final quarter of the company’s financial year.
The group remains well positioned to respond quickly to changes in market conditions and to capitalise on future opportunities, benefitting from its diverse end market exposure, broad customer base and the progression of its Velocity strategy including operational efficiencies.
Overall, trading is in line with the Board's expectations for the full year.
Investors will have to wait another month to find out just how well it has continued to trade in its first half-year, with its Interim Results due in mid-October.
Analyst Joe Brent at Panmure Liberum rates the group’s shares as a Buy, looking for 47p a share, compared to the current 37p.
He is expecting the stronger second half to help the revenues for the year to end-March 2025 to pick up to £446m (£422m), while perking its pre-tax profits up to £24.1m (£14.7m), hoisting its earnings from 2.3p to 3.9p and paying a same again 2.6p dividend.
For 2026 he sees £465m sales, £30.2m profits, 4.9p earnings and a 3.0p per share dividend.
Pushing further ahead he considers that £485m revenues is possible in 2026, with £37.1m profits, 6.0p earnings and a 3.5p dividend.
He states that:
“The new government has set ambitious housebuilding plans for councils to be given mandatory housing targets to deliver 1.5m new homes.
This will be hard to achieve, but there is a likelihood of increased housebuilding activity.
While there will inevitably be some infrastructure cuts as government seeks to balance the books, we remain upbeat about many new areas, such as Water, Energy Transition, Rail and Nuclear.”
This group is still recovering from its recent challenges, but it is doing so convincingly.
Its shares, which have been up to 41.44p in the last year, are currently just 37p.
I now confidently set a new Target Price of 46p.
(Profile 15.10.19 @ 52p set a Target Price of 75p*)
(Profile 01.06.22 @ 47p set a Target Price of 60p)
(Profile 11.09.24 @ 37p set a Target Price of 46p)
Comments