Speedy Hire Strikes Commercial Agreement with ProService, Shares Surge

Speedy Hire plc (LON:SDY), a tool and equipment hire services company, announced a commercial agreement and investment in ProService Building Services Marketplace plc, a subsidiary of HSS Hire Group plc.

The markets reacted positively to the news, with shares experiencing a notable uptick in early trading.

The agreement involves Speedy Asset Services (SASL) entering into a comprehensive hire and services supply arrangement with HSS ProService Limited (to be renamed ProService Building Services Marketplace plc).

As part of the transaction, ProService plc will issue Speedy 79,368,711 shares, representing approximately 9.99% of ProService plc's post-subscription issued share capital. The total consideration payable by Speedy is £35 million, funded from existing resources.

Headline Numbers:

• Revenue Boost: SASL anticipates annual revenues of £50 million to £55 million from supplying ProService with core hire equipment.
• Earnings Accretion: The Commercial Agreement is expected to significantly boost Speedy's earnings and group operating margin in the first full financial year.
• Payback Period: Speedy projects a full payback of the £35 million consideration from operating cash flow within two to three years, excluding any potential cash return from its interest in ProService plc.
• Margin Improvement: The deal is expected to enhance group operating margin by an estimated +160bp to +180bp in the first full year post agreement.

This strategic move offers several benefits to Speedy. SASL gains a right of first refusal to supply ProService with core hire equipment, estimated to generate £50 million to £55 million in annual revenue.

Additionally, SASL, through its Lloyds British business, secures the right of first refusal for test, inspection, and certification services for ProService customers.

Speedy will also acquire HSS core equipment already on hire to ProService customers, directly benefiting from the associated revenue stream. The acquisition includes three HSS service centers, bolstering Speedy's network.

The agreement isn't solely one-sided; ProService will act as a fulfillment provider for Speedy's rehire and resale items, as well as industry-related training needs. This reciprocal arrangement strengthens both companies' service offerings.

The company's strong operating cash flow is expected to support meaningful deleveraging over the next 12-24 months. Speedy plans a reduction in dividend payments for a period up to the end of FY2028, with an anticipated total dividend of 1.00 pence per share for FY2026, growing by at least 5% per annum for each of FY2027 and FY2028, before reinstating it to historic levels.

Dan Evans, CEO of Speedy, commented, “This is a transformational agreement for Speedy, made possible by the progress of the Group under our Velocity growth strategy. It will provide Speedy customers with greater choice and an enhanced service, while providing ProService customers the ability to indirectly access our national network, larger equipment fleet and faster delivery capability.”

Speedy reiterated its five-year financial targets announced at the Capital Markets Day in July 2023, including revenues of approximately £650 million and increasing EBITDA margins to approximately 28%.

Completion of the transaction is expected by December 31, 2025, subject to customary closing conditions. Speedy's management anticipates leverage of c2.1x at the end of March 2026, and aims to reduce this in the following 12-24 months.