Shares of Speedy Hire plc, the Newton-le-Willows-based equipment hire firm, rose about 5% on Monday after it announced it sold a business in the Middle East for $18 million and that its trading since September 30, 2020, has been ahead of expectations. 

“The group’s Middle East operations provide equipment and manpower services to the oil and gas market in Abu Dhabi; the principal customer is ADNOC Logistics and Services LLC (ADNOC),” said Speedy Hire.

“The group has undertaken work for ADNOC since 2012, initially on a five year term but subject to regular renewals subsequently.

“The contracts with ADNOC expired on 28 February 2021.

“The group has today sold its equipment fleet, stock and other fixed assets relating to its Middle East business to ADNOC, for a consideration of USD18 million.

“The transaction, which comprised gross assets with a net book value of c.USD16 million concludes the group’s obligations under its contracts with ADNOC.

“In the year ended 31 March 2020, the Middle East operations generated operating profit of £5.4m; for the six months ended 30 September 2020 operating profit was £1.8m. 

“The consideration was paid in cash in full on completion; in addition outstanding trade receivables from ADNOC of c.$12 million are payable within 30 days.

“The net proceeds, after settlement of creditors, will be applied in reduction of group borrowings.

“The transaction included the group entering into a Transitional Services Agreement (TSA) with ADNOC for up to four months, to support the transfer of the assets, during which time it is anticipated that the group’s c.600 UAE-based employees’ contracts will be terminated and all colleagues offered re-employment by ADNOC.

“On conclusion of the TSA the group intends to wind up its operations in the Middle East.

“The group’s international business continues to operate the Kazakhstan JV, which is performing in line with expectations.”

In its trading update for the year ending March 31, 2021, Speedy Hire said: “Trading since 30 September 2020 has been ahead of the board’s expectations. 

“Revenue has improved as activity levels have continued to increase.

“In February 2021, core hire revenue in the UK and Ireland was c.2% higher than the prior year; utilisation for the period 1 October 2020 to date is 58.7% (2020: 56.2%).

“Underlying overhead costs across the group remain tightly controlled. The group has not utilised government furlough or loan schemes in the second half of the financial year.

“As a consequence of stronger than expected revenue recovery, profit before tax for the year ending 31 March 2021 is anticipated to be well ahead of current market expectations.”

Speedy Hire CEO Russell Down said: “The successful exit from the Middle East operations is an important strategic step for Speedy and we wish the whole of the ADNOC team every success in the future.

“Looking ahead, we are well positioned to take advantage of the market opportunities in the UK and Ireland as activity levels continue to improve.”