Shares of Speedy Hire plc, the Newton-le-Willows-based tools and equipment hire firm, fell about 11% after it said it “identified a deficiency in the value of non-itemised assets” of £20.4 million, triggering an “external investigation.”
Speedy Hire said it is reviewing the “appropriate accounting treatment of the deficiency.”
It said while this is expected to result “in a one-off non-cash write down of the balance sheet value of non-itemised assets in the year ending 31 March 2023, it is not expected to impact the group’s cash position or underlying profit performance.”
The company that said following recommendations made at the end of the audit for the year ended March 31, 2022, it recently carried out a comprehensive count of all hire equipment in preparation for the upcoming 2023 audit.
“As at 31 March 2022, the reported net book value of the group’s hire equipment assets was £226.9m,” said Speedy Hire.
“The company categorises hire equipment into two groups: those that are individually identifiable by a unique serial number to the asset register (‘itemised assets’, representing 78%, or £177.0m, of the total reported net book value), and other equipment such as scaffolding towers, fencing and non-mechanical plant which does not have a unique serial identifier and is not tracked on an individual asset basis (‘non-itemised assets’, representing 22%, or £49.9m, of the total reported net book value).
“The recently completed comprehensive count has covered both itemised and non-itemised assets. Whilst this count validated the previously disclosed net book value of itemised assets, it identified a deficiency in the value of non-itemised assets of c.£20.4m …
“The board has instigated an external investigation into the issue identified with non-itemised assets, including a review of controls and accounting procedures.
“In addition, management has strengthened the control environment for managing its non-itemised asset fleet, including weekly perpetual asset counts with additional internal audit focus, enhanced control over purchases and disposals, and monthly reconciliations against the fixed asset register.
“These actions will be further considered in conjunction with the findings of the external investigation, including any further changes to controls and processes as appropriate.”
Otherwise, Speedy Hire reported no change to the board’s underlying expectations for 2023.
“In the second half the new management team’s operational review has included further progress in the evolution of the depot network towards larger, more energy efficient low-carbon facilities, located and designed to create a better experience for all customers and an enhanced working environment for our colleagues,” said the company.
“This has resulted in a net 20 depot reduction at the end of January 2023. The cost of these closures will be c.£2.9m and will be taken as an exceptional cost in the financial year. The associated benefits are expected to be in the region of £2.9m per annum.
“The group continues to perform well in the second half, with its revenue (excluding disposals) for the four months to 31 January 2023 up c.16% against the corresponding period in the prior year and apart from any effects of the asset loss described above, the board continues to be confident in delivering underlying profi in line with its expectations for the full year.”