PLANT hire group Speedy Hire expects to deliver an operating profit in the second half of its current financial year.

In a trading update today the Newton-le-Willows group said it is trading in line with expectations for an adjusted annual profit before tax, despite an operating loss, excluding amortisation and exceptional items, of £4.6m in the first half.

The group, which has been affected by reduced capacity in the recession-hit construction sector, said that despite the harsh weather conditions in December and a fall in UK construction sector output in the quarter ended December its revenues, excluding fleet equipment sales, rose by 8.8% in the three months to December 31, compared with the corresponding period last year.

The first two quarters of the current financial year had seen revenue declines.

Fleet equipment sales revenues of £1.3m in the same quarter were 23.1% up on the prior year.

January trading was also encouraging, excluding fleet equipment sales, showing a 2.1% increase on January 2010.

Trading in the new international and branded and advisory services divisions produced a combined turnover of £2.6m in the quarter to December 31, which is a 225% improvement on a year ago and demonstrates the potential of both arms.

Speedy Hire says continued revenue growth in the final quarter of the financial year should help “significantly” reduce first half operating losses.

Group debts of £126m by the end of January were better than forecast and it is estimated that strong cash management, a reduction in predicted capital expenditure for the year and better IT systems and management of assets will bring net debt down to around £119m, similar to March 2010.

Today’s statement concluded: “The board continues to take a cautious view about short term recovery prospects in the UK and therefore will maintain its concentration on cash, margins and capital expenditure, all of which have demonstrated further progress during the period.

“However, with its strong balance sheet, improving trading performance, market leading position and ever closer alignment to growth markets, the board considers that Speedy is well placed to benefit from the market recovery when it comes.”

Liverpool stockbroker Panmure Gordon reiterated its ‘buy’ recommendation on Speedy’s stock, today, saying: “Trading in Q3 has been very much as expected in overall terms, despite the bad December weather, and supports our view that Speedy is very much over the worst.

“Debt looks better than forecast after the impact of new IT systems and improved asset management controls, with a lower than expected three year capX (capital expenditure) requirement.”