31.08.2016

HSS cuts loss on higher revenues

UK rental company HSS has reported its half year results, with revenues up 13 percent and a reduction in its pre-tax loss.

Total revenues for the period were £166.2 million, 13.5 percent higher than for the same period last year. Most of the growth came from the specialist businesses which includes UK Platforms, training and its One Call rehire/sourcing service. The company also managed to reduce its pre-tax losses from £14.1 million to £9.8 million.

Much of the loss is put down to exceptional or one off costs, including the expense of its new National Distribution and Engineering Centre which cost £5.9 million during the period, and other restructuring costs totalling £7.1 million. However at the same time it saved over £7 million in finance costs, in spite of a £20.6 million increase in net debt to £238.7 million.

Overall utilisation for the period increased by two percentage points to 50 percent, while utilisation in its specialist businesses, which includes UK Platforms jumped three percentage points to 76 percent helping boost revenues by 8.9 percent. The company is cutting its capital expenditure plans for the year to £40 to £45 million and says that the third quarter has started well and is ahead of the same period last year.

Chief executive John Gill said: “I am pleased to report strong revenue and underlying profit growth in the first half of the year reflecting the positive impact of our revised strategy. Customers are increasingly seeing HSS as a single source provider of tools, equipment and related services and our trading growth reflects this. Our focus on capital and operational efficiency shows through in our utilisation rates and our EBITA margin, both of which have continued to improve through the second quarter.”

“We are confident our new National Distribution and Engineering Centre will position us well for scale and volume growth and, combined with our e-commerce platform and national branch footprint, will further enhance our customer proposition by transforming availability within our sector. The Board believes we are well positioned to take advantage of, and continues to look for, opportunities to increase scale for the benefit of customers and shareholders.”

Vertikal Comment

While the bottom line and debt position are clearly not good news, the results do suggest that the company is making solid progress which should start to generate a positive bottom line by the start the new financial year. What is also clear is that those investors and analysts that believe a merger with Speedy will solve the problems of both companies, they may need to think again. Such a move would almost certainly prove to be a blessing for the competitors of both companies.

Shareholders would do well to give HSS another six to 12 months to get sorted, if it can implement better pricing discipline and hold onto its higher revenues, it could post a reasonably positive 2017. It will need to keep an eye on the age of its fleet though. It needs to be spending around £65 million to keep its average age at a realistic and profitable level.