Hire Group HSS announce further losses

HSS Hire Group plc today announces results for the 26 week period ended 27 June 2015.

Financial Highlights for HSS Hire Group plc

  • Group revenue up 12.1% to £146.4m (H1 14: £130.6m), with organic growth of 10.6%
  • Adjusted EBITDA (2) flat at £28.9m (H1 14: £28.9m), due to plc and new branch start-up costs
  • Adjusted EBITA (3) down to £4.5m (H1 14: £11.3m) as investment in fleet led to higher depreciation
  • Loss before tax of £14.1m (H1 14: £11.1m loss); reduced financing costs partly mitigate Adjusted EBITA movement
  • Basic and diluted loss per share of 10.51p (H1 14: 19.61p)
  • Underlying basic and diluted loss per share of 4.45p (H1 14: 6.03p)
  • Interim dividend of 0.57p per share announced, payable in October 2015

 

Trading and Operational Highlights for HSS Hire Group plc

  • Results in line with guidance issued in the pre-close trading update issued 29 June 2015
  • Continued to grow market share against ongoing variable market backdrop
  • Local branch rollout continues: 27 new branches opened in H1 15 (H1 14: 8 branches)
  • Growth in Key Accounts in line with estimated overall market growth rates of low to mid-single digits
  • Strong growth in Specialist businesses, supplemented by acquisition of All Seasons Hire
  • Hire fleet utilisation further increased as targeted fleet investment continues – Last Twelve Months to end H1 15: 48% and 73% for the Core and Specialist businesses respectively (LTM to end H1 14: 46% and 69% respectively)

 

Current Trading and Outlook

  • Expect to continue growing market share through H2, despite variable market conditions – while July was in line with management expectations, trading has been softer in August
  • 2015 revenue growth (full year) is now expected to be in the range 8 – 11% and earnings for the full year now expected to be below current market expectations
  • Strategic progress continues, driving market share gains:

o 39 new local branches opened year-to-date, on track to reach 50 in FY15, 14 already in progress for FY16

o Healthy pipeline of Key Account opportunities

o Specialist businesses continue to grow strongly

  • Plans to open a new National Distribution Centre in H1 2016 providing local branch fulfilment are well developed. This will step change our distribution network and drive further improvements in customer availability also allowing us to leverage our e-commerce platform more effectively
  • Existing hub and spoke distribution network will focus exclusively on customer delivery and collection, further enhancing our service proposition
  • Rebase of cost structure to reduce operational gearing, targeting cost savings of between £8m and £12m in FY16 and £1.5m and £3m in Q4 15
  • Capex investment will be below FY14, matched to expected customer demand
  • Assessing further cost saving opportunities through refinancing in 2016

 

Commenting on the half year results and trading outlook, Chris Davies, Chief Executive Officer, said:

“Our results for the first half of 2015 are in line with our update at the end of June, with revenue growth of 12% and further gains in market share. However, as others have reported, trading continues to be unpredictable, and after a reasonable July, we have seen softer market conditions in August. This is obviously disappointing. As a result we are cautious on the outlook for the balance of the year and now expect full year earnings to be below current market expectations.

 

“Notwithstanding this, we are confident that our strategy is continuing to underpin our market share progress. We are seeing strong growth in the specialist businesses as a result of our investment. We are building our Key Accounts pipeline and our roll-out of local branches is progressing to plan with 50 openings this year.

 

“We are making good progress in our plans to open a new National Distribution Centre in H1 2016, which will further increase availability for customers. This will also enable us to fully exploit our market-leading online proposition. Furthermore, this development will allow our existing hub and spoke network to concentrate exclusively on customer deliveries and collections, enhancing service levels. It will also contribute to the rebasing of costs in the range of £8m and £12m in 2016 with between £1.5m and £3m being delivered in Q4 2015. Despite the softer August we remain confident in the medium and long term growth prospects for the business.”

Hire Group HSS announce further losses
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