30.08.2017

HSS profits tank

UK rental company HSS has reported increased losses in the first half, on marginally lower revenues.

Total revenues for the six months were 3.4 percent lower at £160.5 million, due to depot closures and increased competition. The company closed a further 13 locations taking the total depot closures since the third quarter 2016 to 68. Rental revenues were over seven percent lower, while service revenues improved more than 10 percent.

Pre-tax losses for the period were £30.1 million, compared to a loss of £7.8 million in the same period last year. The company says that its cost saving measures - which include the depot closures and 92 layoffs - will total between £11 and £13 million. The company has also cut its net debt from £238.7 million to £230.6 million. The company also cut capital expenditure from £29.3 to £18.2 million, overall utilisation for the period was 72 percent for its specialist divisions, which include access, compared to 49 percent in the rest of its business.

Chief executive Steve Ashmore said: “While significant operational change was achieved during the first half, both rental revenue growth and the cost base were temporarily impacted leading to reduced profitability. We are facing into these challenges by taking decisive action to reinvigorate rental revenue growth through the implementation of new sales initiatives and by rolling-out cost actions that will deliver annualised cost savings of around £13 million, a number of which are enabled by the recent investment in our centralised engineering and distribution capability. As a result of these actions the group returned to profitability in June with revenue growth for the first eight weeks of the third quarter and this momentum will result in a stronger second half performance leading to a healthier exit rate as we head into 2018.”

“Whilst the rate of recovery in our rental revenues has been positive, it has been materially slower than originally targeted leading to lower than expected profitability over this period. The new leadership team is currently conducting a thorough review of the group’s strategy to gain profitable share in what remains an attractive and fragmented market. We will update the market on the outcome of this process during the fourth quarter.”

Vertikal Comment

This is more disappointing set of numbers than the company’s earlier trading statement suggested. HSS is still struggling to stem its decline in spite of a strong market. The problem is almost certainly due the extensive changes that the company has been undergoing this year, as it attempts to restructure the business.

The mention of another strategic review is a little disconcerting and hopefully will not send the company off in yet another totally different direction – stability is probably what it needs now more than anything. The company remains a major player in the UK rental market and even in the overall European market and has a great deal of potential.

It also has to be remembered that the new chief executive was only on board for four weeks of the first half, so any changes or improvements he may have in mind will not have had any impact yet. It is likely that he will be aiming to make the best he can of the second half, in preparation for a much better year in 2018.