05.04.2018

£85 million loss for HSS

UK rental group HSS has reported its full year results for 2017 with slightly lower revenues and a substantial loss.

Full year revenues at the company, which owns UK Platforms, were just under two percent lower at £335.8 million. This reflects a 5.7 percent drop in rental revenues, largely driven by branch closures, and a 10.6 percent gain in the Services operation which includes training and its One Call re-rent operation.

The rental business was adversely affected by the core tool hire business, while UK Platforms and other specialist divisions reported revenue and profit growth. In spite of substantial cost savings, the company reported a pre-tax loss of £85.2 million, compared to a loss of £17.4 million in 2016. Most of the loss was due to £66.6 million worth of exceptionals/write offs, involved with the closure of over 55 branches, including over £6 million in lease exit fees and over £8 million of property reparations/dilapidations.

In the second half revenues were roughly the same as last year at £175.3 million with a pre-tax loss in the region of £48 million – due entirely to £54 million of exceptional charges/write offs, without which it would have made a pre-tax profit in the region of £6 million. Capital expenditure was cut to £34.8 million from £47.4 million in 2016 but net debt increased around six percent to £232.7. The company has agreed with its lenders to extend its £80 million revolving credit line until July next year.

Chief executive Steve Ashmore said: “Overall 2017 was a difficult year for HSS, mainly due to the impact of operational changes made in 2016. We have addressed this by focusing on the core rental business and reducing our cost base and I am pleased with how the business responded in the second half of the year. When I arrived in June, I instigated a thorough strategic review process, the results of which have given us clear direction and an ambition to restore the business to historic levels of performance. Whilst we are only a few months into implementing the strategy, early signs are encouraging, and we are pleased with the results of the changes made to our network and the associated cost savings.”

“I have been particularly pleased with how the organisation has embraced and responded to the new strategic direction and remain confident that we will be successful in delivering on our strategic priorities set out in December.”

“Looking ahead the positive trading momentum has continued into the first quarter. This strong start to 2018 and good progress made on our strategic priorities gives me growing confidence the business can deliver on its full potential.”

Vertikal Comment

HSS was - and perhaps still is - in a bit of a mess, however it does appear to be dealing with the situation now and could see a profitable year in 2018. The relatively low capital expenditure in 2017 is a concern, but this may well have been a result of the extensive branch closure programme than anything else.

The company says that it reduced central staffing by 100, which suggests that in spite of recent challenges it was still grossly over staffed and over centralised. It is now beginning to roll out P&L responsibilities to the regions, both of these moves could provide a substantial performance boost, as others have found in recent years.

It is encouraging to hear that the aerial lift business continues to grow in terms of both revenue and profits, but what is amazing is how the country’s leading tool hire business morphed into an operation that has required such major restructuring.

The company’s balance sheet has taken a major hammering in 2017, which will not help with the refinancing programme. But in summary there is a feeling that the business is being stabilised and that barring any market surprises 2017 might just prove to be the turning point for HSS.

Always the optimist.