HSS Hire trims interim loss as key customer accounts grow

HSS Hire Group reported a smaller loss in the first half of the year and said trading in the third quarter was ahead of last year, but analysts and investors remained cautious.

Revenue in the six months to 2 July swelled to £166.2m, a reported rise of 13.5% on the previous year, 12.8% on an organic basis or 9% on a comparable 26 week period.

Sales to smaller customers remained broadly flat, with growth coming from larger core equipment hire customers, specialist hire, with 41% growth from key accounts, which account for around 40% of group revenues, and even more from its OneCall service.

While earnings before interest, tax, depreciation and amortisation (EBITDA) were 11% to the good at £32.1m, at the reported level there was a £9.8m loss before tax, although this was an improvement on the £14.1m a year ago.

The loss per share was down to 6.6p versus 10.5p last time, while adjusted earnings per share were in positive territory at 0.1p versus a 2.3p adjust loss per share in 2015. The interim dividend was maintained at 0.57p per share.

Having earlier in the year reported of economic softness and a "very competitive" market, the company did not expand on the external conditions and said the loss before tax was mainly due to exceptional costs associated with the execution of management's new strategy.

Management reported "significant" progress on strategy, including that the new national distribution and engineering centre (NDEC) was now supporting 50% of the store network, with the ramp-up for nationwide coverage on track for completion by the end of the financial year.

"We are confident our new NDEC 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," said chief executive John Gill, Officer, who also lowered the guidance for capex to £40-45m from the previous £50-55m.

"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."

House broker Numis said it remained "cautious" and cut its EBITA forecasts for this year and next by 2-3% and forecast cash restructuring costs associated with the new NDEC and network optimisation of circa £10m.

Shares in HSS were down 5% to 81p by 1130 BST on Wednesday.