REG - HSS Hire Group PLC - Half-year Report
29/09/2022 07:00
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RNS Number : 0758B HSS Hire Group PLC 29 September 2022
HSS Hire Group Plc
Double digit growth, improved returns and dividend reinstated
HSS Hire Group plc ("HSS" or the "Group") today announces results for the 26
week period ended 2 July 2022
Financial Highlights (Unaudited) H1 2022 H1 2021 Change Like-for-like(2) change
Continuing operations(1) (26 weeks to 2 July 2022) (27 weeks to 3 July 2021)
Revenue £159.9m £146.3m 9.3% 11.3%
Adjusted EBITDA(3) £32.9m £32.8m 0.4% 5.6%
Adjusted EBITA(4) £13.6m £13.1m 3.6% 18.3%
Adjusted profit before tax(5) £8.4m £0.8m £7.6m £9.2m
Adjusted basic EPS 0.96p 0.09p 0.87p 1.10p
ROCE(6) 23.8% 19.2% 4.6pp
Net debt leverage(7) - non IFRS16 0.9x 1.7x 0.8x
Net debt leverage(7) - IFRS16 1.5x 2.0x 0.5x
Other statutory extracts (2021 comparators including non-recurring
credits(8)of £9.0m)
Operating profit £10.2m £18.1m £(7.9)m
Profit before tax £6.5m £6.8m £(0.3)m
Basic EPS 0.86p 0.96p (0.10)p
Like-for-like performance excludes the impact of the following non-recurring
benefits in 2021: additional week's trading and COVID related income from a
business interruption insurance claim and the Republic of Ireland wage subsidy
scheme
· Solid trading performance with capital-light Services business
like-for-like(2) growth of 16%
o H1 22 like-for-like(2) revenues 11% ahead of H1 21
o Services business growth enabled by technology and broadening the rehire
partner network
o Rental revenue like-for-like(2) growth of 9% with utilisation of 56%,
maintained at high levels on larger fleet
o Strong price management and cost discipline navigating through inflationary
pressures
· Underlying earnings progression and improved returns.
o Like-for-like(2) Adjusted EBITDA and Adjusted EBITA up 6% and 18% respectively
with Adjusted EBITA margin increased 0.5pp to 8.5%
o Significant increase in Adjusted profit before tax and Adjusted basic EPS
through improved margins and lower interest cost
o Technology-led, lower-cost operating model driving an increase in ROCE to
23.8% (H1 21: 19.2%)
· Robust balance sheet with leverage at 0.9x(9)
o Net debt(9) £49.3m, materially lower than H1 21 (£97.6m) following
completion of strategic divestitures in 2021
o Reduced exposure to interest base rate changes following successful 2021
refinancing
· Delivery of technology roadmap ahead of plan; well positioned to build on
strong H1 performance
o New operating model built around HSS ProService (customer acquisition and
enquiry conversion) and HSS Operations (fulfilment and service) driving
growth; legal restructuring completed 3 July
o Low-cost builders merchant network expanded to 60 locations (June 21: 43), and
delivered 15% growth on a same stores basis(10)
o Continued technology investment improved enquiry conversion to 73% with over
20% of transactions through our online channel
o Received EcoVadis(11) sustainability Advanced award; rated at 91(st)
percentile in our industry
· Current trading and outlook
o Revenue growth of 10% in Q3 22 to date with EBITDA and EBITA in line with
management expectations
o Management remains confident that full year EBITA will be in line with market
expectations
o Capex investment forecast for 2022 is unchanged with £5-£10m to support
delivery of our technology roadmap
o Significantly strengthened balance sheet and continued positive trajectory
supports reintroduction of dividend with interim dividend of 0.17 pence per
share declared, payable on 2 November 2022 to shareholders on the register as
at close of business on 7 October 2022(12)
Steve Ashmore, Chief Executive Officer, said:
"I am very pleased with our performance in the first half of 2022. Despite the
volatile macroeconomic backdrop, we achieved double-digit revenue growth with
our capital-light, technology-led business providing flexibility and the data
to deliver for our customers while effectively managing prices to navigate
inflationary pressures. The Board's decision to reinstate the dividend
reflects the confidence it has in our long-term growth strategy.
We have continued to invest in our digital capabilities, achieving key
milestones on our technology roadmap ahead of schedule, which will underpin
the future growth of our two businesses: HSS ProService and HSS Operations.
The roadmap includes the rollout of our new portal for larger customers - a
self-service platform where all hire requirements can be efficiently managed
in one place. Our first customer is already being onboarded with significant
expansion to come in the next 12 months.
While mindful of the macroeconomic backdrop we are confident that full year
EBITA will be in line with market expectations as our operating model
continues to drive growth and further cement our position as a technology
leader within the industry."
Notes
1) Results for H1 22 and H1 21 are on a continuing operations basis
(excluding Laois Hire Limited and All Seasons Hire Limited sold in April 2021
and September 2021 respectively)
2) Like-for-like performance excludes the impact of the following in
2021: additional week's trading and non-recurring COVID related benefits
associated with a business interruption insurance claim and the Republic of
Ireland wage subsidy scheme
3) Adjusted EBITDA is defined as operating profit before depreciation,
amortisation, and exceptional items. For this purpose depreciation includes
the net book value of hire stock losses and write offs, and the net book value
of other fixed asset disposals less the proceeds on those disposals
4) Adjusted EBITA defined as Adjusted EBITDA less depreciation
5) Adjusted Profit before tax defined as profit before tax excluding
amortisation of brand and customer lists and exceptional items
6) ROCE is calculated as Adjusted EBITA for the 52 weeks to 2 July
2022 divided by the average of total assets less current liabilities
(excluding intangible assets, cash and debt items) over the same period
7) Net debt leverage is calculated as closing net debt divided by
adjusted EBITDA for the 52 weeks to 2 July 2022 (prior year 53 weeks to 3 July
2021).
8) Non-recurring credits include release of onerous property cost
provisions, business interruption insurance claim and benefit under the
Republic of Ireland wage subsidy scheme
9) Non-IFRS16 basis
10) Merchant locations open for comparable period in both H1 22 and H1
21
11) EcoVadis is one of the world's largest providers of business
sustainability ratings, assessing over 90,000 companies worldwide
12) All dividends will be paid in cash and no scrip dividend, other
dividend reinvestment plan or scheme or currency election will be offered to
shareholders. Ex-dividend date of 6 October 2022
-Ends-
Disclaimer:
This announcement has been prepared solely to provide additional information
to shareholders and meets the relevant requirements of the Disclosure Guidance
and Transparency Rules of the Financial Conduct Authority. This announcement
should not be relied on by any other party or for any other purpose.
This announcement contains forward-looking statements relating to the
business, financial performance and results of HSS Hire Group plc and the
industry in which HSS Hire Group plc operates. These statements may be
identified by words such as "expect", "believe", "estimate", "plan", "target",
or "forecast" and similar expressions, or by their context. These statements
are made on the basis of current knowledge and assumptions and involve risks
and uncertainties. Various factors could cause actual future results,
performance or events to differ materially from those described in these
statements and neither HSS Hire Group plc nor any other person accepts any
responsibility for the accuracy of the opinions expressed in this presentation
or the underlying assumptions. No obligation is assumed to update any
forward-looking statements.
Notes to editors
HSS Hire Group plc provides tool and equipment hire and related services in
the UK and Ireland through a nationwide network of Group companies and
third-party suppliers. It offers a one-stop shop for all equipment through a
combination of its complementary rental and re-hire business to a diverse,
predominantly B2B customer base serving a range of end markets and activities.
Over 90% of its revenues come from business customers. HSS is listed on the
AIM Market of the London Stock Exchange. For more information please
see www.hsshiregroup.com (http://www.hsshiregroup.com/) .
For further information, please contact:
HSS Hire Group plc Tel: 020 3757 9248 (on 29 September 2022)
Steve Ashmore, Chief Executive Officer Thereafter, please email: Investors@hss.com
Paul Quested, Chief Financial Officer
Greig Thomas, Head of Group Finance
Teneo
Tom Davies Tel: 07557 491 860
Charles Armitstead Tel: 07703 330 269
Numis Securities (Nominated Adviser and Broker) Tel: 020 7260 1000
Stuart Skinner
George Price
Chief Executive Officer's Report
The first six months of 2022 has seen the business continue to deliver
increasingly impressive results. With strong like-for-like revenue growth on
improved Adjusted EBITA margins, combined with further improvement in returns,
our operating model is performing well.
Our business reorganisation was finalised with the incorporation of HSS
ProService which we completed on 3(rd) July, creating a business focused on
customer acquisition, sales enquiry conversion and leveraging our digital
assets. Our technology roadmap is ahead of schedule, helping our asset-light,
technology-focused ProService business deliver exciting results and putting us
in a strong position for further profitable growth.
Technology Roadmap
In our FY21 results presentation we set out our technology roadmap for 2022
which involved four key milestones for our technology development. I am
pleased to report that, following a period of successful development, we are
ahead of plan:
1. Cash transactions through HSS Pro. HSS Pro is the interface
colleagues use to fulfil enquiries which we rolled out for all account-based
transactions in 2021. We have now added the necessary functionality to allow
colleagues to fulfil enquiries for cash customers (including ID-checking and
payment-processing). We have just started rolling this out and with
significant improvements in the user journey, we forecast much better
conversion rates and strengthening enquiry levels, mirroring our experience
with the initial rollout of HSS Pro.
2. Extended rehire range available on hss.com. Our rehire revenues
have for a long time grown ahead of the Group, despite limited visibility and
no transactional functionality for these products on our website. We are now
completing the development of our platform that will allow us to surface an
extended range of products on our website and enable customers to complete a
seamless end-to-end rehire transaction online. This tech is currently in test,
and we expect to roll it out in Q4, driving up page views and conversion rates
amongst trade and retail customers.
3. Enhance the ProService platform. This interface to our technology
provides larger customers with the ability to efficiently manage and control
their building services requirements on a single platform, including the
procurement of equipment hire and other related services such as equipment
sales, waste management, training and potentially more. We have commenced the
rollout to one of the UK's top 20 construction companies, which will use this
platform within its procurement team. We also have agreement with our number
one strategic account to transfer their business to this platform in Q1 23. We
are very excited about the prospect of offering this technology to many more
key accounts next year, increasing our share of their wallets.
4. Further development of the supplier portal. Following enhancements
to the supplier interface, we are now promoting reciprocal business from
suppliers who can use the platform to source equipment for their customers
that they cannot otherwise fulfil. This allows them to benefit from our
network of suppliers, improving their own proposition and returns.
In summary, all four elements of our 2022 roadmap will be rolled out in the
near term, leaving the HSS ProService business well poised for its next stage
of growth.
Builders Merchant Network Expansion
In H1 2022 we increased the number of builders merchant locations from 53 to
60, and they now typically account for 15-20% of transactions raised in
England and Wales. The 60 locations provide customers with a convenient
location to collect equipment alongside their building materials, saving them
time during their busy working day. We have 18 builders merchant partners all
of whom have provided positive feedback on the mutually beneficial
partnerships. We continue to benefit from access to the merchants' customer
base and footfall, and the combination of our brand and service offering
strengthens their overall customer proposition. This channel delivered 15%
like-for-like growth in H1 22 and we continue to be delighted with the way in
which these partnerships are maturing.
Incorporation of HSS ProService
In 2021 we began to reorganise our business into two divisions to bring new
focus on how we acquire customers and then fulfil their requirements. We
recently completed the legal separation of the two businesses. Our newly
incorporated ProService business is an asset-light, technology-driven
marketplace business with 27,000 customers and over 600 suppliers, all
connected through our technology platform Brenda. The platform provides
customers with access to the full market of hire equipment with, we believe,
the broadest range of products and best availability in our industry. The
platform provides suppliers with low-cost access to lots of customers, and the
ability to drive utilisation and returns. We are very excited about the growth
prospects for our ProService business, together with our HSS Operations
business which is the primary supplier to it.
HSS Operations
In H1 2022 our HSS Operations business completed the rollout of route
optimisation software (Satalia). This technology has been embedded into the
operation of our transport teams in Customer Distribution Centres and is
delivering improved efficiency as well as maintaining delivery performance at
99%. Average mileage per job has reduced by 12%, helping us to reduce scope
one carbon emissions and to counter inflationary pressures. With the
technology embedded we can begin the second phase of this project, which will
be delivered in 2023 and result in an improved delivery time window
proposition being available for customers at the point of order.
Our HSS Operations business continues to deliver strong performance metrics
beyond transport efficiency. Accident frequency rates are materially lower
than FY21, and these were already at historically low levels. Fleet
utilisation remains high at 56%, supporting the Group's excellent ROCE. Click
and collect adoption remains strong at 16%.
ESG Progress
In June 2022 we published our first ever ESG Impact report, which sets out our
2040 Net Zero plan, our ESG targets and the progress we are making. The report
has been exceptionally well received by a broad selection of stakeholders, who
are pleased to see the progress made and the ambitious plans we have set out.
In August 2022, following an extensive evidence-based assessment by EcoVadis,
we were awarded their 'Advanced' sustainability rating award. EcoVadis is the
world's largest provider of business sustainability ratings, assessing over
90,000 companies worldwide, and we are delighted that they have placed us in
the 91(st) percentile of businesses in our industry for ESG performance.
Market Outlook
Despite inflationary pressures and uncertainty created by the war in Ukraine,
we have seen resilience across the broad range of end markets our business is
exposed to. Whilst uncertainty remains, the construction output forecasts in
the market continue to point to growth in 2023 and 2024. We are confident that
should the outlook worsen, our flexible, low-cost business model and strong
balance sheet puts us in the best possible position to outperform the sector.
In summary, during H1 2022 we finalised the reorganisation of our business,
made great advances on our technology roadmap and delivered an impressive set
of financial results. All this while operating safely, maintaining high levels
of customer service and pursuing our ambitious ESG targets. I would like to
thank all stakeholders and in particular our colleagues for their great work
and its part in delivering these results.
Group Financial Performance
Results and commentary are presented on a continuing operations basis unless
otherwise noted, reflecting the impact of the strategic disposals of Laois and
All Seasons Hire in April and September 2021 respectively.
Revenue and segmental contribution
The H1 22 results are based on 26 weeks of trading whereas H1 21 was 27
weeks. Revenue growth metrics versus H1 21 have been adjusted to exclude the
impact of this additional week as well as non-recurring COVID related benefits
in H1 21 associated with a business interruption insurance claim and the
Republic of Ireland wage subsidy scheme (with the adjusted metric shown in
brackets).
Revenue in H1 22 was £159.9m, 9% (11%) higher than the previous period (H1
21: £146.3m), a solid trading performance delivered through effective
strategy execution in a difficult macro-environment. The Group has managed
well-documented inflationary pressures through continued price management.
Turning to segmental performance, Rental and related revenues were £99.3m in
H1 22 (H1 21: £92.9m), 7% (9%) higher than in H1 21, and with a high level of
utilisation at 56% despite a larger fleet. Contribution is £64.9m (H1 21:
£64.8m). Margin decreased to 65.3% (H1 21: 69.7%) with continued strong price
management offset by the increased cost of fuel impacting revenue mix to the
detriment of margin.
Services revenue has increased by 13% (16%) to £60.6m (H1 21: £53.4m).
Contribution increased to £9.1m (H1 21: £7.7m). Margins have increased by
0.6pp at 15.1% (H1 21: 14.5%) with the overall performance driven by improved
customer experience (via ongoing technology enhancements and broadening the
third party rehire supply chain) and record profit levels in the Training
business.
Costs
In October 2020 the Group implemented a new digitally led operating model,
reducing the fixed cost base by £15m. During H1 21 significant financial
benefit was achieved due to the early surrender of property leases (£7.4m)
which resulted in the release of related provisions and liabilities. These
non-recurring items mask the ongoing benefit from the new operating model and
the disciplined cost control that has been maintained since then.
Cost of sales increased to £81.3m during the period (H1 21: £71.0m) driven
by the growth in the Services business but also as a result of the increase in
resale fuel prices noted in the segmental commentary above.
Distribution costs increased by £2.1m to £14.4m (H1 21: £12.4m). Costs have
been tightly managed but have increased due to the combined impact of higher
road fuel prices and a volume driven uplift in activity, as well as additional
payments made to colleagues in H1 22 to support them through the
cost-of-living challenge.
Administrative expenses increased by £8.1m to £53.2m (H1 21: £45.1m)
however the prior year benefited by £7.5m from property liability releases
following surrender of a significant number of non-trading stores and the
current year includes £0.7m of exceptional expenses principally related to
the Group's restructure (see below) all of which have been treated as
exceptional. Excluding these items, costs are broadly flat despite one-off
payments being made to colleagues as part of the cost-of-living support noted
above.
Net finance expenses
Net finance expenses have reduced by £7.6m, following the successful
refinancing completed in November 2021, which saw the Group reducing its level
of senior finance facility to £70m and achieving a significant reduction in
the interest rate.
Other operating income
Other operating income of £0.3m relates to sub-let income on property space
not required by the Group. In the prior year £1.6m was recognised with £1.2m
received under a COVID-19 business interruption insurance claim, £0.2m
release of provision held against Irish Temporary Wage Subsidy Scheme 2020
receipts and the balance being sublease rental income.
Exceptional items
Total exceptional items of £0.6m have been recognised in the period. Cost of
£0.9m relates to completing the legal separation of the ProService and HSS
Operations businesses into separate entities. The separation will create
better visibility of results and allow increased focus on delivery within each
business. The actual separation took place after the reporting date.
Revisiting the discount rate on the Group's onerous contract provision
resulted in a credit of £0.2m and £0.2m was released from provisions for
closed stores. In the prior year, an exceptional credit of £7.4m was
recognised, the result of efforts to negotiate and complete early surrenders
on stores closed as part of the Group's acceleration of strategy announced in
October 2020.
Profitability
Adjusted EBITDA of £32.9m in H1 22 is slightly higher than the prior period
(H1 21: £32.8m), however as noted above, the prior year benefited from an
additional week's trading as well as £1.6m of COVID related income and cost
recovery. Adjusting for these items, EBITDA is 6% ahead of the prior year as
the Group's lower cost operating model and investments in technology continue
to deliver.
Adjusted EBITA increased from £13.1m in H1 21 to £13.6m in H1 22 with margin
decreasing slightly from 9% in H1 21 to 8% in the current year. Adjusting for
the additional week's trading and non-recurring COVID related income, EBITA
margins increased by 0.5pp.
The result of the drivers noted above is that the Group recognised a
much-improved Adjusted profit before tax of £8.4m versus £0.8m in the prior
period. The Group has changed the definition of Adjusted profit before tax to
include amortisation of software (refer to note 19). Profit from continuing
operations before tax decreased slightly to £6.5m (H1 21: £6.8m) reflecting
the significant impact of exceptional credits in the prior year.
The improved profitability led to the adjusted basic earnings per share
increasing to 0.96p in H1 22 from 0.09p in the prior period. Basic earnings
per share were 0.86p versus 0.96p in the prior period. The diluted basic
earnings per share were only marginally lower at 0.84p versus 0.93p in H1 21,
despite the prior period benefitting from the material non-recurring items
already highlighted.
Profit from discontinued operations (H1 21)
To enable the Group to strengthen its balance sheet and focus on its strategic
priority to Transform the Tool Hire Business, the Group made two strategic
divestments during the year ended 1 January 2022:
Laois Hire Services Limited
Laois Hire Services Limited, the Irish large plant hire business, was sold to
Briggs Equipment Ireland Limited on 7 April 2021. Proceeds of the disposal,
net of transaction costs, were £10.0m generating a profit on disposal of
£3.2m.
All Seasons Hire Limited
All Seasons Hire Limited, a cooling and heating provider, was sold to Cross
Rental Services Limited with the transaction completing on 29 September 2021.
Proceeds of the disposal, net of transaction costs, were £54.3m generating a
profit on disposal of £38.0m. In the H1 21 comparator the All Seasons Hire
result has been re-presented as profit from discontinued operations.
As part of these transactions, the Group entered into commercial agreements to
cross-hire equipment to ensure the broadest possible distribution of, and
customer access to, each party's existing fleet.
Return on Capital Employed
ROCE increased to 24% from 19% in the prior year, supported by strong
performance in the capital-light Services business, targeted fleet investment
using the Group's insight capability and growth through the digitally led
low-cost operating model established in 2020. ROCE is calculated as Adjusted
EBITA (last twelve months) divided by average capital employed, where capital
employed is total assets except intangibles, derivatives and cash, less
current liabilities excluding debt items.
Net debt
Net debt on 2 July 2022 was £103.2m, a reduction of £54.5m from the H1 21
(£157.8m). This has been driven by improved EBITDA, strong working capital
management, proceeds from the disposal of Laois and ASH and a reduction in
lease liabilities following property surrenders. Leverage has reduced to 1.5x
from 2.0x (H1 21 as reported, FY 21: 1.5x).
The debt facilities consist of a £70.0m senior finance facility and an
undrawn revolving credit and overdraft facility of £23.2m, both maturing in
November 2025 but with an option to extend for a further 12 months. Including
cash balances of £38.7m, the Group had access to £74.3m of combined
liquidity at 2 July 2022.
Dividend
The Group has made great progress in delivering its strategy, including
strengthening the balance sheet, which has resulted in increased profitability
and cash generation while continuing to invest in the technology roadmap. The
Board has therefore decided to implement a progressive dividend policy. An
interim dividend of 0.17p per share was approved by the Board on 28 September
and will be paid during November 2022.
Going concern
While encouraged by the resilience of the Group during a period of continued
disruption, the Directors continue to model via a number of scenarios current
macroeconomic factors such as increasing inflation and interest rates. At 28
September 2022 the Group had sufficient liquidity to operate within banking
covenants for the next 12 months even under a 'reasonable worst case'
scenario. The reasonable worst case scenario models lower than forecast market
growth rates, increased inflationary pressures and an increase in debtor days.
After reviewing the above, considering current and future developments and
principal risks and uncertainties, and making appropriate enquiries, the
Directors have a reasonable expectation that the Group has adequate resources
to continue in operational existence over a period of at least twelve months
from the date of approval of these financial statements. Accordingly, they
continue to adopt the going concern basis in preparing these unaudited
condensed consolidated financial statements.
Risks and uncertainties
The principal risks and uncertainties that could have a material impact upon
the Group's performance over the remaining 26 weeks of the 2022 financial year
have not changed significantly from those described in the Group's 2021 Annual
Report and are summarised in note 18 of this interim report.
The main risk expected to affect the Group in the remaining 26 weeks of the
2022 financial year is macroeconomic conditions, which includes the impact of
supply chain pressures, high inflation on energy costs and colleagues, and on
demand from new and existing customers within the numerous and diverse market
sectors which HSS serves.
By order of the Board
Steve Ashmore
Director
28 September 2022
HSS Hire Group plc
Unaudited condensed consolidated income statement
26 weeks ended As restated
2 July 2022
27 weeks ended
3 July 2021
Note £000s £000s
Revenue 3 159,937 146,298
Cost of sales (81,254) (71,027)
Gross profit 78,683 75,271
Distribution costs (14,425) (12,359)
Administrative expenses (53,160) (45,106)
Impairment losses on contract assets (1,204) (1,283)
Other operating income 4 315 1,554
Adjusted EBITDA 19 32,917 32,788
Less: Depreciation 6 (19,359) (19,707)
Adjusted EBITA 19 13,558 13,081
Less: Exceptional items (non-finance) 5 (488) 7,539
Less: Amortisation 6 (2,861) (2,543)
Operating profit 10,209 18,077
Finance expense 7 (3,674) (11,322)
Adjusted profit before tax 19 8,376 764
Less: Exceptional items (non-finance) 5 (488) 7,539
Less: Exceptional items (finance) 5 (66) (120)
Less: Amortisation of customer relationships and brands 6 (1,287) (1,428)
Profit on continuing operations before tax 6,535 6,755
Income tax charge (449) (54)
Profit from continuing operations 6,086 6,701
Profit on disposal of discontinued operations 17 - 3,180
Profit from discontinued operations, net of tax 17 - 4,170
Profit for the financial period 6,086 14,051
Earnings per share (pence)
Continuing operations
Adjusted basic earnings per share 8 0.96 0.09
Adjusted diluted earnings per share 8 0.94 0.09
Basic earnings per share 8 0.86 0.96
Diluted earnings per share 8 0.84 0.93
Continuing and discontinued operations
Basic earnings per share 8 0.86 2.02
Diluted earnings per share 8 0.84 1.95
The notes form part of these condensed consolidated financial statements.
HSS Hire Group plc
Unaudited condensed consolidated statement of comprehensive income
26 weeks ended 27 weeks ended
2 July 2022
3 July 2021
£000s £000s
Profit for the financial period 6,086 14,051
Items that may be reclassified to profit or loss:
Foreign currency translation differences arising on consolidation of foreign 7 (654)
operations
Other comprehensive gain/(loss) for the period, net of tax 7 (654)
Total comprehensive profit for the period 6,093 13,397
Attributable to owners of the Group 6,093 13,397
The notes form part of these condensed consolidated financial statements.
HSS Hire Group plc
Unaudited condensed consolidated statement of financial position
2 July 1 January 2022
2022
Note £000s £000s
ASSETS
Non-current assets
Intangible assets 9 147,561 147,648
Property, plant and equipment
- Hire equipment 10 53,177 44,332
- Non-hire assets 10 13,682 15,605
Right of use assets
- Hire equipment 11 20,776 20,651
- Non-hire assets 11 49,593 55,329
Deferred tax asset 2,596 2,404
287,385 285,969
Current assets
Inventories 3,105 2,682
Trade and other receivables 12 80,758 78,680
Cash 38,689 42,269
122,552 123,631
Total assets 409,937 409,600
LIABILITIES
Current liabilities
Trade and other payables 13 (80,286) (78,704)
Lease liabilities 14 (17,946) (19,310)
Provisions 16 (4,532) (4,713)
Current tax liabilities - (293)
(102,764) (103,020)
Non-current liabilities
Lease liabilities 14 (53,601) (57,255)
Borrowings 15 (68,407) (68,166)
Provisions 16 (16,665) (19,110)
Deferred tax liabilities (148) (148)
(138,821) (144,679)
Total liabilities (241,585) (247,699)
Net assets 168,352 161,901
EQUITY
Share capital 7,050 7,050
Share premium 45,552 45,552
Merger reserve 97,780 97,780
Foreign exchange translation reserve (747) (754)
Retained earnings 18,717 12,273
Total equity 168,352 161,901
The notes form part of these condensed consolidated financial statements.
HSS Hire Group plc
Unaudited condensed consolidated statement of changes in equity
Share capital Share premium Warrant reserve Merger reserve Foreign exchange translation reserve Retained earnings Total equity
£000s £000s £000s £000s £000s £000s £000s
At 2 January 2022 7,050 45,552 - 97,780 (754) 12,273 161,901
Profit for the period - - - - - 6,086 6,086
Foreign currency translation differences arising on consolidation of foreign - - - - 7 - 7
operations
Total comprehensive profit for the period - - - - 7 6,086 6,093
Transactions with owners recorded directly in equity
Share-based payment charge - - - - - 358 358
At 2 July 2022 7,050 45,552 - 97,780 (747) 18,717 168,352
Share capital Share premium Warrant reserve Merger reserve Foreign exchange translation reserve Retained deficit Total equity
£000s £000s £000s £000s £000s £000s £000s
At 27 December 2020 6,965 45,580 2,694 97,780 15 (45,444) 107,590
Profit for the period - - - - - 14,051 14,051
Foreign currency translation differences arising on consolidation of foreign - - - - (654) - (654)
operations
Total comprehensive income/(loss) for the period - - - - (654) 14,051 13,397
Cost true up relating to FY 20 share issue - (28) - - - - (28)
Share-based payment charge - - - - - 451 451
Share-based payment transfer to reserves - - - - - (77) (77)
At 3 July 2021 6,965 45,552 2,694 97,780 (639) (31,019) 121,333
The notes form part of these condensed consolidated financial statements.
HSS Hire Group plc
Unaudited condensed consolidated statement of cash flows
Note 26 weeks ended 27 weeks
2 July 2022
ended
3 July 2021
£000s £000s
Profit after income tax 6,086 14,051
Adjustments for:
- Tax 449 37
- Profit on disposal of discontinued operations 17 - (3,180)
- Amortisation 6 2,851 2,634
- Depreciation 6 17,749 19,398
- Accelerated depreciation relating to hire stock customer losses and hire 6 1,666 1,766
stock write offs
- Profit on disposal of property, plant and equipment and right of use assets 6 (64) (47)
- Lease disposals 14 - (3,463)
- Capital element of net investment in sublease receipts - 129
- Share-based payment charge 358 451
- Foreign exchange gains on operating activities (40) (378)
- Finance expense 7 3,674 11,388
Changes in working capital (excluding the effects of disposals and exchange
differences on consolidation):
- Inventories (423) (389)
- Trade and other receivables 12 (1,775) 3,265
- Trade and other payables 13 1,954 10,217
- Provisions 16 (1,800) (6,929)
Net cash flows from operating activities before changes in hire equipment 30,685 48,950
Purchase of hire equipment 10 (14,404) (9,749)
Cash generated from operating activities 16,281 39,201
Net interest paid (3,228) (10,498)
Income tax (paid)/received (1,238) 7
Net cash generated from operating activities 11,815 28,710
Cash flows from investing activities
Proceeds on disposal of business, net of cash disposed of 17 - 9,550
Proceeds on disposal of assets as part of business divestiture 17 - 526
Purchases of non-hire property, plant, equipment and software 10,11 (3,670) (2,836)
Net cash generated (used in)/from investing activities (3,670) 7,240
Cash flows from financing activities
Costs associated with capital raise - (1,556)
Repayment of borrowings - (38,432)
Capital element of lease liability payments 14 (11,725) (12,279)
Net cash used in financing activities (11,725) (52,267)
Net decrease in cash (3,580) (16,317)
Cash at the start of the period 42,269 97,573
Cash at the end of the period - continuing operations 38,689 79,626
Cash at the end of the period - discontinued operations - 1,630
Cash at the end of the period 38,689 81,256
The notes form part of these condensed consolidated financial statements.
HSS Hire Group plc
Notes forming part of the unaudited condensed consolidated financial
statements
1. General information
The Company is a public limited company, is quoted on the AIM market of the
London Stock Exchange and is incorporated and domiciled in the United Kingdom.
The address of the registered office is Building 2, Think Park, Mosley Road,
Manchester M17 1FQ. These condensed consolidated financial statements comprise
the Company and its subsidiaries (the 'Group') and cover the 26 week period
ended 2 July 2022.
The Group is primarily involved in providing tool and equipment hire and
related services in the United Kingdom and the Republic of Ireland.
The condensed consolidated financial statements were approved for issue by the
Board on 28 September 2022.
The condensed consolidated financial statements do not constitute the
Statutory Accounts within the meaning of Section 434 of the Companies Act 2006
and have not been subject to audit by the Group's auditor. Statutory Accounts
for the year ended 1 January 2022 were approved by the Board on 27 April 2022
and delivered to the Registrar of Companies. The auditor's report on those
accounts was unqualified and did not contain a statement under Section 498(2)
or (3) of the Companies Act 2006.
2. Basis of preparation and significant accounting policies
The condensed consolidated financial statements for the 26 weeks ended 2 July
2022 have been prepared in accordance with IAS 34 Interim Financial Reporting.
The condensed consolidated financial statements should be read in conjunction
with the Group's Annual Report and Accounts for the year ended 1 January 2022,
which were prepared in accordance with IFRS as adopted by the UK (IFRS).
Accounting policies are consistent with those in the Statutory Accounts for
the year ended 1 January 2022.
Going concern
At 2 July 2022, the Group's financing arrangements consisted of a drawn senior
finance facility of £70.0m, undrawn overdraft facilities of £6.0m, undrawn
revolving credit facilities of £17.2m and finance lease lines to fund hire
fleet capital expenditure, of which £12.4m had not been utilised. Both the
senior finance facility and revolving credit facility are subject to net debt
leverage and interest rate cover financial covenant tests each quarter. At the
reporting date the Group had significant headroom against these covenants.
Cash at 2 July 2022 was £38.7m.
While encouraged by the resilience of the Group during a period of continued
disruption, the Directors continue to model via a number of scenarios current
macroeconomic factors such as increasing inflation and interest rates. At 28
September 2022 the Group had sufficient liquidity to operate within banking
covenants for the next 12 months even under a 'reasonable worst case'
scenario. The reasonable worst case scenario models lower than forecast market
growth rates, increased inflationary pressures and an increase in debtor days.
After reviewing the above, considering current and future developments and
principal risks and uncertainties, and making appropriate enquiries, the
Directors have a reasonable expectation that the Group has adequate resources
to continue in operational existence over a period of at least twelve months
from the date of approval of these financial statements. Accordingly, they
continue to adopt the going concern basis in preparing these unaudited
condensed consolidated financial statements.
Prior period restatement
The group made two strategic divestitures during the year ended 1 January 2022
(see note 17). These met the IFRS 5 definition of discontinued operations and
so the prior period figures included in the Consolidated Income Statement and
the supporting notes have been re-presented to exclude amounts relating to
discontinued operations.
Following a review of the Annual Report and Accounts for the year to 26
December 2020 by the FRC's Corporate Reporting Review Team, a change has been
made to separately disclose the impairment loss on trade receivables of £1.3m
on the face of the Consolidated Income Statement. Previously it was included
within administrative expense. There is no impact on the profit for the
period.
3. Segmental reporting
The Group's operations are segmented into the following reportable segments:
- Rental and related revenue; and
- Services.
Rental and related revenue comprises the rental income earned from owned tools
and equipment, including powered access, power generation and HVAC assets,
together with directly related revenue such as resale (fuel and other
consumables), transport and other ancillary revenues. Services comprise the
Group's HSS OneCall rehire business and HSS Training. HSS OneCall provides
customers with a single point of contact for the hire of products that are not
held within HSS' fleet and are obtained from approved third party partners;
HSS Training provides customers with specialist safety training across a wide
range of products and sectors.
Contribution is defined as segment operating profit before branch and selling
costs, central costs, depreciation, amortisation and exceptional items.
All segment revenue, operating profit, assets and liabilities are attributable
to the principal activity of the Group being the provision of tool and
equipment hire and related services in, and to customers in, the United
Kingdom and the Republic of Ireland. No single customer represented more than
10% of Group Revenue in the 26 week period ending 2 July 2022 (27 weeks ending
3 July 2021: one customer was 10% or more of Group Revenue).
26 weeks ended 2 July 2022
Rental Services Central Total
(and related revenue)
£000s £000s £000s £000s
Total revenue from external customers from continuing operations 99,311 60,626 - 159,937
Contribution 64,872 9,129 - 74,001
Branch and selling costs (26,740) (26,740)
Central costs (14,344) (14,344)
Adjusted EBITDA 32,917
Less: Exceptional items (non-finance) (488) (488)
Less: Depreciation and amortisation (12,295) (224) (9,701) (22,220)
Operating profit 10,209
Net finance expenses (3,674)
Profit before tax from continuing operations 6,535
As at 2 July 2022
Rental Services Central Total
(and related revenue)
£000s £000s £000s £000s
Additions to non-current assets
Property, plant and equipment 15,416 41 865 16,322
Right of use assets 3,700 144 1,307 5,151
Intangibles 1,037 39 1,688 2,764
Non-current assets net book value
Property, plant and equipment 53,177 150 13,532 66,859
Right of use assets 20,776 401 49,192 70,369
Intangibles 4,692 3,910 138,959 147,561
Unallocated corporate assets
Deferred tax assets 2,596 2,596
Current assets 122,552 122,552
Current liabilities (102,764) (102,764)
Non-current liabilities (138,821) (138,821)
168,352
As restated(1)
27 weeks ended 3 July 2021
Rental Services Central Total
(and related revenue)
£000s £000s £000s £000s
Total revenue from external customers from continuing operations 92,864 53,434 - 146,298
Contribution 64,756 7,745 - 72,501
Branch and selling costs (24,863) (24,863)
Central costs (14,850) (14,850)
Adjusted EBITDA 32,788
Add back: Exceptional credit 7,539 7,539
Less: Depreciation and amortisation (13,590) (297) (8,363) (22,250)
Operating loss 18,077
Net finance expenses (11,322)
Profit before tax from continuing operations 6,755
1. The notes supporting the income statement have been restated to disclose
continuing operations (note 2).
As at 1 January 2022
Rental Services Central Total
(and related revenue)
£000s £000s £000s £000s
Additions to non-current assets
Property, plant and equipment 18,558 16 2,750 21,324
Right of use assets 8,558 56 6,826 15,440
Intangibles 2,928 39 1,361 4,328
Non-current assets net book value
Property, plant and equipment 44,332 129 15,476 59,937
Right of use assets 20,651 384 54,945 75,980
Intangibles 143,553 836 3,259 147,648
Unallocated corporate assets
Deferred tax asset 2,404 2,404
Current assets 123,631 123,631
Current liabilities (103,020) (103,020)
Non-current liabilities (144,679) (144,679)
Net assets 161,901
4. Other operating income
26 weeks ended As restated(1)
2 July 2022
27 weeks ended
3 July 2021
£000s £000s
COVID-19 Government grant income: Job retention schemes - 232
Insurance proceeds - 1,203
Sublease rental and service charge income 315 119
315 1,554
During the period sub-let rental income of £0.3m (27 weeks ended 3 July 2021:
£0.1m) was received on properties no longer used by the Group for trading
purposes.
During the 27 weeks ended 3 July 2021 the Group recognised £0.2m of income
received in 2020 as a result of earlier participation in the Republic of
Ireland's COVID-19 Wage Subsidy Scheme. Recognition had been deferred pending
confirmation of entitlement. During the 27 weeks ended 3 July 2021 the Group
also received £1.2m from a COVID-19 business interruption insurance claim.
1. The notes supporting the income statement have been restated to disclose
continuing operations (note 2).
5. Exceptional items
Items of income or expense have been shown as exceptional because of their
size and nature or because they are outside the normal course of business. As
a result, during the 26 weeks ended 2 July 2022 the Group has recognised
exceptional items as follows:
Included in administrative expenses Included in other operating income Included in finance expense 26 weeks ended
2 July 2022
£000s £000s £000s £000s
Onerous property costs/(credits) 12 (258) 13 (233)
Costs relating to restructure 945 - - 945
Onerous contract (211) - 53 (158)
Total 746 (258) 66 554
During the 27 weeks ended 3 July 2021, the Group recognised exceptional items
analysed as follows:
Included in administrative expenses Included in finance expense 27 weeks ended
3 July 2021
£000s £000s £000s
Release of onerous property (credits)/costs (7,539) 120 (7,419)
Exceptional items - continuing operations (7,539) 120 (7,419)
Business divesture - discontinued operations (note 17) (3,180) - (3,180)
Total (10,719) 120 (10,599)
Costs related to onerous properties: branch and office closures (incurred in
2022 and 2021)
In the 26 weeks ended 2 July 2022 an exceptional credit of £0.2m has been
recognised, this mainly relates to sublease income on vacant stores. In the 27
weeks ended 3 July 2021 an exceptional credit of £7.4m was recognised. This
related to the release of lease liabilities and onerous non-rental property
cost and dilapidation provisions on surrender of properties closed as part of
the Group's acceleration of strategy announced in October 2020.
Cost relating to restructuring (incurred in 2022 only)
Following the changes made to its operating network in Q4 2020 and the
roll-out of HSS Pro in Q1 2021, the Group commenced an exercise to legally
separate the HSS Operations and Pro Service divisions into distinct entities.
Fees incurred relating to the restructure of £0.9m have been recognised as
exceptional. The legal separation was completed on 3 July 2022 although
further costs are expected in relation to increasing the technological
capability and efficiency of the Group.
Business divesture (incurred in 2021 only)
To enable the Group to focus on its strategic priority to Transform the Tool
Hire Business, the disposal of Laois Hire Service Limited, the Irish large
plant hire business, to Briggs Equipment Ireland Limited ("Briggs") completed
on 7 April 2021. Proceeds of the disposal, net of transaction costs, were
£10.0m generating a profit on disposal of £3.2m. As part of the transaction,
HSS entered into a commercial agreement with Briggs for the cross hire of
equipment to ensure the broadest possible distribution of, and customer access
to, each party's existing fleet.
6. Depreciation and amortisation expense
As restated(1)
26 weeks ended 27 weeks ended
2 July 2022
3 July 2021
£000s £000s
Amortisation 2,861 2,543
Depreciation 19,359 19,707
Amounts charged in respect of depreciation: 26 weeks ending 2 July 2022 27 weeks ending 3 July 2021
Property, plant and equipment Right of use assets Total Property, plant and equipment Right of use assets Total
£000s £000s £000s £000s £000s £000s
Depreciation (notes 10,11) 8,087 9,662 17,749 7,889 11,509 19,398
Accelerated depreciation relating to hire stock lost by customers or written 1,404 262 1,666 6,488 133 6,621
off (notes 10,11)
Loss on disposal of other assets (notes 10,11) 56 - 56 625 304 929
Total depreciation per notes 10,11 9,547 9,924 19,471 15,002 11,946 26,948
Items not charged to income statement (continuing operations)
Dilapidations profit on surrender (120) - (120) - - -
Accelerated depreciation included in exceptionals 8 - 8 (243) - (243)
Disposal of discontinued operations hire stock assets - - - (4,612) - (4,612)
(Loss)/profit on disposals included in exceptional amounts - - - (94) 145 51
Disposal of discontinued operations other assets - - - (588) (439) (1,027)
Depreciation from discontinued operations - - - (1,172) (238) (1,410)
Total non-exceptional depreciation from continuing operations 9,435 9,924 19,359 8,293 11,414 19,707
1. The notes supporting the income statement have been restated to disclose
continuing operations (note 2).
Amounts charged in respect of amortisation:
26 weeks ended 27 weeks ended
2 July 2022
3 July 2021
£000s £000s
Intangible assets
Amortisation (note 9) 2,851 2,634
Loss on write off 10 -
2,861 2,634
Less amortisation from discontinued operations - (91)
Total non-exceptional amortisation 2,861 2,543
7. Finance income and expense
26 weeks ended As restated(1)
2 July 2022
27 weeks ended
3 July 2021
£000s £000s
Senior finance facility 1,269 7,590
Amortisation of debt issue costs 254 1,085
Accelerated amortisation of debt issue costs - 166
Lease liabilities 1,936 2,031
Interest unwind on discounted provisions 94 13
Revolving credit facility, including commitment fees 132 299
Other interest (received)/paid (11) 138
3,674 11,322
1. The notes supporting the income statement have been restated to disclose
continuing operations (note 2).
8. Earnings per share
Basic earnings per share:
Profit after tax from total operations Profit after tax from continuing operations Weighted average number of shares Earnings after tax from total operations per share Earnings after tax from continuing operations per share
£000s £000s 000s pence pence
26 weeks ended 2 July 2022 6,086 6,086 704,988 0.86 0.86
27 weeks ended 3 July 2021 14,051 6,701 696,478 2.02 0.96
Basic earnings per share is calculated by dividing the result attributable to
equity holders by the weighted average number of ordinary shares in issue for
that period.
Diluted earnings per share:
Profit after tax from total operations Profit after Weighted average number of shares Earnings after tax from total operations per share Earnings after tax from continuing operations per share
tax from continuing operations
£000s £000s 000s pence pence
26 weeks ended 2 July 2022 6,086 6,086 722,559 0.84 0.84
27 weeks ended 3 July 2021 14,051 6,701 721,364 1.95 0.93
Diluted earnings per share is calculated using the result attributable to
equity holders divided by the weighted average number of shares outstanding
assuming the conversion of potentially dilutive equity derivatives
outstanding, being market value options, nil-cost share options (LTIP shares),
restricted stock grants, deferred bonus shares and warrants.
All of the Group's potentially dilutive equity derivative securities were
dilutive for the purpose of diluted basic earnings per share for the period
(27 weeks ending 3 July 2021: all equity derivative securities were dilutive
except for the market value options and their related CSOP's which were
anti-dilutive).
The following is a reconciliation between the basic earnings per share and the
adjusted basic earnings per share:
26 weeks ended 2 July 2022 As restated(1)
27 weeks ended 3 July 2021
Total operations Continuing operations Total operations Continuing operations
pence pence pence pence
Basic earnings per share 0.86 0.86 2.02 0.96
Add back:
Exceptional items per share 0.08 0.08 (1.52) (1.07)
Amortisation of customer relationships and brands per share 0.18 0.18 0.21 0.21
Tax per share 0.06 0.06 0.01 0.01
Charge:
Tax charge at prevailing rate (0.22) (0.22) (0.14) (0.02)
Adjusted basic earnings per share 0.96 0.96 0.58 0.09
The following is a reconciliation between the diluted earnings per share and
the adjusted diluted earnings per share:
26 weeks ended 2 July 2022 As restated(1)
27 weeks ended 3 July 2021
Total operations Continuing operations Total operations Continuing operations
pence pence pence Pence
Diluted earnings per share 0.84 0.84 1.95 0.93
Add back:
Adjustment to basic loss per share for the impact of dilutive securities
Exceptional items per share 0.08 0.08 (1.47) (1.03)
Amortisation of customer relationships and brands per share 0.18 0.18 0.20 0.20
Tax per share 0.06 0.06 0.01 0.01
Charge:
Tax charge at prevailing rate (0.22) (0.22) (0.13) (0.02)
Adjusted diluted earnings per share 0.94 0.94 0.56 0.09
1. The notes supporting the income statement have been restated to disclose
continuing operations (note 2).
The weighted average number of shares for the purposes of calculating the
diluted earnings per share are as follows:
26 weeks ended 27 weeks ended
2 July 2022
3 July 2021
Weighted average number of shares Weighted average number of shares
000s 000s
Basic 704,988 696,478
Warrants - 8,505
LTIP share options 4,687 8,368
Restricted stock grant 12,801 7,265
CSOP options 83 748
Diluted 722,559 721,364
9. Intangible assets
Goodwill Customer relationships Brands Software Total
£000s £000s £000s £000s £000s
Cost
At 2 January 2022 115,855 25,400 22,590 31,856 195,701
Additions - - - 2,764 2,764
At 2 July 2022 115,855 25,400 22,590 34,620 198,465
Amortisation
At 2 January 2022 - 23,301 298 24,454 48,053
Charge for the period - 1,270 17 1,564 2,851
At 2 July 2022 - 24,571 315 26,018 50,904
Net book value
At 2 July 2022 115,855 829 22,275 8,602 147,561
Goodwill Brands Software Total
Customer relationships
£000s £000s £000s £000s £000s
Cost
At 27 December 2020 124,877 26,744 23,222 27,580 202,423
Additions - - - 1,751 1,751
Disposals (1,695) - - (138) (1,833)
At 3 July 2021 123,182 26,744 23,222 29,193 202,341
Amortisation
At 27 December 2020 - 21,348 622 21,955 43,925
Charge for the period - 1,377 51 1,206 2,634
Disposals - - - (138) (138)
At 3 July 2021 - 22,725 673 23,023 46,421
Net book value
At 3 July 2021 123,182 4,019 22,549 6,170 155,920
Goodwill Customer relationships Brands Software Total
£000s £000s £000s £000s £000s
Cost
At 27 December 2020 124,877 26,744 23,222 27,580 202,423
Additions - - - 4,328 4,328
Disposals - - - (52) (52)
Business disposal (9,018) (1,344) (632) - (10,994)
Foreign exchange differences (4) - - - (4)
At 1 January 2022 115,855 25,400 22,590 31,856 195,701
Amortisation
At 27 December 2020 - 21,348 622 21,955 43,925
Charge for the period - 2,675 84 2,551 5,310
Disposals - - - (52) (52)
Business disposal - (722) (408) - (1,130)
At 1 January 2022 - 23,301 298 24,454 48,053
Net book value
At 1 January 2022 115,855 2,099 22,292 7,402 147,648
The Group tests property, plant and equipment, goodwill and indefinite life
brands for impairment annually and considers at each reporting date whether
there are indicators that impairment may have occurred.
10. Property, plant and equipment
Land & buildings Plant & machinery Materials & equipment held for hire Total
£000s £000s £000s £000s
Cost
At 2 January 2022 37,303 43,163 133,674 214,140
Transferred to right of use assets - - (1,504) (1,504)
Transferred from right of use assets - - 4,498 4,498
Additions 221 685 15,416 16,322
Disposals (266) (41) (7,086) (7,393)
Remeasurement (790) - - (790)
Foreign exchange differences 4 9 71 84
At 2 July 2022 36,472 43,816 145,069 225,357
Accumulated depreciation
At 2 January 2022 25,453 39,408 89,342 154,203
Transferred from right of use assets - - 2,140 2,140
Charge for the year 1,163 833 6,091 8,087
Disposals (209) (42) (5,682) (5,933)
Foreign exchange differences - - 1 1
At 2 July 2022 26,407 40,199 91,892 158,498
Net book value
At 2 July 2022 10,065 3,617 53,177 66,859
The transferred to right of use assets category represents assets that were
purchased in the prior period and subsequently financed through hire purchase
agreements.
The transferred from right of use assets category represents the acquisition
of ROU assets at expiry of the lease in cases where the title is transferred
to the Group.
Land & buildings Plant & machinery Materials & equipment held for hire Total
£000s £000s £000s £000s
Cost
At 27 December 2020 58,419 55,315 149,534 263,268
Transferred from right of use assets - - 5,967 5,967
Additions 673 412 9,749 10,834
Disposals (618) (1,235) (17,669) (19,522)
Foreign exchange differences (31) (31) (581) (643)
At 3 July 2021 58,443 54,461 147,000 259,904
Accumulated depreciation
At 27 December 2020 45,208 50,580 99,105 194,893
Transferred from right of use assets - - 3,336 3,336
Charge for the year 1,318 859 5,712 7,889
Disposals (163) (1,065) (11,181) (12,409)
Foreign exchange differences (6) (56) (322) (384)
At 3 July 2021 46,357 50,318 96,650 193,325
Net book value
At 3 July 2021 12,086 4,143 50,350 66,579
Land & buildings Plant & machinery Materials & equipment held for hire Total
£000s £000s £000s £000s
Cost
At 27 December 2020 58,419 55,315 149,534 263,268
Transferred from right of use assets - - 8,742 8,742
Additions 2,011 755 18,558 21,324
Disposals (22,394) (11,193) (16,515) (50,102)
Business disposal (702) (1,683) (26,064) (28,449)
Foreign exchange differences (31) (31) (581) (643)
At 1 January 2022 37,303 43,163 133,674 214,140
Accumulated depreciation
At 27 December 2020 45,208 50,580 99,105 194,893
Transferred to right of use assets - - 5,200 5,200
Charge for the year 2,543 1,710 12,482 16,735
Impairment 264 - - 264
Disposals (22,325) (11,171) (13,145) (46,641)
Business disposal (231) (1,485) (14,148) (15,864)
Foreign exchange differences (6) (56) (322) (384)
Transfers - (170) 170 -
At 1 January 2022 25,453 39,408 89,342 154,203
Net book value
At 1 January 2022 11,850 3,755 44,332 59,937
11. Right of use assets
Property Vehicles Equipment for hire Total
Equipment for internal use
£000s £000s £000s £000s £000s
Cost
At 2 January 2022 56,847 26,283 520 25,339 108,989
Additions - 1,451 - 3,700 5,151
Transferred from property, plant and equipment - - - 1,504 1,504
Transferred to property, plant and equipment - - - (3,761) (3,761)
Disposals (71) (334) - (489) (894)
Foreign exchange differences 4 12 - - 16
At 2 July 2022 56,780 27,412 520 26,293 111,005
Accumulated depreciation
At 1 January 2022 15,104 12,773 444 4,688 33,009
Transferred to property, plant and equipment - - - (1,403) (1,403)
Charge for the period 3,878 3,296 29 2,459 9,662
Disposals (71) (334) - (227) (632)
At 2 July 2022 18,911 15,735 473 5,517 40,636
Net book value
At 2 July 2022 37,869 11,677 47 20,776 70,369
The transferred from property, plant and equipment category represents assets
that were purchased in the prior period and subsequently financed through hire
purchase agreements.
The transferred to property, plant and equipment category represents the
acquisition of ROU assets at expiry of the lease in cases where the title is
transferred to the Group.
Property Vehicles Equipment for internal use Equipment for hire Total
£000s £000s £000s £000s £000s
Cost
At 27 December 2020 61,253 23,681 562 21,998 107,494
Additions 519 651 - 3,590 4,760
Remeasurements 227 137 - - 364
Transferred to property, plant and equipment - - - (5,967) (5,967)
Disposals (7,785) (805) - (727) (9,317)
Foreign exchange differences (120) (23) - - (143)
At 3 July 2021 54,094 23,641 562 18,894 97,191
Accumulated depreciation
At 27 December 2020 15,403 6,854 327 1,422 24,006
Transferred to property, plant and equipment - - - (3,336) (3,336)
Charge for the period 4,340 3,783 76 3,310 11,509
Disposals (7,920) (366) - (594) (8,880)
At 3 July 2021 11,823 10,271 403 802 23,299
Net book value
At 3 July 2021 42,271 13,370 159 18,092 73,892
Property Vehicles Equipment for internal use Equipment for hire Total
£000s £000s £000s £000s £000s
Cost
At 27 December 2020 61,253 23,681 562 21,998 107,494
Additions 1,882 5,000 - 8,558 15,440
Remeasurements 3,407 128 (12) - 3,523
Transferred to property, plant and equipment - - - (4,462) (4,462)
Business disposal (1,304) (1,662) (30) - (2,996)
Disposals (8,755) (859) - (755) (10,369)
Amount re-recognised on disposal of sublease 544 - - - 544
Foreign exchange differences (180) (5) - - (185)
At 1 January 2022 56,847 26,283 520 25,339 108,989
Accumulated depreciation
At 27 December 2020 15,403 6,854 327 1,422 24,006
Transfers to property, plant and equipment - - - (920) (920)
Charge for the period 7,840 7,099 147 4,307 19,393
Impairments 233 - - - 233
Business disposal (397) (538) (30) - (965)
Disposals (7,975) (642) - (121) (8,738)
At 1 January 2022 15,104 12,773 444 4,688 33,009
Net book value
At 1 January 2022 41,743 13,510 76 20,651 75,980
Disclosures relating to lease liabilities are included in note 14.
12. Trade and other receivables
26 week period ended 2 July 2022
Gross Provision for impairment Provision for credit notes Net of provision
£000s £000s £000s £000s
Trade receivables 71,815 (3,446) (3,612) 64,757
Accrued income 7,254 (71) - 7,183
Trade receivables and contract assets 79,069 (3,517) (3,612) 71,940
Net investment in sublease 961 - - 961
Other debtors 1,206 - - 1,206
Prepayments 6,651 - - 6,651
Total trade and other receivables 87,887 (3,517) (3,612) 80,758
Year ended 1 January 2022
Gross Provision for impairment Provision for credit notes Net of provision
£000s £000s £000s £000s
Trade receivables 73,873 (3,884) (3,225) 66,764
Accrued income 4,165 (47) - 4,118
Trade receivables and contract assets 78,038 (3,931) (3,225) 70,882
Net investment in sublease 961 - - 961
Other debtors 1,282 - - 1,282
Prepayments 5,555 - - 5,555
Total trade and other receivables 85,836 (3,931) (3,225) 78,680
The following table details the movements in the provisions for credit notes
and impairment of trade receivables and contract assets:
26 week period ended Year ended
2 July 2022 1 January 2022
Provision for impairment Provision for credit notes Provision for impairment Provision for credit notes
£000s £000s £000s £000s
Balance at the beginning of the period (3,931) (3,225) (3,023) (2,458)
Increase in provision (1,204) (1,446) (1,835) (3,746)
Utilisation 1,618 1,059 910 2,752
Business disposals - - 17 227
Balance at the end of the period (3,517) (3,612) (3,931) (3,225)
The bad debt provision based on expected credit losses and applied to trade
receivables and contract assets, all of which are current assets, is as
follows:
2 July 2022 Current 0-60 days past due 61-365 days past due 1-2 years past due Total
Trade receivables and contract assets 61,234 7,829 8,287 1,719 79,069
Expected loss rate 0.9% 3.1% 20.6% 59.6% 4.4%
Provision for impairment charge 546 243 1,704 1,024 3,517
1 January 2022 Current 0-60 days past due 61-365 days past due 1-2 years past due Total
Trade receivables and contract assets 44,209 22,847 9,376 1,606 78,038
Expected loss rate 1.0% 2.4% 19.7% 68.7% 5.0%
Provision for impairment charge 435 544 1,848 1,104 3,931
Contract assets consist of accrued income.
The bad debt provision is estimated using the simplified approach to expected
credit loss methodology and is based upon past default experience and the
Directors' assessment of the current economic environment for each of the
Group's ageing categories.
The Directors have given specific consideration to the level of uncertainty in
the economy driven by the impact of COVID-19, the associated pressures on
businesses facing staff and material shortages and, more latterly, increased
inflation. At the reporting date, the Group has seen an increase in debt
write-offs due to customer failure. This was anticipated following the
withdrawal of COVID-19 related government support in the prior year and
accordingly the Group had exercised judgement in the creation of a significant
additional provision to cover this eventuality, some of which has now been
released. The Group still considers that historical losses are not a reliable
predictor of future failures and so has continued with its practice of
increasing the expected loss rates across all categories of debt. In so doing
the provision has been increased by around £0.6m (1 January 2022: £1.2m)
from that which would have been required based on loss experience over the
past two years. As in the prior year, historical loss rates have been
increased where debtors have been identified as high risk with a reduction
applied to customer debt covered by credit insurance. Unless the counterparty
is in liquidation, these amounts are still subject to enforcement action.
In line with the requirements of IFRS 15, provisions are made for credit notes
expected to be raised after the reporting date for income recognised during
the period.
The combined provisions for bad debt and credit notes amount to 9.0% of trade
receivables and contract assets at 2 July 2022 (1 January 2022: 9.2%).
13. Trade and other payables
2 July 1 January 2022
2022
£000s £000s
Current
Trade payables 42,776 43,062
Other taxes and social security costs 3,439 5,175
Other creditors 1,842 1,308
Accrued interest on borrowings 369 271
Accruals 31,233 28,494
Deferred income 627 394
80,286 78,704
14. Lease liabilities
2 July 1 January 2022
2022
£000s £000s
Current
Lease liabilities 17,946 19,310
Non-current
Lease liabilities 53,601 57,255
71,547 76,565
The interest rates on the Group's lease liabilities are as follows:
2 July 1 January 2022
2022
Equipment for hire Floating %age above the lenders base rate 2.4 to 3.3% 2.4 to 3.3%
Other Fixed 3.5 to 6.0% 3.5 to 6.0%
The weighted average interest rates on the Group's lease liabilities are as
follows:
2 July 1 January 2022
2022
Lease liabilities 5.4% 4.8%
The Group's leases have the following maturity profile:
2 July 1 January 2022
2022
£000s £000s
Less than one year 21,411 23,015
Two to five years 46,336 48,755
More than five years 17,225 19,354
84,972 91,124
Less interest cash flows: (13,425) (14,559)
Total principal cash flows 71,547 76,565
The maturity profile, excluding interest cash flows of the Group's leases is
as follows:
2 July 1 January 2022
2022
£000s £000s
Less than one year 17,946 19,310
Two to five years 39,435 41,417
More than five years 14,166 15,838
71,547 76,565
The lease liability movements are detailed below: Property Vehicles Equipment for hire and internal use Total
£000s £000s £000s £000s
At 2 January 2022 44,879 14,247 17,439 76,565
Additions - 1,451 5,204 6,655
Discount unwind 1,364 225 190 1,779
Payments (including interest) (5,056) (3,181) (5,267) (13,504)
Foreign exchange differences (3) 18 37 52
At 2 July 2022 41,184 12,760 17,603 71,547
Property Vehicles Equipment for hire and internal use Total
£000s £000s £000s £000s
At 27 December 2020 57,181 16,861 15,530 89,572
Additions 1,981 5,029 8,591 15,601
Remeasurements 3,407 128 (12) 3,523
Discount unwind 2,805 535 5 3,345
Payments (including interest) (13,209) (7,012) (6,675) (26,896)
Disposals (6,006) (216) - (6,222)
Business disposals (1,063) (1,048) - (2,111)
Foreign exchange differences (217) (30) - (247)
At 1 January 2022 44,879 14,247 17,439 76,565
15. Borrowings
2 July 1 January 2022
2022
£000s £000s
Non-current
Senior finance facility 68,407 68,166
The senior finance facility is stated net of transaction fees of £1.6m (1
January 2022: £1.8m) which are being amortised over the loan period.
The nominal value of the Group's loans at each reporting date is as follows:
2 July 1 January 2022
2022
£000s £000s
Senior finance facility 70,000 70,000
The interest rates on the Group's borrowings are as follows:
2 July 1 January 2022
2022
Revolving credit facility Floating %age above SONIA 3.0% 3.0%
Senior finance facility Floating %age above SONIA 3.0% 3.0%
The weighted average interest rates on the Group's borrowings is 3.0% (1
January 2022: 3.0%).
The Group's borrowings have the following maturity profile:
2 July 1 January 2022
2022
£000s £000s
Less than one year 2,932 2,235
Two to five years 76,908 76,498
79,840 78,733
Less interest cash flows:
Senior finance facility (9,840) (8,733)
Total principal cash flows 70,000 70,000
The Group had undrawn committed borrowing facilities of £35.6m at 2 July 2022
(1 January 2022: £35.8m), including £12.4m of finance lines (1 January 2022:
£12.6m) to fund hire fleet capital expenditure not yet utilised. Including
net cash balances, the Group had access to £74.3m at 2 July 2022 (1 January
2022: £78.1m) of combined liquidity from available cash and undrawn committed
borrowing facilities.
16. Provisions
Onerous property costs Dilapidations Onerous contracts Total
£000s £000s £000s £000s
At 2 January 2022 186 10,174 13,463 23,823
Additions - 148 - 148
Utilised during the period (11) (43) (1,644) (1,698)
Unwind of provision - 41 53 94
Impact of change in discount rate - (729) (211) (940)
Releases (3) (236) - (239)
Foreign exchange - 9 - 9
At 2 July 2022 172 9,364 11,661 21,197
Of which:
Current 69 1,355 3,108 4,532
Non-current 103 8,009 8,553 16,665
172 9,364 11,661 21,197
Onerous Dilapidations Onerous contracts Total
property costs
£000s £000s £000s £000s
At 27 December 2020 3,959 12,677 17,018 33,654
Additions 86 1,471 - 1,557
Utilised during the period (212) (2,538) (3,290) (6,040)
Unwind of provision (1) 24 (8) 15
Impact of change in discount rate (31) (457) (257) (745)
Releases (3,615) (643) - (4,258)
Business disposals - (361) - (361)
Foreign exchange - 1 - 1
At 1 January 2022 186 10,174 13,463 23,823
Of which:
Current 70 1,453 3,190 4,713
Non-current 116 8,721 10,273 19,110
186 10,174 13,463 23,823
Onerous property costs
The provision for onerous property costs represents the current value of
contractual liabilities for future rates payments and other unavoidable costs
(excluding lease costs) on leasehold properties the Group no longer uses. The
releases are the result of early surrenders being agreed with landlords - the
associated liabilities are generally limited to the date of surrender but were
provided for to the date of the first exercisable break clause to align with
the recognition of associated lease liabilities.
Onerous contract
The onerous contract represents amounts payable in respect of the agreement
reached in 2017 between the Group and Unipart to terminate the contract to
operate the NDEC.
17. Business disposals - 27 weeks ended 3 July 2021 only
To enable the Group to strengthen its balance sheet and focus on its strategic
priority to Transform the Tool Hire Business, the Group made two strategic
divestments during the year ended 1 January 2022:
Laois Hire Services Limited
Laois Hire Services Limited, the Irish large plant hire business, was sold to
Briggs Equipment Ireland Limited on 7 April 2021. Proceeds of the disposal,
net of transaction costs were £10.0m generating a profit on disposal of
£3.2m.
All Seasons Hire Limited
All Seasons Hire Limited, a cooling and heating provider, was sold to Cross
Rental Services Limited with the transaction completing on 29 September 2021.
Proceeds of the disposal, net of transaction costs were £54.3m generating a
profit on disposal of £38.0m.
As part of these transactions, the Group entered into commercial agreements to
cross-hire equipment to ensure the broadest possible distribution of, and
customer access to, each party's existing fleet.
The table below shows the results of discontinued operations for the 27 weeks
ended 3 July 2021:
£000s
Result of discontinued operations
Revenue 7,143
Expenses other than finance costs, amortisation and depreciation (1,480)
Depreciation (1,410)
Finance costs (66)
Taxation (17)
Loss from discontinued operations, net of tax 4,170
Profit on disposal of discontinued operations 3,180
Profit for the period 7,350
Basic earnings per share 1.06
Diluted earnings per share 1.02
The revenue relating to Laois Hire Services Limited is £3.0m with a loss
after tax of £0.3m. The revenue relating to All Seasons Hire Limited is
£4.1m with a profit after tax of £4.5m.
Included in the results for the 27 weeks ended 3 July 2021 are profits of
£3.2m realised on the sale of Laois Hire Services Limited on 7 April 2021.
The table below shows how this amount arose:
£000s
Description of assets and liabilities
Intangible assets (incl Goodwill) 1,695
Property, plant and equipment 5,200
Right of use assets 439
Current assets, excluding cash 2,509
Cash 504
Current liabilities (incl lease liabilities) (3,241)
Foreign exchange reserve (53)
Net assets disposed of 7,053
Proceeds of disposal less transaction costs 9,950
Profit on asset sale 283
Less net assets disposed of (7,053)
Total profit from disposal of Laois Hire Limited 3,180
18. Risks and uncertainties
The principal risks and uncertainties which could have a material impact upon
the Group's performance over the remaining 26 weeks of the 2022 financial year
have not changed significantly from those set out on pages 32 to 34 of the
Group's 2021 Annual Report, which is available at
https://www.hsshiregroup.com/investors-section-landing/.
These risks and uncertainties are:
1) Macroeconomic conditions;
2) Competitor challenge;
3) Strategy execution;
4) Customer service;
5) Third party reliance;
6) IT infrastructure;
7) Financial risk;
8) Inability to attract and retain personnel;
9) Legal and regulatory requirements;
10) Safety; and
11) Environment, Social and Governance (ESG).
COVID-19 and the impact of the war in Ukraine have been considered in terms of
their impact on relevant principal risks and uncertainties. The risk presented
by COVID-19 is considered to have reduced significantly but been replaced by
the macroeconomic impacts of the war in Ukraine - namely increasing inflation
and interest rates. The main risk expected to affect the Group in the
remaining 26 weeks of the 2022 financial year is therefore macroeconomic
conditions, which includes the impact of high inflation on energy costs,
colleagues, the supply chain and on demand from new and existing customers
within the numerous and diverse market sectors which HSS serves.
19. Alternative performance measures
Earnings before interest, tax, depreciation and amortisation (EBITDA) and
Adjusted EBITDA, earnings before interest, tax and amortisation (EBITA) and
Adjusted EBITA and Adjusted profit/(loss) before tax are alternative, non-IFRS
and non-Generally Accepted Accounting Practice (GAAP), performance measures
used by the Directors and management to assess the operating performance of
the Group.
- EBITDA is defined as operating profit before depreciation and amortisation.
For this purpose depreciation includes: depreciation charge for the year on
property, plant and equipment and on right of use assets; the net book value
of hire stock losses and write-offs; the net book value of other fixed asset
disposals less the proceeds on those disposals; impairments of right of use
assets; the net book value of right of use asset disposals, net of the
associated lease liability disposed of; and the loss on disposal of
sub-leases. Amortisation is calculated as the total of the amortisation charge
for the year and the loss on disposal of intangible assets. Exceptional items
are excluded from EBITDA to calculate Adjusted EBITDA.
- EBITA is defined by the Group as operating profit before amortisation.
Exceptional items are excluded from EBITA to calculate Adjusted EBITA.
- Adjusted profit/(loss) before tax is defined by the Group as profit/(loss)
before tax, amortisation of customer relationships and brands related
intangibles as well as exceptional items. The way the Group calculates
Adjusted profit/(loss) before tax has been modified from that included in the
financial statements for the period ended 1 January 2022, to include amounts
relating to amortisation of software. Comparative figures have been restated
to reflect this change.
The Group discloses Adjusted EBITDA, Adjusted EBITA and Adjusted profit/(loss)
before tax as supplemental non-IFRS financial performance measures because the
Directors believe they are useful metrics by which to compare the performance
of the business from period to period and such measures similar to Adjusted
EBITDA, Adjusted EBITA and Adjusted profit/(loss) before tax are broadly used
by analysts, rating agencies and investors in assessing the performance of the
Group. Accordingly, the Directors believe that the presentation of Adjusted
EBITDA, Adjusted EBITA and Adjusted profit/(loss) before tax provides useful
information to users of the Financial Statements.
As these are non-IFRS measures, Adjusted EBITDA and adjusted operating profit
measures used by other entities may not be calculated in the same way and are
hence not directly comparable.
Adjusted EBITDA is calculated as follows:
26 weeks ended As restated(1)
2 July 2022
27 weeks ended
3 July 2021
Continuing operations Continuing operations
£000s £000s
Operating profit 10,209 18,077
Add: Depreciation of property, plant and equipment and right of use assets 19,359 19,707
Add: Amortisation of intangible assets 2,861 2,543
EBITDA 32,429 40,327
Add: Exceptional items (non-finance) 488 (7,539)
Adjusted EBITDA 32,917 32,788
Adjusted EBITA is calculated as follows:
26 weeks ended As restated(1)
2 July 2022
27 weeks ended
3 July 2021
Continuing operations Continuing operations
£000s £000s
Operating profit/(loss) 10,209 18,077
Add: Amortisation of intangible assets 2,861 2,543
EBITA 13,070 20,620
Add: Exceptional items (non-finance) 488 (7,539)
Adjusted EBITA 13,558 13,081
Adjusted profit before tax is calculated as follows:
26 weeks ended As restated(1)
2 July 2022
27 weeks ended
3 July 2021
Continuing operations Continuing operations
£000s £000s
Profit before tax 6,535 6,755
Add: Amortisation of customer relationships and brands 1,287 1,428
Profit before tax and amortisation of customer relationships and brands 7,822 8,183
Add: Exceptional items (finance and non-finance) 554 (7,419)
Adjusted profit before tax 8,376 764
1. The notes supporting the income statement have been restated to disclose
continuing operations (note 2).
20. Post Balance Sheet Events
Given the excellent progress made on strategy which has resulted in increased
profitability and cash generation as well as strengthening the balance sheet,
the Board has decided to implement a progressive dividend policy. An interim
dividend of 0.17p per share was approved by the Board on 28 September, will be
paid in cash during November 2022 and has an ex-dividend date of 6 October
2022.
On 23 September 2022 the Government announced that from 1 April 2023 the
corporate tax rate would remain at 19% (rather than increase to 25% as
previously enacted). If this legislation had been enacted at the balance
sheet date the deferred tax asset would be reduced by £623,000 to
£1,973,000.
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. END IR FLFSTASITFIFRecent news on HSS Hire
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