REG - HSS Hire Group PLC - Results for the 26 week period ended 29 June 2024
24/09/2024 07:00
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RNS Number : 3264F HSS Hire Group PLC 24 September 2024
HSS Hire Group Plc
Solid performance, launching next phase of strategy
HSS Hire Group plc ("HSS" or the "Group") today announces results for the 26
week period ended 29 June 2024.
Next phase of strategy being implemented to separate the management and
trading operations of HSS ProService and HSS Operations to allow each business
to pursue different but complementary growth objectives to maximise
shareholder value
Financial Highlights (Unaudited) H1 2024 H1 2023 Change
Continuing operations 1
(26 weeks to 29 (26 weeks to 1 July
June 2024) 2023)
Revenue £170.8m £165.6m 3.2%
Adjusted EBITDA2 £26.9m £28.9m £(2.0)m
Adjusted EBITA3 £7.3m £10.8m £(3.5)m
Adjusted profit before tax4 £1.2m £5.0m £(3.8)m
Adjusted basic EPS 0.13p 0.55p (0.42)p
ROCE5 14.9% 18.0% (3.1)pp
Net debt leverage6 - non IFRS16 1.0x 1.0x6 -x
Net debt leverage7 - IFRS16 1.5x 1.6x7 0.1x
Operating profit (Underlying8) £6.2m £9.9m £(3.7)m
Profit before tax (Underlying8) £1.2m £5.0m £(3.8)m
Solid performance, strong balance sheet
· Solid revenue performance in challenging markets with H1 24
revenue growth +3.2%
o HSS ProService ("ProService") marketplace business like for like growth of
3.4%, ahead of market(9), with double digit Services(10) increase somewhat
offset by seasonal product(11) weakness
o HSS Operations ("Operations") maintained utilisation at 56% through
efficient fleet management
· Seasonal product weakness impacted H1 24 profitability
o Adjusted EBITDA and EBITA excluding this impact broadly in line with H1 23
o Targeted cost action creating operational efficiency to mitigate demand
softness in certain end markets
o Continued strong returns with ROCE above the Group's cost of capital
· Robust balance sheet with non-IFRS16 leverage(6) maintained at
1.0x (H1 23: 1.0x)
o Net proceeds of £20m from sale of Power businesses used to reduce debt
and further strengthen the Group balance sheet
o HSS continues to deliver consistently high returns ahead of cost of
capital
o Material liquidity headroom of £75m to support ongoing strategy
development
· Interim dividend maintained at 0.18 pence per share(12)
Continued strategic momentum, launching next phase of strategy
· Following legal separation of ProService and Operations in 2022
as previously announced, the commercial and operational activities of each
entity will now be fully separated
· Each business will now pursue complementary growth strategies
with separate management teams and greater control over resources and
investment decisions
· ProService:
· Digital marketplace business for building services focussed on
buyer and seller acquisition across a broad range of products and services
· Marketplace growth strategy building momentum with over 2,200
buyers having now transacted on our self-service marketplace platform,
resulting in 38% average buyer revenue growth year-on-year
· Medium term target of 7,000 buyers transacting through our
marketplace
· Operations:
· Well-invested asset-owning independent tool hire business in the
UK and Ireland focussed on delivering a consistently high-quality service
combined with unlocking ongoing efficiency gains
· Low-cost builders merchant network expanded to 104 locations
delivering 13% growth on a same stores basis(13)
· Medium term target of over 150 trading locations
· The Board believes that this structure provides greater
optionality to maximise future value for shareholders
· Capital Markets Days planned for each business during 2025 when
the management teams will present their individual growth strategies and
market opportunities.
Current trading
· While a continued weakness in seasonal products has led to a more
challenging start to H2 2024, we are somewhat encouraged by lead macroeconomic
indicators for UK construction beginning to trend in a positive direction.
Both our businesses are positively positioned to capitalise on improving
markets and we shortly expect to mobilise on a number of large accounts won
over the summer.
Steve Ashmore, Chief Executive Officer, said:
"The Group delivered a solid first-half performance against a challenging
market backdrop, with above-market growth in our ProService marketplace
business and continued good utilisation in Operations.
Today we are meaningfully progressing our growth strategy with the
announcement of the commercial and operational separation of ProService and
Operations. This will enable each business to pursue complementary growth
strategies under independent leadership teams with greater control over
resources and investment decisions.
Looking ahead, we are well placed to capitalise on any change to market
conditions and in the meantime have a number of new contracts mobilising in
H2. However, as a result of the new Group structure and the period of
transition that this will involve, the Board believes it is prudent to remove
guidance until further notice.
The Board and I are excited about this next stage in the development of our
strategy, which we are confident will fully unlock the growth potential of
each business and provide greater optionality to maximise future value for
shareholders."
H1 24 Results Presentation
HSS Hire Group Plc will host a virtual presentation for analysts at 9:00am on
24 September 2024. Analysts wishing to attend should contact FTI Consulting to
register - Connie.Gibson@fticonsulting.com
(mailto:Connie.Gibson@fticonsulting.com)
An audio recording will be available on our website in due course.
Notes
1) Results for H1 24 and H1 23 are on a continuing operations basis,
excluding the Power businesses which were disposed of in March 2024.
2) 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
3) Adjusted EBITA defined as Adjusted EBITDA less depreciation
4) Adjusted Profit before tax defined as profit before tax excluding
amortisation of brand and customer lists and exceptional items
5) ROCE is calculated as Adjusted EBITA for the 52 weeks to 29 June
2024 divided by the average of total assets less current liabilities
(excluding intangible assets, cash and debt items) over the same period
6) Non-IFRS16 leverage is calculated as closing net debt excluding
non-hire equipment leases divided by adjusted EBITDA less right of use
depreciation and interest on non-hire equipment for the 52 weeks to 29 June
2024 (prior year 52 weeks to 1 July 2023). Comparators on a reported basis
with no pro-forma adjustments to reflect the disposal of the Power businesses.
7) IFRS16 leverage is calculated as closing net debt divided by
adjusted EBITDA for the 52 weeks to 29 June 2024 (prior year 52 weeks to 1
July 2023). Comparators on a reported basis with no pro-forma adjustments to
reflect the disposal of the Power businesses.
8) Performance excluding exceptional items
9) European Rental Association forecast +2.7%
10) Services relates to rehire income generated from third-party owned
assets and the Training product vertical as historically presented in
operating segments
11) Seasonal products include Heating and Air Conditioning assets
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 3(rd) October 2024, record date of 4th
October 2024 and payment date of 6th November 2024.
13) Merchant locations open for comparable period in both H1 24 and H1 23
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 operates through two separate but complimentary businesses
serving predominately business customers:
· HSS ProService is the leading Digital marketplace business
focussed on buyer and seller acquisition. Technology driven, scalable and
uniquely differentiated. Wide range of building services, including hire,
resale, materials, training and more
· HSS Operations, which includes HSS Ireland, 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.
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 24 September 2024)
Steve Ashmore, Chief Executive Officer Thereafter, please email: Investors@hss.com
Richard Jones, Interim Group Chief Financial Officer
FTI Consulting Tel: 020 3727 1340
Nick Hasell
Victoria Hayns
Numis Securities (Nominated Adviser and Broker) Tel: 020 7260 1000
Stuart Skinner
George Price
This announcement contains inside information for the purposes of Article 7 of
EU Regulation 596/2014 as it forms part of domestic law of the United Kingdom
by virtue of the European Union (Withdrawal) Act 2018, as amended (together,
"MAR"). Upon the publication of this announcement, this inside information is
now considered to be in the public domain. The person responsible for
arranging the release of this announcement on behalf of HSS is Richard Jones,
Interim Group Chief Financial Officer.
Chief Executive Officer's Report
Summary of H1 2024 Group performance
We delivered a solid performance during the first six months of 2024 despite
challenging market conditions. The warmer winter and cooler early summer
weather conditions have led to significantly lower demand for seasonal
products. Non-seasonal product performance, while resilient, saw subdued
demand driven by low levels of end-user construction activity, particularly in
housing and commercial sectors, and wetter Q2 weather also having an impact on
enquiry levels.
The teams across ProService, Operations and HSS Ireland have done well to
drive performance, despite these challenging markets. The price and cost
actions they have taken mitigated some of the market softness and the
inflationary pressures that persist. Overall, our revenue growth of 3.2% was
marginally ahead of the rental market(9).
Launch of the next phase of the strategy
Our strategy to create two divisions in ProService and Operations in 2022 has
proved successful, with each business making material progress in recent
years. The Directors believe that the ProService and Operations businesses
have leading offerings independently of one another and are well positioned to
take advantage of a fragmented market and to further capitalise on
increasingly complex customer and supplier requirements. However, as both
ProService and Operations continue to grow, the Board believes that each
business, while complementary, have different growth strategies and strategic
priorities.
In light of the above, the Board believes that a separation of the businesses
has the potential to better unlock the value in each business and that this
will provide the Board with additional optionality to maximise value for
shareholders. It will also allow each business to pursue their strategic
objectives independently with greater control over resources and opportunities
through individually focused management teams.
As part of the new operating structure, we have established a trading
agreement for Operations to provide services to ProService and maintain
customer service levels during a period of transition. This is supported by a
temporary services agreement to maintain continuity in back-office functions,
almost all of which will sit within these respective businesses. The small
Group corporate function will continue to exist, fulfilling governance and
external reporting activities.
ProService
Positioning and strategy
ProService is a capital light, technology-driven marketplace which acts as a
marketplace for those looking to procure and supply for the building services
sector. The business is focused on leveraging its platform and first mover
advantage and building on the strong momentum and growth in buyer and seller
adoption.
The Board recognises the opportunities to be gained by broadening this
offering, expanding the number of buyers and sellers on the platform and
accessing the wider building services sector in the UK of approximately £186
billion. Our medium-term aspirations are to have a digital platform growing
from the existing base of 2,200 to over 7,000 buyers using the marketplace
which should allow the business to double its EBITDA margins as it benefits
from operating leverage from the platform revenue growth.
ProService H1 2024 trading performance
The investment we made in our technology team during 2023 has supported
material strategic and operational progress. The team delivered v2.0 of our
marketplace platform, which we launched in December 2023, and during the first
six months of 2024 we saw a significant acceleration in the number of buyers
using this online self-service platform. To date over 2,200 buyers have
registered for the marketplace and raised a contract themselves. This has been
achieved primarily through promotion by our salesforce, rather than marketing
spend, and is a reflection of the attractiveness of the platform offering.
26% of all contracts in H1 24 were originated through our self-serve
technology platforms: ProService Marketplace and HSS.com, compared to 15% in
H1 23.
The training vertical continues to perform well achieving 20% year-on-year
growth. The training market continues to be supported by tightening
legislative and Health & Safety drivers, supporting growth in demand from
all buyer markets. Our extensive network of over 240 training sellers,
offering a wide range of training solutions on our platform, complements our
in-house provision of technical training, combining to offer buyers a
market-leading one-stop-shop training proposition.
The two new verticals, building materials and equipment sales, that we
launched in 2023 continue to show robust levels of demand despite challenging
markets, with revenue in these verticals, having doubled year-on-year.
Operations
Positioning and strategy
Operations is a leading fulfilment business in the UK and Ireland focussed on
service delivery, health & safety and quality, with comprehensive coverage
across a wide range of tools, low-level powered access and site equipment. It
has a well invested asset base and has consistently demonstrated growth ahead
of the market. The business has delivered high levels of customer service
whilst striving for ongoing efficiency gains, underpinned by expansion of its
national network and progress on carbon reduction.
Our medium-term aspirations in the UK are to expand our network of trading
locations to over 150 and to continue to deliver above market revenue growth
whilst maintaining ROCE above our cost of capital.
In the Republic of Ireland, HSS is well placed to capitalise in the growth in
key markets such as the construction of data centres.
Operations H1 2024 trading performance
We have continued to expand our low-cost builders merchant network, adding a
further 10 locations during the first six months of 2024, bringing our total
network to 98 at June 2024 (June 2023: 67). A further six have been opened
since the period-end. We are pleased with the continued growth in revenues
from these locations, with year-on-year growth of 13% on a same-stores
like-for-like basis. We currently have plans to open a further ten locations
this year and medium-term aspirations for a 150-location national network.
Our route optimisation software, Satalia, continues to optimise vehicle
productivity and minimise our carbon footprint. The Digital Service Portal
technology we are using in our workshops continues to improve process
adherence and drive equipment quality. In addition, we are currently trialling
new bar-coding technology, aimed at improving stock availability and enhancing
the digital information available to customers.
Health & Safety continues to be top of the agenda amongst our operational
teams. They have been promoting three basics of safety this year: following
training procedures, wearing the correct PPE for the job and calling out
unsafe behaviours. Colleagues have made more than 9,400 safety observations
this year and our All-Injury Frequency Rate (AIFR) has reduced from 3.22 in H1
last year to 2.74 in H1 this year. Whilst the number of RIDDORS has increased
from 1 to 4 over the same period, I would note that the additional incidents
became RIDDORS on the basis of extended lost time, rather than on the basis of
the severity of the injury.
Board and people
From the end of September, as part of the new structure, I will take the role
of Executive Chairman for ProService and while I remain on the PLC Board as an
Executive Director, I will no longer serve as Chief Executive Officer. Alan
Peterson OBE will become non-Executive Chairman of Operations and HSS Ireland
and will retain his role as non-Executive Chair of the PLC Board. Other than
the impending departure of Amanda Burton from the Board announced earlier
today, the Board will therefore remain unchanged.
I am also pleased to announce the appointments of Jon Overman and Tom Shorten
into the roles of CEO for Operations and ProService respectively. They have
each appointed CFOs and CROs for each business including both internal and
external hires into these new roles. Both leadership teams are now at full
strength and both businesses have strong independent ambitions.
Michael Killeen will continue to run HSS Ireland which is the market-leading
rental operator in the Republic of Ireland, and which is already independently
self-sufficient, with only limited support required from Group functions.
As previously announced, Paul Quested stepped down from his role as Group CFO
at the end of August 2024, with Richard Jones joining as Interim CFO earlier
in August.
ESG Progress
The entire Group has continued to make progress on our ESG roadmap. We have
recently published our 3(rd) ESG Impact report, which outlines our performance
against our targets. We have also completed a Biodiversity impact assessment,
publishing the results in out first ever Sites Biodiversity Report. Both new
reports are available at www.hsshiregroup.com (http://www.hsshiregroup.com) .
We are proud to maintain our Ecovadis Gold Sustainability Rating and look
forward to our reassessment later this year. Our ProService team have enhanced
our marketplace platform to provide customers with more information on the ESG
credentials of different products, allowing them to make better informed
choices. They have also enhanced the customer carbon reporting available via
the marketplace.
Summary
We expect there to be a period of significant transition over the next 6-12
months as we implement change across the Group. Both businesses will need to
settle into new team structures and adapt to new ways of working. There will
also be changes to systems and processes, most notably in ProService who will
be implementing a new ERP system so that it can migrate from the legacy HSS
Hire systems. There will also be some optimisation of routes to market and
some bedding in of the trading agreement, alongside some temporary
double-running of costs and some exceptional costs.
As a result of this period of change, we believe it is prudent to remove
guidance for the foreseeable future. We will regularly review the timing with
which we will reinstate guidance and provide visibility of our revised
expectations at the earliest opportunity. Irrespective of any recovery in
market conditions I am confident the business will show further resilience, as
it continues to benefit from the broad spectrum of customers we serve and the
wide range of products and services we offer. The ongoing strength of our
balance sheet makes us well positioned to address any ongoing market
challenges, whilst also providing the opportunity to invest in a recovering
market.
H1 2024 Group Financial Performance
Revenue and segmental contribution
The H1 2024 results are based on 26 weeks of trading, consistent with H1 2023.
Both the current and comparator financials are presented on a continuing
operations basis, excluding the Power businesses which were disposed of in
March 2024. Segmental analysis is based on a consistent basis with FY 2023 but
prior to the impact of the separation of the two businesses which is due to
take effect from the end of September 2024.
Revenue in H1 2024 was £170.8m, an increase of £5.2m, or 3.2% higher than
the previous period (H1 2023: £165.6m), a resilient trading performance given
the challenging macro-environment with demand softness in certain end markets
and weakness in seasonal product performance due to the mild winter and
summer.
ProService revenue increased 3.4% to £156.8m (H1 2023: £151.6m) with growth
primarily from rehire of third-party rental fleet and increased resale
contracts, reflective of continued demand for the one-stop-shop offering.
Operations UK revenues decreased 8.7% to £49.3m (H1 2023: £54.0m) impacted
by softness from certain markets such as housing, RMI (repairs, maintenance
and improvements) and fit-out and weak seasonal performance which declined 23%
compared to H1 2023. On a consistent foreign exchange basis, HSS Ireland
revenue grew 1.1% (reported basis down 1.3%). The Central segment represents
the elimination of intercompany revenue between Operations and ProService.
Costs
Cost of sales increased to £94.7m during the period (H1 2023: £85.8m) driven
by the growth of third party rehire and resale revenue.
Distribution costs decreased by 3.1% to £13.6m (H1 2023: £14.0m) reflecting
the continuing tight control of costs and operational efficiency gains,
enabling greater flexibility as volumes change, offsetting inflationary
pressures.
Administrative expenses increased by £1.2m to £55.6m (H1 2023: £54.4m). In
addition to labour inflation, ongoing costs were incurred relating to the
operating of the ProService Marketplace Platform being expensed (£0.8m).
There has been a corresponding reduction in the software capitalisation as
developers increasingly focus on maintenance activities associated with the
recently developed infrastructure.
Adjusted EBITDA and Adjusted EBITA
Adjusted EBITDA reduced £2.0m to £26.9m (H1 2023: £28.9m), principally due
to the revenue mix, compounded by the seasonal product performance, and
increased technology costs as we invest to support the long-term growth of the
business.
Adjusted EBITA decreased £3.5m to £7.3m (H1 2023: £10.8m) with an increase
in property right of use depreciation arising from increases as rent review
negotiations are concluded.
Operating Profit
The reduction in adjusted EBITA flowed through to operating profit which
decreased £3.7m to £6.2m (H1 2023: £9.9m) with the increase in the variance
linked to higher amortisation associated with the investment in ProService's
marketplace technology.
This resulted in adjusted basic earnings per share (on a continuing basis)
decreasing to 0.13p in H1 24 from 0.55p in the prior period. The change in the
continuing basic earnings per share was 0.87p, to a loss per share of 0.21p.
Net finance expenses
Net finance expenses were £5.0m, in line with H1 2023, with the impact of
increased charges due to UK base rate changes offset by a £12.5m senior
facility prepayment in March 2024, utilising the proceeds from the Power
businesses sale.
Exceptional items
Total exceptional items of £3.1m have been recognised in H1 2024 principally
linked to the formal separation of the commercial and operational activities
of ProService and Operations (£2.2m) and the financial impact of the Power
businesses disposal (£0.9m).
Return on Capital Employed
ROCE on a continuing basis decreased to 14.9% from 18.0% in the prior year
with the impact of seasonal product weakness resulting in an adverse impact of
around 3 percentage points.
Net debt
Net debt on 29 June 2024 was £88.3m, a £22.6m reduction compared to H1 2023
(£111.6m). This reduction has been primarily driven by the sale of the Power
businesses in March 2024 which realised net proceeds of £20.1m alongside the
removal of related hire purchase and lease liabilities. The reduction in net
debt and continued strong working capital management has resulted in IFRS16
leverage decreasing to 1.5x (H1 2023: 1.6x, FY 2023: 1.7x). Non-IFRS16
leverage remained at 1.0x (H1 2023: 1.0x)
The debt facilities consist of a £57.5m senior finance facility and an
undrawn revolving credit and overdraft facility of £25.0m, both maturing in
November 2025. Including cash balances of £38.2m and unutilised finance lines
for the expansion of hire fleet of £11.3m, the Group had liquidity headroom
of £74.5m at 29 June 2024.
Dividend
The Board has decided to maintain the dividend at 0.18 pence per share despite
the reduction in H1 2023 Earnings Per Share, demonstrating confidence in the
company's strong balance sheet position
Going concern
At 29 June 2024, the Group's financing arrangements consisted of a drawn
senior finance facility of £57.5m, an undrawn revolving credit facility of
£19.0m and undrawn overdraft facilities of £6.0m. Cash at 29 June was
£38.2m, providing liquidity headroom of £74.5m. 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. Since the
2023 year end, the Group has been in a position to make repayments against the
senior finance facility of £12.5m and the Group has begun discussions to
renew the financing, with the Directors confident that this will be achieved
well in advance of the expiration date of the facility.
The Directors continue to model via a number of scenarios current
macroeconomic factors such as increasing inflation. At 24 September 2024 the
Group had sufficient liquidity to operate within banking covenants for the
period to 30 September 2025 even under a 'reasonable worst case' scenario. The
reasonable worst case scenario models lower underlying revenue performance,
lowers product margins, and increases 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 2024 financial year
have not changed significantly from those described in the Group's 2023 Annual
Report and are summarised in note 18 of this interim report.
Macroeconomic and strategy execution, given the scale of organisational
change, have been identified as the most material risks that could impact
performance and will continue to be closely monitored to ensure that
appropriate actions can be taken as required.
Steve Ashmore
Director
24 September 2024
HSS Hire Group plc
Unaudited condensed consolidated income statement
Note 26 weeks ended 26 weeks ended(1)
29 June 2024
1 July 2023
Underlying Exceptional items Total Underlying Exceptional items Total
(note 5) (note 5)
£000s £000s £000s £000s £000s £000s
Revenue 3 170,769 - 170,769 165,553 - 165,553
Cost of sales (94,708) - (94,708) (85,817) - (85,817)
-
Gross profit 76,061 - 76,061 79,736 - 79,736
Distribution costs (13,557) - (13,557) (13,990) - (13,990)
Administrative expenses (55,585) (2,298) (57,883) (54,408) (209) (54,617)
Impairment loss on trade receivables and contract assets (870) - (870) (1,422) - (1,422)
Other operating income 4 148 - 148 - 112 112
Operating profit 6,197 (2,298) 3,899 9,916 (97) 9,819
Net finance expense 7 (5,002) (154) (5,156) (4,905) (187) (5,092)
(Loss)/profit on continuing operations before tax 1,195 (2,452) (1,257) 5,011 (284) 4,727
Income tax charge (228) - (228) (50) - (50)
(Loss)/profit from continuing operations 967 (2,452) (1,485) 4,961 (284) 4,677
(Loss)/profit from discontinued operations, net of tax 17 (230) (642) (872) 817 - 817
(Loss)/profit for the financial period 737 (3,094) (2,357) 5,778 (284) 5,494
Alternative performance measures £000s
Adjusted EBITDA (note 19) 26,875 28,928
Adjusted EBITA (note 19) 7,289 10,810
Adjusted profit before tax (note 19) 1,195 5,011
Earnings per share for continuing operations (pence)
Adjusted basic earnings per share (note 8) 0.13 0.55
Adjusted diluted earnings per share (note 8) 0.13 0.54
Basic (loss)/earnings per share (note 8) (0.21) 0.66
Diluted (loss)/earnings per share (note 8) (0.20) 0.64
Continuing and discontinued operations (pence)
Basic (loss)/earnings per share (note 8) (0.33) 0.78
Diltuted (loss)/earnings per share (note 8) (0.32) 0.76
The notes form part of these condensed consolidated financial statements.
1. The notes supporting the income statement have been restated to
disclose continuing operations (note 2)
HSS Hire Group plc
Unaudited condensed consolidated statement of comprehensive income
26 weeks ended 26 weeks ended
29 June 2024
1 July 2023
£000s £000s
(Loss)/profit for the financial period (2,357) 5,494
Items that may be reclassified to profit or loss:
Foreign currency translation differences arising on consolidation of foreign (340) (368)
operations
Other comprehensive loss for the period (340) (368)
Total comprehensive (loss)/profit for the period (2,697) 5,126
Attributable to owners of the Group (2,697) 5,126
The notes form part of these condensed consolidated financial statements.
HSS Hire Group plc
Unaudited condensed consolidated statement of financial position
At 29 At 30 December
June 2023
2024
Note £000s £000s
ASSETS
Non-current assets
Intangible assets 9 147,426 152,982
Property, plant and equipment
- Hire equipment 10 72,535 81,191
- Non-hire assets 10 10,825 11,992
Right of use assets
- Hire equipment 11 2,281 2,592
- Non-hire assets 11 45,623 49,219
Deferred tax asset 2,012 2,012
280,702 299,988
Current assets
Inventories 3,066 3,823
Trade and other receivables 12 79,887 93,441
Cash 38,201 31,931
121,154 129,195
Total assets 401,856 429,183
LIABILITIES
Current liabilities
Trade and other payables 13 82,860 85,317
Lease liabilities 14 12,891 14,548
Borrowings 15 5,047 5,545
Provisions 16 5,015 4,816
105,813 110,226
Non-current liabilities
Lease liabilities 14 39,774 42,822
Borrowings 15 67,518 79,015
Provisions 16 10,678 13,753
Deferred tax liabilities 26 182
117,996 135,772
Total liabilities 223,809 245,998
Net assets 178,047 183,185
EQUITY
Share capital 7,108 7,050
Share premium 45,552 45,552
Merger reserve 97,780 97,780
Foreign exchange translation reserve (993) (653)
Retained earnings 28,600 33,456
Total equity 178,047 183,185
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 Merger reserve Foreign exchange translation reserve Retained earnings Total equity
£000s £000s £000s £000s £000s £000s
At 30 December 2023 7,050 45,552 97,780 (653) 33,456 183,185
Loss for the period - - - - (2,357) (2,357)
Foreign currency translation differences arising on consolidation of foreign - - - (340) - (340)
operations
Total comprehensive loss for the period - - - (340) (2,357) (2,697)
Transactions with owners recorded directly in equity
Share-based payment charge - - - - 239 239
Issue of shares 58 - - - (58) -
Dividends paid - - - - (2,680) (2,680)
At 29 June 2024 7,108 45,552 97,780 (993) 28,600 178,047
Share capital Share premium Merger reserve Foreign exchange translation reserve Retained earnings Total equity
£000s £000s £000s £000s £000s £000s
At 1 January 2023 7,050 45,552 97,780 (422) 32,503 182,463
Profit for the period - - - - 5,494 5,494
Foreign currency translation differences arising on consolidation of foreign - - - (368) - (368)
operations
Total comprehensive profit/(loss) for the period - - - (368) 5,494 5,126
Transactions with owners recorded directly in equity
Share-based payment charge - - - - 82 82
At 1 July 2023 7,050 45,552 97,780 (790) 38,079 187,671
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
29 June 2024
26 weeks
ended
1 July 2023
£000s £000s
(Loss)/profit for the financial period (2,357) 5,494
Adjustments for:
- Tax 228 45
- Amortisation 6 1,092 956
- Depreciation 6 16,903 17,881
- Accelerated depreciation relating to hire stock customer losses and hire 6 2,536 2,808
stock write offs
- Lease Disposals 6 (815) -
- Profit/(loss) on disposal of property, plant and equipment and right of use 6 1,001 (438)
assets
- Capital element of net investment in sublease receipts 80 -
- Share-based payment charge 239 82
- Loss on disposal of discontinued operations 872 -
- Foreign exchange gains on operating activities (586) (161)
- Net finance expense 7 5,156 5,222
Changes in working capital (excluding the effects of disposals and exchange
differences on consolidation):
- Inventories (151) (241)
- Trade and other receivables 12 9,199 617
- Trade and other payables 13 (1,676) (9,994)
- Provisions 16 (2,537) (1,772)
Cash flows from operating activities before purchase of hire equipment 29,184 20,499
Purchase of hire equipment 10 (10,324) (14,163)
Cash generated from operating activities 18,860 6,336
Net interest paid (4,842) (4,471)
Income tax received/(paid) 753 (614)
Net cash generated from operating activities 14,771 1,251
Cash flows from investing activities
Proceeds on disposal of business, net of cash disposed of 20,321 -
Purchases of non-hire property, plant, equipment and software 10,11 (3,891) (5,147)
Proceeds on disposal of non-hire property, plant and equipment 6 - 315
Net cash generated from/(used in) investing activities 16,430 (4,832)
Cash flows from financing activities
Repayment of borrowings (12,500) -
Capital element of lease liability payments 14 (8,343) (7,506)
Capital element of hire purchase arrangements (4,298) -
Net cash paid in financing activities (25,141) (7,506)
Net increase/(decrease) in cash 6,060 (11,087)
Net effects of foreign exchange on cash and cash equivalents 210 -
Cash at the start of the period 31,931 47,709
Cash at the end of the period 38,201 36,622
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 29 June 2024.
The Group is primarily involved in providing tool and equipment hire and
related services in the United Kingdom and the Republic of Ireland, details of
the developments in the period, along with the effects of seasonality, can be
found in the Chief Executive Officer's Report and Group Financial Performance.
The condensed consolidated financial statements were approved for issue by the
Board on 24 September 2024.
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 30 December 2023 were approved by the Board on 30 April
2024 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 29 June
2024 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 30 December
2023, which were prepared in accordance with IFRS as adopted by the UK (IFRS).
Under the requirements of IFRS5, the group has restated certain income
statement disclosures to present the comparative figures on a continuing
operations basis. For details of the discontinued operation please see note 17
business disposals.
Accounting policies are consistent with those in the Statutory Accounts for
the year ended 30 December 2023.
Going concern
At 29 June 2024, the Group's financing arrangements consisted of a drawn
senior finance facility of £57.5m, an undrawn revolving credit facility of
£19.0m, undrawn overdraft facilities of £6.0m and finance lines to fund hire
fleet of £11.3m. Cash at 29 June was £38.2m, providing liquidity headroom of
£74.5m. 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. Since the year end, the Group has been in a position to make
repayments against the senior finance facility of £12.5m and the Group has
begun discussions to renew the financing, with the Directors confident that
this will be achieved well in advance of the expiration date of the facility.
The Directors continue to model via a number of scenarios current
macroeconomic factors such as increasing inflation. At 24 September 2024 the
Group had sufficient liquidity to operate within banking covenants for the
period to 30 September 2025 even under a 'reasonable worst case' scenario. The
reasonable worst case scenario models lower underlying revenue performance,
lowers product margins, and increases 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.
3. Segmental reporting
In the previous year, the Group's Operating Segments were amended after
restructuring during 2022 had changed the internal Board Reporting and by
extension, the Operating and Reportable Segments. In the previous interim
financial statements, the Group had included the original and revised
segmental information as a transitional disclosure arrangement because it was
not possible to restate the comparative period under the new Segments. These
interim financial statements present both periods using only the revised
segments for the first time.
As discussed more fully in note 17, the Group disposed of the 'Power' segment
during the period (comprising ABird Limited, ABird Superior Limited and Apex
Generators Limited). As a result of this transaction, the Group has restated
the comparative income statement disclosures on a continuing operations basis.
The Power companies were previously presented within the 'Operations - UK'
Segment.
The largest customer of the Power companies was and continues to be the
ProService business. This relationship means that the elimination of
transactions between trading segments included within Central have also been
restated as a result of the continuing operations basis of preparation. The
relationship between ProService and the Power companies continues under
commercial terms reached during the sale and are discussed in note 17.
The Group continues to present separately costs relating to central management
within the "Central" heading in the disclosures below, which, also includes
the elimination of revenue between trading segments. 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 29 June 2024 (26 weeks ending 1 July 2023: None).
26 weeks ending 29 June 2024
ProService Operations - UK HSS Ireland Central Total
£000s £000s £000s £000s £000s
Equipment hire and related revenue 130,320 47,026 11,772 (47,127) 141,990
Sale of goods and related service 15,136 2,290 1,580 (1,557) 17,450
Other services rendered 11,318 - 11 - 11,329
Total revenue (including intergroup) 156,774 49,316 13,363 (48,684) 170,769
Adjusted EBITDA (continuing basis) 9,213 21,968 3,565 (7,871) 26,875
Less: Depreciation (941) (16,749) (1,664) (232) (19,586)
Adjusted EBITA (continuing basis) 8,272 5,219 1,901 (8,103) 7,289
Less: Exceptional items (non-finance) (2,298)
Less: Amortisation (1,092)
Operating profit (continuing basis) 3,899
Net finance expenses (5,156)
Loss before tax (continuing basis) (1,257)
26 weeks ending 1 July 2023
ProService Operations - UK HSS Ireland Central Total
£000s £000s £000s £000s £000s
Equipment hire and related revenue 130,431 51,234 11,435 (51,234) 141,866
Sale of goods and related service 11,789 2,772 2,103 (2,400) 14,264
Other services rendered 9,420 - 3 - 9,423
Total revenue (including intergroup) 151,640 54,006 13,541 (53,634) 165,553
Adjusted EBITDA (continuing basis) 9,746 24,341 3,678 (8,838) 28,928
Less: Depreciation (801) (15,849) (1,371) (97) (18,118)
Adjusted EBITA (continuing basis) 8,945 8,492 2,307 (8,935) 10,810
Less: Exceptional items (non-finance) (97)
Less: Amortisation (894)
Operating profit (continuing basis) 9,819
Net finance expenses (5,093)
Profit before tax (continuing basis) 4,726
As at 29 June 2024
ProService Operations - UK HSS Ireland Central Total
£000s £000s £000s £000s £000s
Additions to non-current assets
Property, plant and equipment 185 13,510 1,361 - 15,056
Right of use assets 1,419 6,142 1,049 166 8,776
Intangible assets 1,340 590 - - 1,930
Non-current assets net book value
Property, plant and equipment 658 72,197 10,505 - 83,360
Right of use assets 4,976 39,335 3,064 529 47,904
Intangible assets 72,203 67,713 7,510 - 147,426
Other non-current assets 2,012 2,012
Current assets 121,154 121,154
Current liabilities (105,813) (105,813)
Non-current liabilities (117,996) (117,996)
Net assets 178,047
As at 30 December 2023
ProService Operations - UK HSS Ireland Central Total
£000s £000s £000s £000s £000s
Additions to non-current assets
Property, plant and equipment 458 26,081 5,539 - 32,078
Right of use assets 3,037 15,100 741 309 19,187
Intangible assets 5,718 1,340 - - 7,058
Non-current assets net book value
Property, plant and equipment 649 82,242 10,292 - 93,183
Right of use assets 4,477 44,311 2,601 422 51,811
Intangible assets 71,613 73,859 7,510 - 152,982
Other non-current assets 2,012 2,012
Current assets 129,195 129,195
Current liabilities (110,226) (110,226)
Non-current liabilities (135,772) (135,772)
Net assets 183,185
4. Other operating income
26 weeks 26 weeks ended
1 July 2023
ended
29 June 2024
£000s £000s
Sublease rental and service charge income 148 112
During the period sub-let rental income of £0.1m (26 weeks ended 1 July 2023:
£0.1m) was received on properties no longer used by the Group for trading
purposes.
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.
During the 26 weeks ended 29 June 2024 the Group has recognised exceptional
items as follows:
Included in administrative expenses Included in finance expense Included in loss on disposal Total 26 weeks ended
29 June 2024
£000s £000s £000s £000s
Onerous property costs/(credits) (209) 29 - (180)
Costs relating to group restructuring 2,507 - - 2,507
Onerous contract - 125 - 125
Exceptional items from continuing operations 2,298 154 - 2,452
Loss arising from business divestiture - discontinued operations - - 642 642
Total 2,298 154 642 3,094
During the 26 weeks ended 1 July 2023, the Group recognised exceptional items
analysed as follows:
Included in administrative expenses Included in other operating income Included in finance expense Included in loss on disposal Total 26 weeks ended
1 July 2023
£000s £000s £000s £000s £000s
Onerous property costs/(credits) 10 (112) 18 - (84)
Costs relating to group restructuring 208 - - - 208
Onerous contract (9) - 169 - 160
Exceptional items from continuing operations 209 (112) 187 - 284
Costs related to onerous properties: branch and office closures (incurred in
2024 and 2023)
In the 26 weeks ended 1 July 2023 an exceptional credit of £0.1m has been
recognised within other operating income, this mainly relates to sublease
income on vacant stores.
Cost relating to restructuring (incurred in 2024 and 2023)
Following the changes made to its operating network in Q4 2020 and the
roll-out of HSS Pro in Q1 2021, the Group finalised the restructuring exercise
in the prior period. This related primarily to third party legal and
professional expenses in connect with the legal separation of the HSS
Operations and HSS Pro Service divisions into distinct entities, with the
legal separation completed on 3 July 2022.
In the current period, £2.2m of these costs principally relate to the formal
separation of the commercial and operational activities of ProService and
Operations.
Discontinued operations (incurred in 2024 and 2023)
Included within exceptional items is the loss on disposal of the Group's power
companies. This has been classified as exceptional to ensure that the results
of the Group can be clearly distinguished from all discontinued amounts in the
income statement, more detail on the disposal of the Power businesses is
provided in note 17.
6. Depreciation and amortisation expense
26 weeks ended
1 July 2023
26 weeks ended
29 June 2024
£000s £000s
Amortisation 1,092 894
Depreciation 19,586 18,118
Amounts charged in respect of depreciation: 26 weeks ending 29 June 2024
26 weeks ending 1 July 2023
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) 9,427 8,300 17,727 9,897 7,984 17,881
Accelerated depreciation relating to hire stock lost by customers or written 2,438 98 2,536 2,680 128 2,808
off (notes 10,11)
Loss on disposal of non-hire PPE before proceeds (notes 10,11) 77 924 1,001 259 115 374
Total depreciation per notes 10,11 11,942 9,322 21,264 12,836 8,227 21,063
Proceeds on disposal of non-hire property, plant and equipment - - - (315) - (315)
Profit on surrender of leases (163) (815) (978) (167) (340) (507)
Total depreciation per income statement and statement of cash flows 11,779 8,507 20,286 12,354 7,887 20,241
Less depreciation from discontinued operations (677) (170) (847) (1,919) (214) (2,133)
Less depreciation included within exceptional items (33) 180 147 10 - 10
Total depreciation used in calculating adjusted performance measures 11,069 8,517 19,586 10,445 7,673 18,118
Amounts charged in respect of amortisation:
26 weeks ended 26 weeks ended
29 June 2024
1 July 2023
£000s £000s
Intangible assets
Amortisation (note 9) 1,110 935
Loss on disposal - 21
Total amortisation per notes 1,110 956
Amortisation included in discontinued operations (18) (62)
Total from continuing operations and used in calculating adjusted performance 1,092 894
measures
1. The notes supporting the income statement have been restated to
disclose continuing operations (note 2).
7. Net finance expense
26 weeks ended 26 weeks ended
29 June 2024
1 July 2023
£000s £000s
Interest on senior finance facility 2,548 2,462
Amortisation of debt issue costs 254 254
Interest on lease liabilities 1,678 1,630
Interest on hire purchase arrangements 466 345
Interest unwind on discounted provisions 298 347
Interest on revolving credit facility, including commitment fees 148 108
Other interest received (236) (54)
Net finance expense 5,156 5,092
Finance expense from discontinued operations 119 130
Total finance expense for statement of cash flows 5,275 5,222
8. Earnings per share
Basic earnings per share:
(Loss)/profit after tax from total operations (Loss)/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 29 June 2024 (2,357) (1,485) 705,788 (0.33) (0.21)
26 weeks ended 1 July 2023 5,494 4,677 704,988 0.78 0.66
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:
(Loss)/profit after tax from total operations (Loss)/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 29 June 2024 (2,357) (1,485) 728,141 (0.32) (0.20)
26 weeks ended 1 July 2023 5,494 4,677 726,283 0.76 0.64
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
(26 weeks ending 1 July 2023: all equity derivative securities were dilutive).
The following is a reconciliation between the basic earnings per share and the
adjusted basic earnings per share:
26 weeks ended 29 June 2024 As restated(1)
26 weeks ended 1 July 2023
Total operations Continuing operations Total operations Continuing operations
pence pence pence pence
Basic earnings per share (0.33) (0.21) 0.78 0.66
Add back:
Exceptional items per share 0.44 0.35 0.04 0.04
Tax per share 0.02 0.03 0.01 0.01
Charge:
Tax charge at prevailing rate (0.03) (0.04) (0.18) (0.16)
Adjusted basic earnings per share 0.10 0.13 0.65 0.55
The following is a reconciliation between the diluted earnings per share and
the adjusted diluted earnings per share:
26 weeks ended 29 June 2024 As restated(1)
26 weeks ended 1 July 2023
Total operations Continuing operations Total operations Continuing operations
pence pence pence pence
Diluted earnings per share (0.32) (0.20) 0.76 0.64
Add back:
Exceptional items per share 0.42 0.34 0.04 0.04
Tax per share 0.02 0.03 0.01 0.01
Charge:
Tax charge at prevailing rate (0.03) (0.04) (0.18) (0.15)
Adjusted diluted earnings per share 0.09 0.13 0.63 0.54
The weighted average number of shares for the purposes of calculating the
diluted earnings per share are as follows:
26 weeks ended 26 weeks ended
29 June 2024
1 July 2023
Weighted average number of shares Weighted average number of shares
000s 000s
Basic 705,788 704,988
LTIP share options 2,564 3,003
Restricted stock grant 19,712 18,209
CSOP options 77 83
Diluted 728,141 726,283
1. The notes supporting the income statement have been restated to disclose
continuing operations (note 2).
9. Intangible assets
Goodwill Customer relationships Brands Software Total
£000s £000s £000s £000s £000s
Cost
At 31 December 2023 115,855 25,400 22,585 39,462 203,302
Additions - - - 1,931 1,931
Disposed of on business divestiture (6,053) (900) (685) - (7,638)
Disposals - - - - -
At 29 June 2024 109,802 24,500 21,900 41,393 197,595
Amortisation
At 31 December 2023 - 25,382 361 24,577 50,320
Charge for the period - 13 5 1,092 1,110
Disposed of on business divestiture - (895) (366) - (1,261)
Disposals - - - - -
At 29 June 2024 - 24,500 - 25,669 50,169
Net book value
At 29 June 2024 109,802 - 21,900 15,724 147,426
Goodwill Brands Software Total
Customer relationships
£000s £000s £000s £000s £000s
Cost
At 1 January 2023 115,855 25,400 22,585 32,764 196,604
Additions - - - 4,246 4,826
Disposals - - - (3,827) (3,827)
At 1 July 2023 115,855 25,400 22,585 33,183 197,023
Amortisation
At 1 January 2023 - 25,291 327 23,119 48,737
Charge for the period - 45 17 873 935
- - - (3,827) (3,827)
At 1 July 2023 - 25,336 344 20,165 45,845
Net book value
At 1 July 2023 115,855 64 22,241 13,018 151,178
Goodwill Customer relationships Brands Software Total
£000s £000s £000s £000s £000s
Cost
At 1 January 2023 115,855 25,400 22,585 32,764 196,604
Additions - - - 7,058 7,058
Disposals - - - (360) (360)
At 30 December 2023 115,855 25,400 22,585 39,462 203,302
Amortisation
At 1 January 2023 - 25,291 327 23,119 48,737
Charge for the period - 91 34 1,818 1,943
Disposals - - - (360) (360)
At 30 December 2023 - 25,382 361 24,577 50,320
Net book value
At 30 December 2023 115,855 18 22,224 14,885 152,982
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 31 December 2023 35,759 21,912 181,054 238,725
Transferred from right of use assets - - 193 193
Additions 662 431 13,963 15,056
Disposals (912) (2) (10,306) (11,220)
Disposed on business divestiture (1,414) (1,291) (39,277) (41,982)
Foreign exchange differences (24) (5) (8) (37)
At 29 June 2024 34,071 21,045 145,619 200,735
Accumulated depreciation
At 31 December 2023 26,539 19,140 99,863 145,542
Transferred from right of use assets - - 145 145
Charge for the period 1,160 517 7,750 9,427
Disposals (835) (2) (7,869) (8,706)
Disposed on business divestiture (1,007) (1,210) (26,756) (28,973)
Foreign exchange differences (9) (2) (49) (60)
At 29 June 2024 25,848 18,443 73,084 117,375
Net book value
At 29 June 2024 8,223 2,602 72,535 83,360
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 1 January 2023 35,045 29,196 174,508 238,749
Transferred from right of use assets - - 242 242
Additions 575 405 17,788 18,768
Disposals (360) (40) (9,958) (10.358)
Foreign exchange differences (32) (3) (302) (337)
At 1 July 2023 35,228 29,558 182,278 247,064
Accumulated depreciation
At 1 January 2023 23,957 26,122 100,895 150,974
Transferred from right of use assets - - 169 169
Charge for the year 1,278 666 7,953 9,897
Disposals (102) (40) (7,278) (7,420)
Foreign exchange differences (3) - - (3)
At 1 July 2023 25,130 26,748 101,739 153,617
Net book value
At 1 July 2023 10,098 2,810 80,539 93,447
Land & buildings Plant & machinery Materials & equipment held for hire Total
£000s £000s £000s £000s
Cost
At 1 January 2023 35,045 29,196 174,508 238,749
Transferred from right of use assets - - 372 272
Transferred to right of use assets - - (483) (483)
Additions 1,680 847 29,551 32,078
Disposals (724) (8,128) (22,753) (31,605)
Remeasurement (216) - - (216)
Foreign exchange differences (26) (3) (141) (170)
At 30 December 2023 35,759 21,912 181,054 238,725
Accumulated depreciation
At 1 January 2023 23,957 26,122 100,895 150,974
Transferred from right of use assets - - 323 323
Transferred to right of use assets - - (380) (380)
Charge for the year 2,531 1,248 15,296 19,075
Disposals (444) (8,124) (16,382) (24,950)
Accelerated depreciation on exit of trading locations 507 9 - 516
Foreign exchange differences (12) - (4) (16)
Transfers - (115) 115 -
At 30 December 2023 26,539 19,140 99,863 145,542
Net book value
At 30 December 2023 9,220 2,772 81,191 93,183
11. Right of use assets
Property Vehicles Equipment for internal use Equipment for hire Total
£000s £000s £000s £000s £000s
Cost
At 31 December 2023 52,935 27,908 - 4,134 84,977
Additions 2,615 5,773 150 237 8,775
Remeasurements (321) - - - (321)
Transferred to property, plant and equipment - - - (193) (193)
Disposals (1,107) (2,303) - (174) (3,584)
Disposed of with business divestiture (3,779) (1,801) (30) - (5,610)
Foreign exchange differences (56) (47) - - (103)
At 29 June 2024 50,287 29,530 120 4,004 83,941
Accumulated depreciation
At 31 December 2023 21,321 10,303 - 1,542 33,166
Charge for the period 4,511 3,373 14 402 8,300
Transferred to property, plant and equipment - - - (145) (145)
Disposals (746) (1,740) - (76) (2,562)
Disposed of with business divestiture (1,942) (748) - - (2,690)
Foreign exchange differences (14) (18) - - (32)
At 29 June 2024 23,130 11,170 14 1,723 36,037
Net book value
At 29 June 2024 27,157 18,360 106 2,281 47,904
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 1 January 2023 56,895 31,613 520 3,606 92,634
Additions 2,152 7,462 - 1,012 10,626
Transferred to property, plant and equipment - - - (242) (242)
Disposals (4) (547) (200) (179) (930)
Foreign exchange differences (64) (35) - - (99)
At 1 July 2023 58,979 38,493 320 4,197 101,989
Accumulated depreciation
At 1 January 2023 20,540 18,909 502 870 40,821
Charge for the period 4,028 3,453 17 486 7,984
Transferred to property, plant and equipment - - - (169) (169)
Disposals (4) (432) (200) (51) (687)
Foreign exchange differences (5) (9) - - (14)
At 1 July 2023 24,559 21,921 319 1,136 47,935
Net book value
At 1 July 2023 34,420 16,572 1 3,061 54,054
Property Vehicles Equipment for internal use Equipment for hire Total
£000s £000s £000s £000s £000s
Cost
At 1 January 2023 56,895 31,613 520 3,606 92,634
Additions 5,243 12,882 - 1,062 19,187
Re-measurements (608) - - (608)
Transferred to property, plant and equipment - - - (372) (372)
Transferred from property, plant and equipment - - 483 483
Disposals (8,558) (16,573) (520) (645) (26,296)
Foreign exchange differences (37) (14) - - (51)
At 30 December 2023 52,935 27,908 - 4,134 84,977
Accumulated depreciation
At 1 January 2023 20,540 18,909 502 870 40,821
Transfers to property, plant and equipment - - - (323) (323)
Transferred from property, plant and equipment - - - 380 380
Charge for the year 6,625 6,976 18 979 14,598
Accelerated depreciation on exit of trading locations 943 - - - 943
Disposals (6,787) (15,582) (520) (364) (23,253)
At 30 December 2023 21,321 10,303 - 1,542 33,166
Net book value
At 30 December 2023 31,614 17,605 - 2,592 51,811
Disclosures relating to lease liabilities are included in note 14.
12. Trade and other receivables
26 week period ended 29 June 2024
Gross Provision for impairment Provision for credit notes Net of provision
£000s £000s £000s £000s
Trade receivables 62,106 (3,350) (4,909) 53,847
Accrued income 14,389 (115) - 14,274
Trade receivables and contract assets 76,495 (3,465) (4,909) 68,121
Net investment in sublease 217 - - 217
Other debtors 4,232 - - 4,232
Prepayments 7,317 - - 7,317
Total trade and other receivables 88,261 (3,465) (4,909) 79,887
Year ended 30 December 2023
Gross Provision for impairment Provision for credit notes Net of provision
£000s £000s £000s £000s
Trade receivables 76,620 (3,607) (5,528) 67,485
Accrued income 13,318 (103) - 13,215
Trade receivables and contract assets 89,938 (3,710) (5,528) 80,700
Net investment in sublease 569 - - 569
Other debtors 5,846 - - 5,846
Prepayments 6,326 - - 6,326
Total trade and other receivables 102,679 (3,710) (5,528) 93,441
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
29 June 2024 30 December 2023
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 (3,710) (5,528) (3,449) (5,554)
Increase in provision (870) (3,631) (2,183) (4,166)
Utilisation 1,070 4,187 1,922 4,192
Disposed of with business divestiture 45 63 - -
Balance at the end of the period (3,465) (4,909) (3,710) (5,528)
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:
At 29 June 2024 Current 0-60 days past due 61-365 days past due 1-2 years past due Total
Trade receivables and contract assets 59,816 7,256 7,621 1,802 76,495
Expected loss rate 0.7% 2.3% 20.6% 74.2% 4.5%
Provision for impairment charge 392 169 1,567 1,337 3,465
At 30 December 2023 Current 0-60 days past due 61-365 days past due 1-2 years past due Total
Trade receivables and contract assets 73,810 7,594 7,031 1,503 89,938
Expected loss rate 0.6% 2.4% 24.1% 90.6% 4.1%
Provision for impairment charge 469 184 1,696 1,361 3,710
Contract assets consist of accrued income.
The provision for impairment 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 macroeconomic
uncertainty leading to pressures on businesses facing staff and material
shortages and, more latterly, increased inflation. At the balance sheet date,
similar to 2023, the Group considers that historical losses are not a reliable
predictor of future failures and has exercised judgement in the expected loss
rates across all categories of debt. In so doing the Group has applied an
adjusted risk factor of 1.125x (2023: 1.25x) to reflect the increased risk of
future insolvency. 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.
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 12.3% of trade
receivables and contract assets at 29 June 2024 (30 December 2023: 11.4%).
13. Trade and other payables
29 June 30 December 2023
2024
£000s £000s
Current
Trade payables 48,272 50,410
Other taxes and social security costs 4,049 4,631
Other creditors 4,144 1,020
Accrued interest on borrowings 589 716
Accruals 24,464 27,204
Deferred income 1,342 1,336
82,860 85,317
14 Lease liabilities
29 June 30 December 2023
2024
£000s £000s
Current
Lease liabilities 12,891 14,548
Non-current
Lease liabilities 39,774 42,822
52,665 57,370
The interest rates on the Group's lease liabilities are as follows:
29 June 30 December 2023
2024
Equipment for hire Fixed 10.6 to 19.1% 10.6 to 19.1%
Other Fixed 6.3 to 7.7% 5.7 to 6.1%
The weighted average interest rates on the Group's lease liabilities are as
follows:
29 June 30 December 2023
2024
Lease liabilities 6.5% 6.4%
The Group's leases have the following maturity profile:
29 June 30 December 2023
2024
£000s £000s
Less than one year 15,953 17,735
Two to five years 35,455 37,765
More than five years 12,207 13,375
63,615 68,875
Less interest cash flows: (10,950) (11,505)
Total principal cash flows 52,665 57,370
The maturity profile, excluding interest cash flows of the Group's leases is
as follows:
29 June 30 December 2023
2024
£000s £000s
Less than one year 12,891 14,548
Two to five years 29,627 31,737
More than five years 10,147 11,085
52,665 57,370
The lease liability movements are detailed below: Property Vehicles Equipment for hire and internal use Total
£000s £000s £000s £000s
At 31 December 2023 35,940 18,158 3,272 57,370
Additions 2,150 5,775 266 8,191
Re-measurements (321) - - (321)
Discount unwind 1,056 539 198 1,793
Payments (including interest) (4,865) (3,810) (1,462) (10,137)
Disposals (472) (615) - (1,087)
Disposed of with business divestiture (2,020) (1,028) (26) (3,074)
Foreign exchange differences (45) (25) - (70)
At 29 June 2024 31,423 18,994 2,248 52,665
Property Vehicles Equipment for hire and internal use Total
£000s £000s £000s £000s
At 1 January 2023 39,268 13,472 3,552 56,292
Additions 5,167 12,955 1,126 19,248
Re-measurements (720) - - (720)
Discount unwind 2,320 764 536 3,620
Payments (including interest) (9,483) (7,924) (1,942) (19,349)
Disposals (584) (1,091) - (1,675)
Foreign exchange differences (28) (18) - (46)
At 30 December 2023 35,940 18,158 3,272 57,370
15 Borrowings
29 June 30 December 2023
2024
£000s £000s
Current
Hire purchase arrangements 5,047 5,545
Non-current
Hire purchase arrangements 10,679 9,930
Senior finance facility 56,839 69,085
67,518 79,015
The senior finance facility is stated net of transaction fees of £0.7m (30
December 2023: £0.9m) which are being amortised over the loan period.
The nominal value of the Group's loans at each reporting date is as follows:
29 June 30 December 2023
2024
£000s £000s
Hire purchase arrangements 15,726 15,475
Senior finance facility 57,500 70,000
73,226 85,475
The interest rates on the Group's borrowings are as follows:
29 June 30 December
2024 2023
Hire purchase arrangements Floating % above NatWest base rate 2.2 to 2.5% 2.2 to 2.5%
Revolving credit facility Floating % above SONIA 3.0% 3.0%
Senior finance facility Floating % above SONIA 3.0% 3.0%
The weighted average interest rates on the Group's borrowings are as follows:
29 June 30 December 2023
2024
Hire purchase arrangements Floating % above NatWest base rate 7.7% 7.7%
Revolving credit facility Floating % above SONIA 8.2% 8.2%
Senior finance facility Floating % above SONIA 8.2% 8.2%
The Group had undrawn committed borrowing facilities of £36.3m at 29 June
2024 (2023: £36.3m), including £11.3m (2022: £11.3m) of finance lines to
fund hire fleet capital expenditure not yet utilised. Including net cash
balances, the Group had access to £74.5m of combined liquidity from available
cash and undrawn committed borrowing facilities at 29 June 2024 (2023:
£68.2m).
The Group's borrowings have the following maturity profile:
29 June 2024 30 December 2023
Hire purchase arrangements Senior finance facility Hire purchase arrangements Senior finance facility
£000s £000s £000s £000s
Less than one year 5,964 4,715 6,333 5,733
Two to five years 11,789 59,307 10,805 75,096
17,753 64,022 17,138 80,829
Less interest cash flows: (2,027) (6,522) (1,663) (10,829)
Total principal cash flows 15,726 57,500 15,475 70,000
16 Provisions
Onerous property costs Dilapidations Onerous contracts Total
£000s £000s £000s £000s
At 30 December 2023 554 11,215 6,800 18,569
Additions - 99 - 99
Utilised during the period (149) (519) (1,644) (2,312)
Unwind of provision 10 166 125 301
Impact of change in discount rate - - - -
Releases (198) (126) - (324)
Foreign exchange - (19) - (19)
Disposed of with business divestiture - (621) - (621)
At 29 June 2024 217 10,195 5,281 15,693
Of which:
Current 112 1,775 3,128 5,015
Non-current 105 8,420 2,153 10,678
217 10,195 5,281 15,693
Onerous Dilapidations Onerous contracts Total
property costs
£000s £000s £000s £000s
At 1 January 2023 117 11,380 9,806 21,303
Additions 492 230 - 722
Utilised during the period (60) (508) (3,289) (3,857)
Unwind of provision 5 377 311 693
Impact of change in discount rate - 907 (28) 879
Releases - (1,153) - (1,153)
Foreign exchange - (18) - (18)
At 30 December 2023 554 11,215 6,800 18,569
Of which:
Current 271 1,477 3,068 4,816
Non-current 283 9,738 3,732 13,753
554 11,215 6,800 18,569
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.
Dilapidations
The timing and amounts of future cash flows related to lease dilapidations are
subject to uncertainty. The provision recognised is based on management's
experience and understanding of the commercial retail property market and
third-party surveyors' reports commissioned for specific properties in order
to best estimate the future outflow of funds, requiring the exercise of
judgement applied to existing facts and circumstances, which can be subject to
change. Utilisation of provisions during the period led to a £0.5m decrease
in the provision (2023: £0.5m), driven by the exit of properties associated
with the branch network restructure discussed in the Group's 2023 annual
report. Provisions of £0.6m were disposed of in the period in association
with the disposal of the Power companies, see note 17 for more details.
17 Business disposals
During the current period, on 7 March 2024, the Group announced the sale of
ABird Limited, ABird Superior Limited and Apex Generators Limited (together
the 'Power' Companies) to CES Global. The sale was undertaken as part of a
strategic decision to focus on the core business and growth of the ProService
and Operations businesses. The consideration for the sale was entirely settled
in cash.
As discussed more fully in Note 3, the results of the Power businesses were
previously reported within the Group's 'Operations - UK' reporting segment,
with a significant element of revenues recorded through the ProService
business.
As part of this transaction, HSS has entered into a commercial agreement with
CES for the cross-hire of power generators and related services to ensure the
broadest possible distribution of, and customer access to, both parties'
existing fleets. The Board expects this commercial arrangement to ensure that
even post-disposal, the sales in respect of the Power hire stock will continue
through HSS ProService under the new commercial agreement.
Shortly after the disposal, the Group utilised £12.5m of the proceeds to
repay borrowings and further strengthen the Group's balance sheet position.
The Group have restated comparative figures for the income statement
throughout the financial statements in accordance with IFRS 5. The table below
shows the details results of discontinued operations:
Result of discontinued operations 26 weeks ended 29 June 2024 26 weeks ended 1 July 2023
£000s £000s
Revenue 4,052 14,893
Expenses other than finance costs, amortisation and depreciation (3,402) (11,756)
Depreciation (847) (2,133)
Amortisation (18) (62)
Net finance expenses (119) (130)
Taxation 104 5
(Loss)/profit from trade within discontinued operations, net of tax (230) 817
Loss on disposal of discontinued operations (642) -
(Loss)/profit from discontinued operations, net of tax (872) 817
Basic earnings/(loss) per share (p) from discontinued operations (0.12) 0.12
Diluted earnings/(loss) per share (p) from discontinued operations (0.12) 0.12
Weighted average number of shares (000s) 705,788 704,988
Weighted average number of diluted shares (000s) 728,141 726,283
Below is a detailed breakdown of the result on disposal:
£000s
Description of assets and liabilities
Goodwill 6,053
Brand and customer lists 324
Property, plant and equipment 13,009
Right of use assets 2,920
Deferred tax assets 56
Inventories 908
Trade and other receivables 3,018
Cash 369
Trade and other payables (2,148)
Provisions (621)
Deferred tax liabilities (108)
Lease liabilities (3,074)
Net assets disposed of 20,706
Total consideration 20,690
Less: costs of disposal (626)
Less: net assets disposed of (20,706)
Total loss on disposal (642)
Cash consideration received 20,690
Cash disposed of (369)
Net cash inflow on disposal of discontinued operations 20,321
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 2023 financial year
have not changed significantly from those set out on pages 48 to 54 of the
Group's 2023 Annual Report, which is available at
https://www.https://www.hsshiregroup.com/investor-relations/financial-results/.
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').
The Group continues to identify Macroeconomic Conditions as the main risk
expected to affect the Group in the remaining 26 weeks for the financial year.
The Group continues to monitor the impact of inflationary pressures and
interest rates at their current levels. In addition, wider macroeconomic
factors like increased global conflict and the change in UK Government shortly
after the balance sheet date are all taken into consideration by the Board.
19. Alternative performance measures
Earnings before interest, taxation, depreciation and amortisation (EBITDA) and
Adjusted EBITDA, earnings before interest, tax and amortisation (EBITA) and
Adjusted EBITA and Adjusted profit 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 before tax is defined by the Group as profit before tax,
amortisation of customer relationships and brand related intangibles as well
as exceptional items.
The Group discloses Adjusted EBITDA, Adjusted EBITA and Adjusted profit 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 like Adjusted EBITDA,
Adjusted EBITA and Adjusted profit 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 before tax provides useful information to
users of the financial statements.
As these are non-IFRS measures, other entities may not calculate the measures
in the same way and hence are not directly comparable.
Adjusted EBITDA is calculated as follows:
26 weeks ended 26 weeks ended 26 weeks ended 26 weeks ended
29 June 2024
29 June 2024
1 July 2023
1 July 2023
Continuing Total Continuing Total
£000s £000s £000s £000s
Operating profit 3,899 3,684 9,819 10,761
Add: Depreciation of property, plant and equipment and right of use assets 19,586 20,433 18,118 20,251
Add: Amortisation of intangible assets 1,092 1,110 894 956
EBITDA 24,577 25,227 28,831 31,968
Add: Exceptional items (non-finance) from continuing operations 2,298 2,298 97 97
Adjusted EBITDA 26,875 27,525 28,928 32,065
Adjusted EBITA is calculated as follows:
26 weeks ended 26 weeks ended 26 weeks ended 26 weeks ended
29 June 2024
29 June 2024
1 July 2023
1 July 2023
Continuing Total Continuing Total
£000s £000s £000s £000s
Operating profit 3,899 3,684 9,819 10,761
Add: Amortisation of intangible assets 1,092 1,110 894 956
EBITA 4,991 4,794 10,713 11,717
Add: Exceptional items (non-finance) from continuing operations 2,298 2,298 97 97
Adjusted EBITA 7,289 7,092 10,810 11,814
Adjusted profit before tax is calculated as follows:
26 weeks ended 26 weeks ended 26 weeks ended 26 weeks ended
29 June 2024
29 June 2024
1 July 2023
1 July 2023
Continuing Total Continuing Total
£000s £000s £000s £000s
Profit before tax (1,257) (2,233) 4,727 5,539
Add: Amortisation of customer relationships and brands - 18 - 62
Profit before tax and amortisation (1,257) (2,215) 4,727 5,601
Add: Exceptional items (finance and non-finance) 2,452 3,094 284 284
Adjusted profit before tax 1,195 879 5,011 5,885
20. Post Balance-sheet events
Dividends
Subsequent to the half end, on 23 August 2024, an interim dividend of 0.18p
per share was approved by the Board. This will be paid on 6(th) November 2024
and has an ex-dividend date of 3(rd) October 2024.
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