RNS Number : 4503N
HSS Hire Group PLC
30 September 2021
HSS Hire Group Plc
2017 strategic plan complete; business positioned for next phase of accelerated growth
HSS Hire Group plc ("HSS" or the "Group") today announces results for the 27 week period ended 3 July 2021
Financial Highlights 1 (Unaudited)
H1 2021
H1 2020
Change
Revenue2
£150.5m
£120.7m
22.0%
Adjusted EBITDA3
£38.3m
£27.9m
37.2%
Adjusted EBITDA margin
25.4%
23.1%
2.3pp
Adjusted EBITA4
£17.7m
£1.1m
£16.6m
Adjusted EBITA margin
11.8%
0.9%
10.9pp
Net debt leverage5,7
1.7x
2.9x
1.2x
Other extracts
Operating profit / (loss)
£22.6m
£(0.7)m
£23.3m
Profit / (loss) after tax
£11.2m
£(12.9)m
£24.1m
Basic earnings/(loss) per share
1.61p
(7.55)p
9.16p
· Strong trading performance with new operating model driving significantly improved profitability above 2019 levels
o H1 2021 like-for-like6 revenues at 99% of H1 2019, with Q2 2021 at 102%
o Capital-light Services segment 17% ahead of FY19 on a like-for-like6 basis
o EBITDA7 and EBITA7 comfortably ahead of 2019, up 13% and 99% respectively
o Digitally-led, lower-cost operating model underpinning Group profitability with EBITDA margin up 2.3pp on H1 2020 and ROCE8 increasing to 24.0%, up 13.3pp since December 2020
· Further strengthening of balance sheet with leverage reduced to 1.7x7
o Net debt7 reduced further to £97.6m (FY 2020: £120.4m)
o Leverage at a record low and significantly ahead of previous FY 2021 target
o Sale of Laois completed April 2021 for €11.2m
o Efficient working capital management maintained, overdue debt remains at low levels
· Delivered 2017 strategic plan, focus now on leveraging digital offering to drive accelerated growth
o Transition to new digital platform, HSS Pro POS, largely complete; improving the customer experience by providing single point-of-sale access to full range of HSS products and services
o Restructured organisation into two divisions, already delivering improved sales conversion and customer service
o "Sales Acquisition", focused on customer conversion and the leveraging of digital assets; and
o "Make it Happen", focused on customer fulfilment and service.
o Low cost builders merchant network expanded to 50 locations (June 2020: 10), now representing 13% of customer orders in England & Wales
o Continued technology investment including enhancements to HSS.com, with online revenue up 75% compared to prior year representing 24% of transactions in H1 2021
· Current trading and outlook
o Revenue, EBITDA7 and EBITA7 all above management expectations in Q3 2021 to date.
o Management now expect full year EBITDA, on a non-IFRS16, continuing operations basis, to be ahead of market expectations and EBITA7 to be materially ahead
o Sale of All Seasons Hire completed 29 September 2021 for gross consideration of £55m, with proceeds to be used to further reduce debt. Leverage7 as at 3 July 2021 on a LTM pro-forma basis will reduce to c1.0x post this transaction, delivering on one of the three strategic objectives announced in 2017 - "Delever the Group".
o Group revised target is for leverage7 to remain between 1.0x and 1.5x
o Refinancing process underway, well placed for material reduction in Group interest cost
o Strategy delivering, well positioned to capitalise on market opportunities
o HSS will host a series of events, starting later in the year, to demonstrate the Group's technology platforms and provide an update on the Group's financial performance framework
Steve Ashmore, Chief Executive Officer, said:
"The first half of 2021 has been one of significant progress and I am very pleased with what we have accomplished. We started the year with strong momentum and trading continued to improve over the period, with Q2 21 revenues at 102% of 2019 levels, EBITDA and EBITA margins up and ROCE at a record level. This strong performance, combined with the post balance sheet date sale of All Seasons Hire, has allowed us to reduce leverage to around 1.0x, well below our 2.0x target, completing the final element of the strategic plan set out in 2017: to Delever the Group, Transform the Tool Hire business and Strengthen our Commercial proposition.
The Group has made strong progress over the last four years so that HSS today is unrecognisable from the HSS of 2017. Our unrivalled digital capabilities allow us to offer our customer what they need, when they need it, servicing demand through our 500+ partner supply chain. Leveraging our differentiated customer offering, highly-evolved technology platform, and scalable structure built around two key divisions, we are uniquely positioned to capitalise on market opportunities as we begin the next exciting phase of our growth."
Notes
1) Results for H1 21 and H1 20 are for continuing operations on an IFRS16 basis (unless otherwise stated) and exclude the Laois Hire Limited business which was sold in April 2021
2) Revenue variance excludes the impact of additional week's trading in H1 FY21
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) Net debt leverage is calculated as closing net debt divided by adjusted Last Twelve Months (LTM) EBITDA
6) Like-for-like excludes impact of loss of Services volume associated with FY19 announced change to one managed service contract and impact of additional week's trading in Q1 FY21
7) Pre-IFRS16 basis
8) ROCE is calculated as Adjusted EBITA for the 12 months to 3 July 2021 divided by the average of total assets less current liabilities (excluding intangible assets, cash and debt items) over the same period
-Ends-
Disclaimer:
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 and its OneCall rehire business. 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.
For further information, please contact:
HSS Hire Group plc
Tel: 07557 491 860 (on 30 September 2021)
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 Charles Armitstead
Tel: 07557 491 860 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 2021 saw our new operating model deliver well, with revenue returning to pre-COVID-19 levels despite further related government restrictions, and profitability increasing significantly above 2019 levels. Performance has been driven by the rollout of new technology (HSS Pro POS) to our salesforce, expansion of the builders merchant model and a resilient construction market. The changes made to our network in Q4 2020 have proved successful, delivering strong customer service, while reducing costs and our carbon footprint. Following on from that we have reorganised our business into two divisions, Sales Acquisition and Make it Happen, which is bringing separate focus to how we acquire customers and then fulfil their requirements.
HSS Pro POS Technology Rollout
We have continued to invest in the Brenda platform since its launch for the OneCall business in 2018. During Q1 2021 we rolled out the latest application, HSS Pro POS, to our entire salesforce. This allows them direct access to our full range of products and services, whether sourced directly from owned fleet or via our large supply chain of rehire suppliers. The platform has landed well with colleagues, being simple, quick and intuitive, and most important of all, allowing them to say "Yes!" to customers quickly for all hire enquiries.
We are already seeing HSS Pro POS deliver great results with rehire enquiries up 18%, conversion rates improved by 17ppts and a resultant 17% improvement in like-for-like Services revenue. We are also seeing better decision-making, reducing the number of high cost-to-serve and high-carbon, long-distance jobs in favour of using our rehire supply chain to offer a more efficient response to customers. This is likely to drive continued outperformance of Services revenue against Rental.
Builders Merchants Network Expansion
In H1 2021 we increased the number of builders merchant locations from 24 to 43, and at mid-September have 50 open, all of which have significantly higher footfall than a typical standalone hire location. These builders merchants are proving to be a convenient location for our customers to order and collect hire equipment, with 13% of our contracts raised in England & Wales now being done at these locations. Our network is approaching optimum size with a national footprint now in place with 14 partners. The pace of rollout will slow in H2 as we focus instead on maturing open locations and working with our partners to improve penetration with their larger customers.
Market Resilience
While some important end-user markets like retail, hospitality and airports continued to be adversely impacted by COVID-19 in H1, the lack of volume there has been replaced by strong demand in areas like housebuilding, home improvement, repair & maintenance and infrastructure. It is testament to our diversified customer base and exposure to so many end-user markets that our revenue performance remains strong. As more COVID-19 restrictions are removed we see further opportunities for growth in H2. The outlook for the market is positive with the Construction Products Association forecasting 6.3% growth in construction output for 2022 and the ONS publishing forecasts for GDP growth in 2022 averaging 5.4%.
Operating Network Changes
The changes to our operating network in October 2020 have delivered ahead of our operational and financial expectations and we are now better placed than ever to fulfil customer requirements. We believe that we have the leading national fulfilment network, offering both depth of coverage and breadth of offering across the UK and Ireland. Our directly employed operations teams have new-found focus on operating 40 well established distribution hubs, into which we consolidated the vast majority of our owned fleet. This strategically located network is fit for the future and we do not foresee any major changes, providing an opportunity for our teams to focus on delivering exceptional customer service using the new routing and scheduling technologies that we are introducing in H2.
Our network also includes fulfilment from a further 2000+ locations operated by over 500 supply partners, ranging from large multi-site generalists to small single-site specialists. Our technology platform allows these suppliers to access our enquiries and fulfil those suited to them. This gives customers access to an unrivalled level of availability in addition to lowering the cost to serve and reducing duplicated carbon footprint.
Finally, the combination of our distribution centres, local sales branches and builders merchants locations means that we now have 135 click-and-collect locations nationwide. I am pleased to report that 21% of customer orders were fulfilled this way in H1, a reflection of customer demand for this technology-driven fulfilment channel
Business Reorganisation
Following the changes made to our operating network in Q4 2020 and the rollout of HSS Pro POS in Q1 2021, we have now reorganised our business around two divisions in order to drive superior customer service and to create clarity around performance management.
Our Sales Acquisition division comprises our directly employed field sales teams, 45 local sales branches, 50 HSS builders merchant hire counters and over 100 ProService managers. Its role is to drive revenue growth through generating enquiry volume and maximising conversion rates, while maintaining gross margins and improving digital penetration. The rollout of HSS Pro POS has enhanced cross-selling and is driving a quicker response for customers.
Our Make It Happen division comprises our directly employed operations teams in 40 distribution centres, plus the operations teams of the 500 supplier partners which operate from over 2000 locations. This division is focused on fulfilment rates, customer service measures, utilisation, cost-to-serve and returns. We now have an operating model well suited to minimise the Group's carbon footprint going forward.
These two divisions offer customers what we believe is an unrivalled speed of response, the deepest and broadest product offering and by far the best availability in the market. It certainly appears to be working with like-for-like Services revenue up 17% in H1 (versus 2019) and Trustpilot scores of 4.3 stars.
Strategy update
We are approaching the four year anniversary of our strategy reset launched in December 2017, where we set out to: 1. Delever the Group; 2. Repair the Tool Hire business; and 3. Strengthen our Commercial Proposition. I am pleased to report that these three strategic priorities have been fulfilled and our business turnaround is complete. The business is now in great shape, delivering superior profitability and return on capital, and has a strong balance sheet. I believe we are uniquely positioned to target market share gains through outstanding service, driven by unparalleled technology and a focused organisational structure.
1. Delever the Group
Since we announced our strategy reset we have reduced our leverage (pre-IFRS16) from 4.8x to 1.7x. This is an outstanding achievement and testament to both the hard work of colleagues and the support from our Board and shareholders on key strategic decisions. The divestments of UKP, Laois and ASH have provided proceeds to reduce debt, while retaining capability and customer service through long-term commercial partnerships. Significantly improved profitability has also reduced our leverage, both through improved trading and cost reduction. In particular, the decisions taken to remove the NDEC and reduce central costs in 2018 removing circa £14m in operating costs per annum, to implement a builders merchant model starting from 2019 and to close 134 branches in October 2020 resulting in £15m annualised cost savings have all led to a leaner, more agile operating network and record returns.
2. Repair the Tool Hire business (more latterly 'Transform')
The original priority of improving profitability in key areas of products, branches and customers in 2018 allowed us to repair the tool hire business and then focus on transforming it into the great business we have today. The customer segmentation study in 2018 led to a new vision to become the market-leading digitally-led brand for equipment services. Our journey to make the customer proposition 'easy' started with the launch of our customer App in 2018, the first fully transactional App in our sector, and has more recently involved the launch of HSS Pro POS. Our employee proposition has improved too with continued improvements in engagement scores over four years and significantly improved safety performance.
Strengthen our Commercial Proposition
Significant progress has been made here in the last 12 months as we accelerated our strategy and created a more scalable organisation model. Our national network of Customer Distribution Centres, click-and-collect locations and supply chain partners offers superior customer choice and availability. Our successful builders merchant network rollout is built on convenience for customers and gives us access to new customers. Our technology provides colleagues with a platform that is easy to operate, allowing them to convert enquiries across the full range of hire products. We now have a scalable, agile, technology-driven proposition in place which has the opportunity to target ambitious market share gains in the next chapter of our development. We are already seeing 24% of orders transacted online.
In conclusion, our turnaround phase is complete and the business is in great shape both financially and operationally. I look forward to sharing our ambitions for the next exciting phase of business growth later in H2.
Group Financial Performance
Results and commentary are presented on a continuing operations basis unless otherwise noted, reflecting the impact of the strategic disposal of Laois in April 2021.
Revenue and segmental contribution
The H1 21 results are based on 27 weeks of trading whereas H1 20 is 26 weeks. Revenue growth metrics versus FY20 have been adjusted to exclude the impact of this additional week (with the adjusted metric shown in brackets). We have made comparisons to FY19 because, given COVID-19, FY20 is not a typical period for trading. All comparisons to FY19 are on a like-for-like basis, taking into account this adjustment as well as the impact of a loss of Services volume associated with the FY19 announced change to one managed service contract.
Revenue in H1 21 was £150.5m, 25% (22%) higher than the previous period (H1 20: £120.7m), which was heavily impacted by the COVID-19 pandemic and associated lockdowns in the UK and Ireland from March 2020. Since then, revenue has recovered to pre-COVID-19 levels through effective strategy implementation in an improving market as government restrictions relax. In H1 21 the Group's revenue, on a like for like basis, was 99% of the comparable FY19 period with an improving trend over the six months.
Turning to segmental performance, Rental and related revenues were £101.7m in H1 21 (H1 20: £82.3m), 24% (21%) higher than in H1 20, and recovered to 94% of FY19 levels on a comparable basis. Contribution is up 27% at £72.0m (H1 20: £56.6m). Margin increased to 70.8% (H1 20: 68.8%) with good cost control as volume recovered and reflecting the benefit of the new operating model. H1 20 contribution benefited from around £1.6m of government furlough income, and after adjusting for the impact of this the improvement in margin rises to 3.8pp.
Services revenue has increased by 27% (24%) to £48.7m (H1 20: £38.4m). Against FY19, on a like for like basis, revenue has grown 17%, reflecting a very strong performance from the business segment with customers continuing to value the one stop shop offer through the Group's evolving technology platforms; making it easy for customers to access all of their hire needs in one simple transaction. Contribution increased to £7.2m (H1 20: £4.9m). Margins are increased by 2.1pp at 14.9% (H1 20: 12.8%), reflecting the mix benefit of recovering Training revenue and the increased OneCall volume. H1 20 contribution benefited from around £0.6m of government furlough income, and after adjusting for the impact of this the improvement in margin rises to 3.6pp.
Costs
In October 2020 the Group implemented a new digitally-led operating model, reducing the fixed cost base by £15m. The benefit of this change is borne out by the year on year reduction in costs set out below.
Cost of sales increased to £68.3m during the period (H1 20: £60.1m) primarily as a result of the recovery in revenue following a COVID-19 related decline in our Services business during 2020. Distribution costs increased only slightly by £0.2m versus the prior year to £13.1m (H1 20: £12.9m). Costs have been tightly managed despite the increase in activity.
Administrative expenses decreased by £7.2m to £48.0m (H1 20: £55.2m) with the reduction mainly driven by the move to a digitally-led operating model noted above and the associated property and headcount related savingsAn exceptional credit of £7.5m was recognised in H1 21 largely as a result of the Group's efforts to negotiate and complete early surrenders on stores closed as part of the changes to the Group's operating model referenced above. The figure includes £0.9m of associated professional fees. In H1 20 an exceptional credit of £0.8m was recognised reflecting a release from onerous lease provision on adoption of IFRS16.
Net finance expenses have reduced reflecting the reduction in discount unwind following lease surrenders and the reduced interest and debt issue cost amortisation following repayments of senior finance facility debt in January and May.
Other operating income
Other operating income at £1.6m (H1 20: £6.7m) relates to £1.2m received under a COVID-19 business interruption insurance claim, a £0.2m release of provision held against Irish Temporary Wage Subsidy Scheme 2020 receipts (now that eligibility to participate in the scheme has been confirmed) and £0.1m of sublease rental income. Government support has not been taken in FY21 given the recovery of trading and strengthened balance sheet. Prior year income comprises the receipt of £6.2m in grant income as a result of participation in the UK Job Retention Scheme and a similar scheme operated in the Republic of Ireland, alongside rates grants of £0.3m and sublease rental income of £0.2m.
Profitability
Adjusted EBITDA of £38.3m in H1 21 is significantly higher than the prior period (H1 20: £27.9m); improving revenue performance delivered through the Group's lower cost operating model being the principal driver. This has resulted in a corresponding increase in adjusted EBITDA margin of 2.3pp to 25.4% (H1 20: 23.1%).
Adjusted EBITA increased from £1.1m in H1 20 to £17.7m in H1 21 with margin increasing 10.9pp to 11.8% (H1 20: 0.9%). In addition to the drivers of EBITDA performance, depreciation of right-of-use assets materially reduced with the implementation of the new operating model.
The result of the drivers noted above is that the Group recognised a profit before tax of £11.2m versus a loss of £12.9m in the prior period.
The basic earnings per share were 1.61p in H1 21 versus a basic loss per share of 7.55p in H1 20 reflecting the large improvement in profit before tax but reduced by the significant increase in average shares in issue following the Group's highly successful capital raise in December 2020. The diluted earnings per share were 1.55p, versus a loss of 7.55p in the prior period (when all potentially dilutive instruments were anti-dilutive).
Sale of Laois Hire Limited
To enable the Group to focus on its strategic priority to Transform the Tool Hire Business, the disposal of Laois Hire 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. Accordingly, Laois has been treated as a discontinued operation. The loss from the discontinued operation was £0.3m (H1 20: loss of £21k)
The profit on disposal of Laois, net of the loss in the period, increased the profit from total operations for the financial period to £14.1m compared to a loss of £12.9m in the prior period.
Return on Capital Employed
ROCE was 24.0% reflecting the significant improvement in EBITA driven by the improvements in revenue noted above. ROCE is calculated as Adjusted EBITA 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 at 3 July 2021 was £97.6m, a reduction of £22.8m from the year end. This has been driven by improved EBITDA, strong working capital management, proceeds from the disposal of Laois and a reduction in lease liabilities following the successful surrender of closed branches. Leverage has reduced to 1.7x (pre-IFRS16 basis), ahead of the Group's target of below 2x by the end of 2021. Leverage post-IFRS16 is 2.0x.
The debt facilities consist of a £160.8m senior finance facility, maturing in June 2023, and an undrawn revolving credit and overdraft facility of £23.2m maturing in January 2023. Including net cash balances the Group had access to £119.2m of combined liquidity at 3 July 2021.
Dividend
The Group has made great progress in reducing leverage by executing against its strategy. Reducing net debt and continuing to invest in the technology to drive better returns remain the focus for the Board. As such, it believes that the interests of the shareholders of the Group are best served by not paying a dividend at this time, a position which will be reviewed in the next twelve months.
Going concern
While encouraged by the resilience of the Group during a period of unprecedented disruption, the Directors continue to model via a number of scenarios the potential impact of COVID-19 on results. At the 26 December 2020 year end the Group had sufficient liquidity to operate within banking covenants for the next 12 months even under its reasonable worst case scenario. Actual events and trading since then have been favourable compared to the assumptions made and as a result the more recent models predict only increased liquidity from that position.
After reviewing the above, taking into account 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 2021 financial year have not changed significantly from those described in the Group's 2020 Annual Report and are summarised in note 19 of this interim report.
The main risk expected to affect the Group in the remaining 26 weeks of the 2021 financial year is macro-economic conditions, which includes the impact that COVID-19 and Brexit related developments could have on the business.
By order of the Board
Steve Ashmore
Director
29 September 2021
HSS Hire Group plc
Unaudited condensed consolidated income statement
27 weeks ended 3 July 2021
26 weeks ended 27 June 2020
Note
£000s
£000s
Revenue
4
150,450
120,657
Cost of sales
(68,322)
(60,054)
Gross profit
82,128
60,603
Distribution costs
(13,094)
(12,883)
Administrative expenses
(47,988)
(55,154)
Other operating income
5
1,554
6,708
Adjusted EBITDA
4, 20
38,275
27,892
Less: Depreciation
7
(20,580)
(26,800)
Adjusted EBITA
20
17,695
1,092
Add back: Exceptional items (non-finance)
6
7,539
802
Less: Amortisation
7
(2,634)
(2,620)
Operating profit/(loss)
22,600
(726)
Finance expense
8
(11,379)
(12,133)
Adjusted profit/(loss) before tax
6,436
(11,041)
Add back: Exceptional items (non-finance)
6
7,539
802
Add back: Exceptional items (finance)
6
(120)
-
Less: Amortisation
7
(2,634)
(2,620)
Profit/(loss) before tax
11,221
(12,859)
Income tax charge
(37)
-
Profit/(loss) from continuing operations
11,184
(12,859)
Profit on disposal of discontinued operations
18
3,180
-
Loss from discontinued operations, net of tax
18
(313)
(21)
Profit/(loss) for the financial period
14,051
(12,880)
Earnings/(loss) per share (pence)
Continuing operations
Basic earnings/(loss) per share
9
1.61
(7.55)
Diluted earnings/(loss) per share
9
1.55
(7.55)
Continuing and discontinued operations
Basic earnings/(loss) per share
9
2.02
(7.57)
Diluted earnings/(loss) per share
9
1.95
(7.57)
The notes form part of these condensed consolidated financial statements.
HSS Hire Group plc
Unaudited condensed consolidated statement of comprehensive income
27 weeks ended 3 July 2021
26 weeks ended 27 June 2020
£000s
£000s
Profit/(loss) for the financial period
14,051
(12,880)
Items that may be reclassified to profit or loss:
Foreign currency translation differences arising on consolidation of foreign operations
(654)
842
Gains arising on cash flow hedges
-
86
Other comprehensive (loss)/gain for the period, net of tax
(654)
928
Total comprehensive profit/(loss) for the period
13,397
(11,952)
Attributable to owners of the Company
13,397
(11,952)
The notes form part of these condensed consolidated financial statements.
HSS Hire Group plc
Unaudited condensed consolidated statement of financial position
3 July 2021
26 December 2020
Note
£000s
£000s
ASSETS
Non-current assets
Intangible assets
10
155,920
158,498
Property, plant and equipment
11
60,228
62,024
Right of use assets
12
80,243
89,839
296,391
310,361
Current assets
Inventories
3,366
3,183
Trade and other receivables
13
68,790
75,880
Cash
81,256
97,573
153,412
176,636
Total assets
449,803
486,997
LIABILITIES
Current liabilities
Trade and other payables
14
(70,049)
(61,821)
Borrowings
16
-
(15,000)
Lease liabilities
15
(19,233)
(23,395)
Provisions
17
(5,395)
(7,448)
Current tax liabilities
(75)
(1)
(94,752)
(107,665)
Non-current liabilities
Borrowings
16
(156,875)
(179,099)
Lease liabilities
15
(56,250)
(66,177)
Provisions
17
(20,363)
(26,206)
Deferred tax liabilities
(230)
(260)
(233,718)
(271,742)
Total liabilities
(328,470)
(379,407)
Net assets
121,333
107,590
EQUITY
Share capital
6,965
6,965
Share premium
45,552
45,580
Warrant reserves
2,694
2,694
Merger reserve
97,780
97,780
Foreign exchange translation reserve
(639)
15
Retained deficit
(31,019)
(45,444)
Total equity
121,333
107,590
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
Cash flow hedging reserve
Retained earnings/ (deficit)
Total equity
£000s
£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 operations
-
-
-
-
(654)
-
-
(654)
Total comprehensive (loss)/profit for the period
-
-
-
-
(654)
-
14,051
13,397
Transactions with owners recorded directly in equity
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
Share capital
Share premium
Warrant reserve
Merger reserve
Foreign exchange translation reserve
Cash flow hedging reserve
Retained deficit
Total equity
£000s
£000s
£000s
£000s
£000s
£000s
£000s
£000s
At 29 December 2019 - as previously presented
1,702
-
2,694
97,780
(602)
(306)
(22,307)
78,961
Implementation of IFRS 16
-
-
-
-
-
-
(9)
(9)
At 29 December 2019 - as restated
1,702
-
2,694
97,780
(602)
(306)
(22,316)
78,952
Total comprehensive loss for the period
Loss for the period
-
-
-
-
-
-
(12,880)
(12,880)
Foreign currency translation differences arising on consolidation of foreign operations
-
-
-
-
842
-
-
842
Hedging of financial instruments
-
-
-
-
-
86
-
86
Total comprehensive income/(loss) for the period
-
-
-
-
842
86
(12,880)
(11,952)
Transactions with owners recorded directly in equity
Share-based payment charge
-
-
-
-
-
-
221
221
At 27 June 2020
1,702
-
2,694
97,780
240
(220)
(34,975)
67,221
The notes form part of these condensed consolidated financial statements.
HSS Hire Group plc
Unaudited condensed consolidated statement of cash flows
Note
27 weeks ended 3 July 2021
26 weeks ended 27 June 2020
£000s
£000s
Profit/(loss) after income tax
14,051
(12,880)
Adjustments for:
- Tax
37
-
- Profit on disposal of discontinued operations
18
(3,180)
-
- Amortisation
7
2,634
2,620
- Depreciation
7
19,398
25,294
- Accelerated depreciation relating to hire stock customer losses and hire stock write offs
7
1,766
2,324
- (Profit)/loss on disposal of property, plant and equipment and right of use assets
7
(47)
14
- Lease disposals
(3,463)
-
- Share-based payment charge
451
221
- Foreign exchange (gains)/loss on operating activities
(378)
516
- Finance expense
8
11,388
12,140
Changes in working capital (excluding the effects of disposals and exchange differences on consolidation):
- Inventories
(389)
469
- Trade and other receivables
3,265
20,697
- Trade and other payables
10,217
4,154
- Provisions
(6,929)
(2,770)
Net cash flows from operating activities before changes in hire equipment
48,821
52,799
Purchase of hire equipment
11
(9,749)
(6,630)
Cash generated from operating activities
39,072
46,169
Net interest paid
(10,498)
(8,871)
Income tax repaid
7
648
Net cash generated from operating activities
28,581
37,946
Cash flows from investing activities
Proceeds on disposal of business, net of cash disposed of
18
9,550
-
Proceeds on disposal of fixed assets
526
Purchases of non-hire property, plant, equipment and software
10,11
(2,836)
(3,411)
Net cash generated from/(used in) investing activities
7,240
(3,411)
Cash flows from financing activities
Costs of capital raise
(1,556)
-
Proceeds from borrowings
16
-
17,200
Repayment of borrowings
16
(38,432)
-
Capital element of lease liability payments
(12,279)
(11,689)
Capital element of net investment in sublease receipts
129
-
-
Net cash (paid)/received from financing activities
(52,138)
5,511
Net (decrease)/increase in cash
(16,317)
40,046
Cash at the start of the period
97,573
22,658
Cash at the end of the period - continuing operations
81,256
61,626
Cash at the end of the period - discontinued operations
-
1,078
Cash at the end of the period
81,256
62,704
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 which is listed on the London Stock Exchange and is incorporated and domiciled in the United Kingdom. The address of the registered office is Oakland House, 76 Talbot Road, Manchester, M16 0PQ. These condensed consolidated financial statements comprise the Company and its subsidiaries (the 'Group') and cover the 27 week period ended 3 July 2021.
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 29 September 2021.
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 26 December 2020 were approved by the Board on 28 April 2021 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 27 weeks ended 3 July 2021 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 26 December 2020, which were prepared in accordance with IFRS as adopted by the European Union.
Accounting policies are consistent with those in the Statutory Accounts for the year ended 26 December 2020.
Going concern
At 3 July 2021, the Group's financing arrangements consisted of a drawn senior finance facility of £160.8m, 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 £14.7m had not been utilised. Both the senior finance facility and revolving credit facility are subject to a net debt leverage financial covenant test every quarter. At the balance sheet date the Group had 51% headroom against this covenant.
While encouraged by the resilience of the Group during a period of unprecedented disruption, the Directors continue to model via a number of scenarios the potential impact of COVID-19 on results. At the 26 December 2020 year end the Group had sufficient liquidity to operate within banking covenants for the next 12 months even under its reasonable worst case scenario. Actual events and trading since then have been favourable compared to the assumptions made and as a result the more recent models only predict increased liquidity from that position.
After reviewing the above, taking into account 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. Restatement of interim results for 26 weeks ending 27 June 2020
During the preparation of the 26 December 2020 annual financial statements, a lease validation exercise was performed that identified the following restatements relating to the transition date. The restatement of property, plant and equipment of £4.5m represents hire stock assets held under finance lease that had not been included in the transfer to right of use assets. The remaining restatement of right of use assets relates to contractual rent escalations, rolling leases and lease term amendments.
The impact of these entries on the consolidated statement of financial position as at the date of initial application (DIA) 29 December 2019 is reflected below:
As previously reported
Restatement
Restated 29 December 2019
£000s
£000s
£000s
Intangible assets
160,378
-
160,378
Property, plant and equipment
76,999
(4,460)
72,539
Right of use assets
104,059
5,472
109,531
Derivative financial instruments
14
-
14
Current assets
112,938
375
113,313
Lease liabilities
(98,351)
(958)
(99,309)
Other liabilities
(238,508)
(272)
(238,780)
Provisions
(38,393)
-
(38,393)
Deferred tax liabilities
(341)
-
(341)
Net assets
78,795
157
78,952
The impact of these entries on the consolidated statement of financial position as at 27 June 2020 is reflected below:
As previously reported
Restatement
Restated 27 June 2020
£000s
£000s
£000s
Intangible assets
159,618
-
159,618
Property, plant and equipment
71,545
(4,460)
67,085
Right of use assets
99,140
5,472
104,612
Current assets
131,007
375
131,382
Lease liabilities
(96,928)
(958)
(97,886)
Other liabilities
(261,350)
(272)
(261,622)
Provisions
(35,627)
-
(35,627)
Deferred tax liabilities
(341)
-
(341)
Net assets
67,064
157
67,221
There was no impact on the income statement or the statement of cash flow as a result of this restatement and no change is required to the financial statements for the year ending 26 December 2020.
4. 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 typically 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. In the 27 weeks ending 3 July 2021 the Group recognised £0.2m of income received in 2020, the result of participation in Republic of Ireland's COVID-19 Wage Subsidy Scheme, recognition of which had been deferred pending confirmation of entitlement (26 weeks ended 27 June 2020: £6.2m recognised from participation in UK and Republic of Ireland schemes). Income has been allocated to segments based on where the underlying costs were incurred. This resulted in £0.1m being allocated to Rental and related contribution (26 weeks ending 27 June 2020: £1.6m), £nil to Services contribution (26 weeks ending 27 June 2020: £0.6m), £0.1m to Branch and Selling Costs (26 weeks ending 27 June 2020: £3.8m) and £nil to Central costs (26 weeks ending 27 June 2020: £0.2m). £0.3m of grant income related to property rates was allocated to Branch and Selling Costs for the 26 weeks ending 27 June 2020.
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. Revenue from one customer was 10% or more of Group Revenue in the period ending 3 July 2021 (26 weeks ending 27 June 2020: one customer was 10% or more of Group Revenue).
27 weeks ended 3 July 2021
Rental (and related revenue)
Services
Central
Total
£000s
£000s
£000s
£000s
Total revenue from external customers from continuing operations
101,742
48,708
-
150,450
Contribution
71,992
7,248
-
79,240
Branch and selling costs
(26,115)
(26,115)
Central costs
(14,850)
(14,850)
Adjusted EBITDA
38,275
Add back: Exceptional items
7,539
7,539
Less: Depreciation and amortisation
(14,237)
(297)
(8,680)
(23,214)
Operating profit
22,600
Net finance expenses
(11,379)
Profit before tax from continuing operations
11,221
As at 3 July 2021
Rental (and related revenue)
Services
Central
Total
£000s
£000s
£000s
£000s
Additions to non-current assets
Property, plant and equipment
9,749
15
1,070
10,834
Right of use assets
3,590
-
1,170
4,760
Intangibles
1,178
-
573
1,751
Non-current assets net book value
Property, plant and equipment
43,999
203
16,026
60,228
Right of use assets
24,602
579
55,062
80,243
Intangibles
151,717
1,046
3,157
155,920
Unallocated corporate assets
Current assets
153,412
153,412
Current liabilities
(94,752)
(94,752)
Non-current liabilities
(233,718)
(233,718)
121,333
26 weeks ended 27 June 2020
Rental (and related revenue)
Services
Central
Total
£000s
£000s
£000s
£000s
Total revenue from external customers from continuing operations
82,255
38,402
-
120,657
Contribution
56,612
4,902
-
61,514
Branch and selling costs
(22,203)
(22,203)
Central costs
(11,419)
(11,419)
Adjusted EBITDA
27,892
Add back: Exceptional credit
802
802
Less: Depreciation and amortisation
(15,027)
(236)
(14,157)
(29,420)
Operating loss
(726)
Net finance expenses
(12,133)
Loss before tax from continuing operations
(12,859)
Year ended 26 December 2020
Rental (and related revenue)
Services
Central
Total
£000s
£000s
£000s
£000s
Additions to non-current assets
Property, plant and equipment
14,099
59
2,286
16,444
Right of use assets
4,880
-
4,357
9,237
Intangibles
979
861
1,477
3,317
Non-current assets net book value
Property, plant and equipment
44,078
203
17,743
62,024
Right of use assets
26,976
212
62,651
89,839
Intangibles
153,804
1,246
3,448
158,498
Unallocated corporate assets
Current assets
176,636
176,636
Current liabilities
(107,665)
(107,665)
Non-current liabilities
(271,742)
(271,742)
Net assets
107,590
5. Other operating income
27 weeks ended 3 July 2021
26 weeks ended 27 June 2020
£000s
£000s
COVID-19 Government grant income: Job retention schemes
232
6,194
COVID-19 Government grant income: Rates grants
-
345
Insurance proceeds
1,203
-
Sublease rental and service charge income
119
169
1,554
6,708
During the 27 weeks ended 3 July 2021 the Group recognised £0.2m of income received in 2020, the result of participation in Republic of Ireland's COVID-19 Wage Subsidy Scheme, recognition of which had been deferred pending confirmation of entitlement (26 weeks ended 27 June 2020: £6.2m recognised from participation in UK and Republic of Ireland schemes), and £1.2m from a COVID-19 business interruption insurance claim.
Sub-let rental income £0.1m (26 weeks ended 27 June 2020: £0.2m) was received on vacant properties that were not treated as exceptional and which have been assessed as operating sub-leases under IFRS 16.
6. 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 period ended 3 July 2021 the Group has recognised exceptional items as follows:
Included in administrative expenses
Included in finance expense
27 weeks ended 3 July 2021
£000s
£000s
£000s
Release of onerous property costs
(7,539)
120
(7,419)
Exceptional items - continuing operations
(7,539)
120
(7,419)
Business divesture - discontinued operations
(3,180)
-
(3,180)
Total
(10,719)
120
(10,599)
During the period ended 27 June 2020, the Group recognised exceptional costs analysed as follows:
Included in administrative expenses
26 weeks ended 27 June 2020
£000s
£000s
Release of onerous property costs
(828)
(828)
Cost reduction programme
26
26
Total
(802)
(802)
Costs related to onerous properties: branch and office closures (incurred in 2021 and 2020)
An exceptional credit of £7.4m (26 weeks ended 27 June 2020 exceptional credit of £0.8m) has been recognised in the 27 weeks ended 3 July 2021. This relates mainly to the release of lease liabilities, onerous property cost and dilapidations provisions on surrender of properties following the branch closures as part of the Group's acceleration of its digital and network strategy announced in October 2020. The figure includes £0.9m of associated professional fees. Lease liability discount unwind on closed stores totalling £0.1m was recognised as an exceptional finance expense.
In H1 20 an exceptional credit of £0.8m was recognised reflecting a release from onerous lease provision on adoption of IFRS16.
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 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.
Cost reduction programme (incurred in 2020 only)
In the 26 weeks ended 27 June 2020 the Group recognised final costs related to a cost reduction programme which included internal restructuring that was announced and largely completed during 2019.
7. Depreciation and amortisation expense
27 weeks ended 3 July 2021
26 weeks ended 27 June 2020
£000s
£000s
Amortisation
2,634
2,620
Depreciation
20,580
26,800
Amounts charged in respect of depreciation:
27 weeks ending 3 July 2021
27 weeks ending 3 July 2021
27 weeks ending 3 July 2021
26 weeks ending 27 June 2020
26 weeks ending 27 June 2020
26 weeks ending 27 June 2020
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
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 (note 11,12)
7,889
11,509
19,398
12,045
12,978
25,023
Accelerated depreciation relating to hire stock customer losses and hire stock write offs (note 11,12)
6,488
133
6,621
2,324
1
2,325
Loss on disposal of other assets (note 11,12)
625
304
929
284
1
285
15,002
11,946
26,948
14,653
12,980
27,633
Less accelerated depreciation included in exceptionals
(243)
-
(243)
-
-
-
Less disposal of Laois hire stock assets
(4,612)
-
(4,612)
-
-
-
Less (loss)/profit on disposals included in exceptional amounts
(94)
145
51
-
(1)
(1)
Less disposal of Laois other assets
(588)
(439)
(1,027)
-
-
-
Less depreciation from discontinued operations
(413)
(124)
(537)
(731)
(101)
(832)
Total non-exceptional depreciation
9,052
11,528
20,580
13,922
12,878
26,800
Amounts charged in respect of amortisation
27 weeks ending 3 July 2021
26 weeks ending 27 June 2020
£000s
£000s
Intangible assets
Amortisation (note 10)
2,634
2,620
Loss on disposal of intangible assets
1,695
-
4,329
2,620
Less disposal of Laois goodwill
(1,695)
-
Total non-exceptional amortisation
2,634
2,620
8. Finance income and expense
27 weeks ended 3 July 2021
26 weeks ended 27 June 2020
£000s
£000s
Senior finance facility
7,590
8,167
Debt issue costs
1,085
1,199
Accelerated amortisation of debt issue costs
166
-
Lease liabilities
2,088
2,315
Interest unwind on discounted provisions
13
142
Revolving credit facility
104
75
Interest on financial instruments
-
100
Bank loans and overdrafts
333
135
11,379
12,133
9. Earnings per share
Basic earnings/(loss) per share
Profit/(loss) after tax from continuing operations
Weighted average number of shares
Profit/(loss) per share from continuing operations
£000s
000s
pence
27 weeks ended 3 July 2021
11,184
696,478
1.61
26 weeks ended 27 June 2020
(12,859)
170,207
(7.55)
Basic earnings/(loss) 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 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, Sharesave Scheme share options and warrants.
All of the Group's potentially dilutive equity derivative securities were dilutive (26 weeks ending 27 June 2020: anti-dilutive) for the purpose of diluted basic earnings per share for the period except for market value options and their related CSOP's which were anti-dilutive.
Diluted earnings/(loss) per share
Profit/(loss) after tax from continuing operations
Weighted average number of shares
Profit/(loss) per share from continuing operations
£000s
000s
pence
27 weeks ended 3 July 2021
11,184
721,364
1.55
26 weeks ended 27 June 2020
(12,859)
170,207
(7.55)
The weighted average number of shares for the purposes of calculating the diluted earnings per share are as follows:
27 weeks ended 3 July 2021
26 weeks ended 27 June 2020
Weighted average number of shares
Weighted average number of shares
000s
000s
Basic
696,478
170,207
Warrants
8,505
-
LTIP share options
8,368
-
Restricted stock grant
7,265
-
CSOP options
748
-
Diluted
721,364
170,207
10. Intangible assets
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
-
-
-
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 29 December 2019
124,877
26,744
23,222
24,409
199,252
Additions
-
-
-
1,860
1,860
At 27 June 2020
124,877
26,744
23,222
26,269
201,112
Amortisation
At 29 December 2019
-
18,694
525
19,655
38,874
Charge for the period
-
1,328
48
1,244
2,620
At 27 June 2020
-
20,022
573
20,899
41,494
Net book value
At 27 June 2020
124,877
6,722
22,649
5,370
159,618
Goodwill
Customer relationships
Brands
Software
Total
£000s
£000s
£000s
£000s
£000s
Cost
At 29 December 2019
124,877
26,744
23,222
24,409
199,252
Additions
-
-
-
3,317
3,317
Disposals
-
-
-
(146)
(146)
At 26 December 2020
124,877
26,744
23,222
27,580
202,423
Amortisation
At 29 December 2019
-
18,694
525
19,655
38,874
Charge for the period
-
2,654
97
2,446
5,197
Disposals
-
-
-
(146)
(146)
At 26 December 2020
-
21,348
622
21,955
43,925
Net book value
At 26 December 2020
124,877
5,396
22,600
5,625
158,498
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.
11. Property, plant and equipment
Land and buildings
Plant and machinery
Materials and equipment held for hire
Total
£000s
£000s
£000s
£000s
Cost
At 27 December 2020
58,419
55,315
133,280
247,014
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
130,746
243,650
Accumulated depreciation
At 27 December 2020
45,208
50,580
89,202
184,990
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
86,747
183,422
Net book value
At 3 July 2021
12,086
4,143
43,999
60,228
Restated
Restated
Land and buildings
Plant and machinery
Materials and equipment held for hire
Total
£000s
£000s
£000s
£000s
Cost
At 29 December 2019
73,505
61,925
179,788
315,218
Transferred to right of use assets
-
-
(46,888)
(46,888)
Additions
1,012
551
7,279
8,842
Disposals
(559)
(236)
(9,778)
(10,573)
Foreign exchange differences
118
149
734
1,001
At 27 June 2020
74,076
62,389
131,135
267,600
Accumulated depreciation
At 29 December 2019
54,437
55,936
102,994
213,367
Transferred to right of use assets
-
-
(17,576)
(17,576)
Charge for the year
1,971
887
9,187
12,045
Disposals
(343)
(168)
(7,454)
(7,965)
Foreign exchange differences
95
123
426
644
At 27 June 2020
56,160
56,778
87,577
200,515
Net book value
At 27 June 2020
17,916
5,611
43,558
67,085
Refer to note 3 for further details on the restatement relating to the 26 weeks ending 27 June 2020.
Land and buildings
Plant and machinery
Materials and equipment held for hire
Total
£000s
£000s
£000s
£000s
Cost
At 29 December 2019
73,505
61,925
179,788
315,218
Transferred to right of use assets
-
-
(46,888)
(46,888)
Transferred from right of use assets
-
-
3,144
3,144
Additions
1,284
1,061
14,099
16,444
Disposals
(16,408)
(7,748)
(17,328)
(41,484)
Foreign exchange differences
38
77
465
580
At 26 December 2020
58,419
55,315
133,280
247,014
Accumulated depreciation
At 29 December 2019
54,437
55,936
102,994
213,367
Transferred to right of use assets
-
-
(17,576)
(17,576)
Transferred from right of use assets
-
-
1,652
1,652
Charge for the year
3,516
2,139
14,518
20,173
Impairment
1,789
227
-
2,016
Disposals
(14,536)
(7,592)
(13,004)
(35,132)
Foreign exchange differences
2
40
448
490
Transfers
-
(170)
170
-
At 26 December 2020
45,208
50,580
89,202
184,990
Net book value
At 26 December 2020
13,211
4,735
44,078
62,024
'Transferred from right of use assets' category represents assets previously held under a lease where ownership has passed to the Group. 'Transferred to right of use assets' category represents the value of assets transferred to right of use assets on adoption of IFRS16.
12. Right of use assets
Property
Vehicles
Equipment for hire and internal use
Total
£000s
£000s
£000s
£000s
Cost
At 27 December 2020
61,253
23,681
30,061
114,995
Foreign exchange differences
(120)
(23)
-
(143)
Additions
519
651
3,590
4,760
Remeasurements
227
137
-
364
Transfers to property, plant and equipment
-
-
(5,967)
(5,967)
Disposals
(7,785)
(805)
(727)
(9,317)
At 3 July 2021
54,094
23,641
26,957
104,692
Accumulated depreciation
At 27 December 2020
15,403
6,854
2,899
25,156
Transfers to property, plant and equipment
-
-
(3,336)
(3,336)
Charge for the period
4,340
3,783
3,386
11,509
Disposals
(7,920)
(366)
(594)
(8,880)
At 3 July 2021
11,823
10,271
2,355
24,449
Net book value
At 3 July 2021
42,271
13,370
24,602
80,243
Restated
Restated
Restated
Restated
Property
Vehicles
Equipment for hire and internal use
Total
£000s
£000s
£000s
£000s
Cost
Recognised on transition date
58,014
21,416
30,101
109,531
Foreign exchange differences
167
26
-
193
Additions
3,254
961
3,652
7,867
Disposals
(110)
(136)
-
(246)
At 27 June 2020
61,325
22,267
33,753
117,345
Accumulated depreciation
Charge for the period
6,180
3,927
2,871
12,978
Disposals
(110)
(135)
-
(245)
At 27 June 2020
6,070
3,792
2,871
12,733
Net book value
At 27 June 2020
55,255
18,475
30,882
104,612
Refer to note 3 for further details on the restatement relating to the 26 weeks ending 27 June 2020.
Property
Vehicles
Equipment for hire and internal use
Total
£000s
£000s
£000s
£000s
Cost
Recognised on transition date
58,014
21,416
30,101
109,531
Foreign exchange differences
155
22
-
177
Additions
1,317
3,040
4,880
9,237
Remeasurements
6,931
17
-
6,948
Transfers to property, plant and equipment
-
-
(3,144)
(3,144)
Disposals
(5,164)
(814)
(1,776)
(7,754)
At 26 December 2020
61,253
23,681
30,061
114,995
Accumulated depreciation
Transfers to property, plant and equipment
-
-
(1,652)
(1,652)
Charge for the period
10,999
7,613
5,924
24,536
Impairments
9,541
-
-
9,541
Disposals
(5,137)
(759)
(1,373)
(7,269)
At 26 December 2020
15,403
6,854
2,899
25,156
Net book value
At 26 December 2020
45,850
16,827
27,162
89,839
Right of use assets are measured at cost comprising the initial measurement of lease liability, initial direct costs and restoration costs.
Right of use assets are depreciated over the lease term on a straight line basis, except where the Group has the right, and expects to exercise that right, to take ownership of the assets after the end of the lease; in such cases the assets are depreciated over the useful life.
Disclosures relating to lease liabilities are included in note 15.
13. Trade and other receivables
3 July 2021
26 December 2020
Gross
Provision for impairment
Net of provision
Gross
Provision for impairment
Net of provision
£000s
£000s
£000s
£000s
£000s
£000s
Trade receivables
65,607
(5,698)
59,909
66,434
(5,374)
61,060
Accrued income
3,288
(73)
3,215
6,965
(107)
6,858
Contract assets
68,895
(5,771)
63,124
73,399
(5,481)
67,918
Net investment in sublease
1,029
-
1,029
1,497
-
1,497
Other debtors
939
-
939
3,502
-
3,502
Prepayments
3,698
-
3,698
2,963
-
2,963
Total trade and other receivables
74,561
(5,771)
68,790
81,361
(5,481)
75,880
The following table details the movements in the provision for impairment of trade receivables and other receivables:
3 July 2021
26 December 2020
£000s
£000s
Balance at the beginning of the period
(5,481)
(3,745)
Movement in provision
(290)
(1,736)
Balance at the end of the period
(5,771)
(5,481)
The provision for impairment of trade receivables is comprised as follows:
3 July 2021
26 December 2020
£000s
£000s
Bad debt provision
(3,156)
(3,023)
Credit note provision
(2,615)
(2,458)
(5,771)
(5,481)
The bad debt provision based on expected credit losses and applied to trade receivables, all of which are current assets, is as follows:
3 July 2021
Current
0-60 days past due
61-365 days past due
1-2 years past due
Total
Contract assets
57,208
5,342
4,993
1,352
68,895
Expected loss rate
1.6%
5.7%
25.5%
50.1%
4.6%
Provision for impairment charge
902
302
1,274
678
3,156
26 December 2020
Current
0-60 days past due
61-365 days past due
1-2 years past due
Total
Contract assets
61,197
5,902
4,962
1,338
73,399
Expected loss rate
1.4%
4.6%
25.7%
47.5%
4.1%
Provision for impairment charge
839
272
1,276
636
3,023
Contract assets consist of trade receivables and 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 impact of COVID-19 on the general economy, particularly given tapering of government support. At the balance sheet date the Group has not seen a marked increase in debt write-offs. However the Group expects the situation to deteriorate as government support is withdrawn. Given the above, historical losses are not a good predictor of future failures and the Group has exercised judgement in increasing the expected loss rates across all categories of debt. In so doing the provision has been increased by around £1.2m from that which would have been required based on loss experience over the past two years. The position is being monitored closely and the Group expects to review these judgements at year-end based on ageing of debt, write-offs in the second half of the year and the economic outlook at that point.
Provisions are made for credit notes expected to be raised after the reporting date for income recognised during the year.
14. Trade and other payables
3 July 2021
26 December 2020
£000s
£000s
Current
Trade payables
30,407
23,957
Other taxes and social security costs
5,091
5,109
Other creditors
1,603
2,300
Accrued interest on borrowings
2,785
3,442
Accruals
29,760
26,907
Deferred income
403
106
70,049
61,821
15. Lease liabilities
3 July 2021
26 December 2020
£000s
£000s
Current
Lease liabilities
19,233
23,395
19,233
23,395
Non-current
Lease liabilities
56,250
66,177
56,250
66,177
The weighted average interest rates on the Group's lease liabilities are as follows:
3 July 2021
26 December 2020
Lease liabilities
5.2%
4.8%
The Group's leases have the following maturity profile:
3 July 2021
26 December 2020
£000s
£000s
Less than one year
22,685
27,452
Two to five years
47,342
55,544
More than five years
20,091
23,483
90,118
106,479
Less interest cash flows:
(14,635)
(16,907)
Total principal cash flows
75,483
89,572
The maturity profile, excluding interest cash flows of the Group's leases is as follows:
3 July 2021
26 December 2020
£000s
£000s
Less than one year
19,233
23,395
Two to five years
39,909
47,030
More than five years
16,341
19,147
75,483
89,572
16. Borrowings
3 July 2021
26 December 2020
£000s
£000s
Current
Senior finance facility
-
15,000
-
15,000
Non-current
Senior finance facility
156,875
161,899
Revolving credit facility
-
17,200
156,875
179,099
The senior finance facility is stated net of unamortised debt issue costs of £3.9m (26 December 2020: £5.1m).
The nominal value of the Group's loans at each reporting period date is as follows:
3 July 2021
26 December 2020
£000s
£000s
Senior finance facility
160,750
181,982
Revolving credit facility
-
17,200
160,750
199,182
The interest rates on the Group's borrowings are as follows:
3 July 2021
26 December 2020
Revolving credit facility
Floating
%age above LIBOR
2.5%
2.5-3.0%
Senior finance facility
Floating
%age above LIBOR
7.5%-8.0%
8.0%
The weighted average interest rates on the Group's borrowings is 9.3% (26 December 2020: 9.8%).
The Group's borrowings have the following maturity profile:
3 July 2021
26 December 2020
£000s
£000s
Less than one year
13,085
30,581
Two to five years
174,702
208,725
187,787
239,306
Less interest cash flows:
Senior finance facility
(27,037)
(38,822)
Revolving credit facility
-
(1,302)
Total principal cash flows
160,750
199,182
The Group repaid £15.0m of the senior finance facility in January 2021 and a further £6.2m in May 2021. The £17.2m RCF was repaid in April 2021.
The Group has undrawn committed borrowing facilities of £37.9m at 3 July 2021 (26 December 2020: £20.7m), including £14.7m of finance lines (26 December 2020: £14.7m) to fund hire fleet capital expenditure not yet utilised. Including net cash balances, the Group had access to £119.2m at 3 July 2021 (26 December 2020: £118.3m) of combined liquidity from available cash and undrawn committed borrowing facilities.
17. Provisions
Onerous property costs
Dilapidations
Onerous contracts
Total
£000s
£000s
£000s
£000s
At 27 December 2020
3,959
12,677
17,018
33,654
Additions
147
24
-
171
Utilised during the period
268
(2,058)
(1,645)
(3,435)
Unwind of provision
-
13
-
13
Releases
(3,727)
(919)
-
(4,646)
Foreign exchange
-
1
-
1
At 3 July 2021
647
9,738
15,373
25,758
Of which:
Current
212
1,894
3,289
5,395
Non-current
435
7,844
12,084
20,363
647
9,738
15,373
25,758
Onerous property costs
Dilapidations
Onerous contracts
Total
£000s
£000s
£000s
£000s
At 29 December 2019
4,833
16,209
19,573
40,615
Eliminated on transition to IFRS 16
(2,222)
-
-
(2,222)
Additions
5,326
1,452
-
6,778
Utilised during the period
(601)
(2,726)
(3,330)
(6,657)
Unwind of provision
7
204
218
429
Impact of change in discount rate
88
747
557
1,392
Releases
(3,472)
(3,226)
-
(6,698)
Foreign exchange
-
17
-
17
At 26 December 2020
3,959
12,677
17,018
33,654
Of which:
Current
1,328
2,823
3,297
7,448
Non-current
2,631
9,854
13,721
26,206
3,959
12,677
17,018
33,654
On the 8th October 2020, the Group announced a programme of restructuring which includes the permanent closure of around 130 of its branches. Since then, the Group has worked hard to negotiate and complete the early surrender of leases resulting in the large reduction in the value of onerous property cost and dilapidations provisions.
18. Business disposal
To enable the Group to focus on its strategic priority to Transform the Tool Hire Business, the disposal of Laois Hire Limited, the Irish large plant hire business, along with its parent company Bannagroe Limited, 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. The funds from the sale are being used to invest in the hire fleet.
The table below shows the assets and liabilities disposed of:
Of the transaction fees included in the calculation £0.1m remains unpaid at period end.
The table below shows the result of discontinued operations:
£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
27 weeks ended 3 July 2021
26 weeks ended 27 June 2020
£000s
£000s
Result of discontinued operations
Revenue
2,991
5,160
Expenses other than finance costs, amortisation and depreciation
(2,758)
(4,342)
Depreciation
(537)
(832)
Finance costs
(9)
(7)
Loss from discontinued operations, net of tax
(313)
(21)
Profit on disposal of discontinued operations
3,180
-
Profit for the period
2,867
(21)
Basic earnings/(loss) per share
0.41
(0.01)
Diluted earnings/(loss) per share
0.40
(0.01)
19. 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 2021 financial year have not changed significantly from those set out on pages 30 to 35 of the Group's 2020 Annual Report, which is available at https://www.hsshiregroup.com/wp-content/uploads/2021/05/HSS_ARA2020_Web.pdf.
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; and
9) Safety, legal and regulatory requirements
COVID-19 has been considered in terms of its impact on each of the principal risks and uncertainties. The main risk expected to affect the Group in the remaining 26 weeks of the 2021 financial year is macroeconomic conditions, which includes the impact COVID-19 and Brexit could have on the prevailing demand from new and existing customers within the numerous and diverse market sectors which HSS serves.Adjusted EBITDA and Adjusted EBITA
Adjusted EBITDA is calculated as follows:
27 weeks ended 3 July 2021
26 weeks ended 27 June 2020
Continuing operations
Continuing operations
£000s
£000s
Operating profit/(loss)
22,600
(726)
Add: Depreciation of property, plant and equipment
7,476
11,314
Add: Depreciation of right of use assets
11,385
12,877
Add: Accelerated depreciation relating to hire stock customer losses, hire stock write offs and other asset and right of use asset disposals
1,719
2,609
Add: Impairments of right of use assets
-
-
Add: Loss on disposal of subleases
-
-
Add: Amortisation of intangible assets
2,634
2,620
Add: Loss on disposal of intangible assets
-
-
EBITDA
45,814
28,694
Less: Exceptional items
(7,539)
(802)
Adjusted EBITDA
38,275
27,892
Adjusted EBITA is calculated as follows:
27 weeks ended 3 July 2021
26 weeks ended 27 June 2020
Continuing operations
Continuing operations
£000s
£000s
Operating profit/(loss)
22,600
(726)
Add: Amortisation of intangible assets
2,634
2,620
Add: Loss on disposal of intangible assets
-
-
EBITA
25,234
1,894
Less: Exceptional items
(7,539)
(802)
Adjusted EBITA
17,695
1,092
20. Post balance sheet event
On the 29th September 2021, following market close, the Group entered into an unconditional agreement to sell All Seasons Hire Limited ("ASH"), the Group's heating, ventilation and air-conditioning ("HVAC") hire solution provider, to Cross Rental Services ("CRS") for a cash consideration of £55million (the "Disposal"). The proceeds from the Disposal will principally be used to accelerate the repayment of debt. As part of this transaction, HSS has entered into a commercial agreement with CRS for the cross hire of HVAC equipment to ensure the broadest possible distribution of, and customer access to, both parties existing fleets. The sale has been treated as a non-adjusting post balance sheet event.
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