Hss Hire Share Discussion Threads

[kingston78] 09/10/2015 11:01

If you look at the share chart of Speedy Hire it has recently undergone a recovery.

HSS is no worse a business than Speedy Hire. There is no reason for HSS Hire not to go up. The current level is really the bottom price.

[kingston78] 06/10/2015 22:43

The shares of Speedy Hire have steadied after the most recent profit warning, so I don't see how and why HSS Hire cannot recover from here.

[tsmith2] 06/10/2015 20:03

Directors need to show faith and by a slug of shares

[kingston78] 05/10/2015 23:24

If the present directors do not turn the company round within the next 12 months I bet that someone will take it over- probably a private equity firm. They will reinvent the wheel and re-float it at a huge premium a few years down the line.

[effortless cool] 01/10/2015 07:13

Jonwig,
Yes, I also wish I had seen this at the IPO! Congratulations if you did. Better late to the party than to miss it altogether, however.

[kingston78] 30/9/2015 21:29

Businesses, good or bad, including giants like supermarkets and miners, go through cycles. So long as they can manage the cash flow effectively they can see through hard times. All they need is a steady pair of hands at the top. Witness the recovery of share price in Sainsbury's today.

It has been pointed out by analysts that the problems associated with Speedy Hire and HSS Hire are company specific. There are profitable quoted companies in this sector. I am sure that the senior management of Speedy Hire and HSS Hire can learn from their competitors. It is not as if the tool hire market is shrinking. It is how you manage the costs and grow revenue in tandem that matters. I know it is easier said than done, but I trust that these people will find a way round it.

It is true that the floatation price of HSS Hire was way too high. But I think that its current share price offers an attractive upside in 12 months time. I don't think HSS Hire is going to go bust, far from it. It takes a long time to build up a business, and it has the assets. If it does not perform well, it will be taken over by a competitor or by a private equity fund. I suggest that this is the right time to buy these shares when many people are shunning from them.

[jonwig] 30/9/2015 17:00

EC - a pity you didn't see this coming at the IPO. Quite a few companies floated in early Spring, and it was pretty obvious at the time that this was a dog. (In fact so many recent IPOs - last couple of years - were PE-funded, over-leveraged and opportunistic.) All would have been decent targets for shorting: INFI, SAGA, AA, DFS, ...

The notion that HSS will "bounce" (or something), even taken over at above zero, is ridiculous. The secured loan holders will have it for zero.

[nw99] 28/9/2015 09:04

@FinancialTimes: .@fastFT: Speedy Hire down 15.5% after new profit warning

[nw99] 28/9/2015 07:44

@FinancialTimes: .@fastFT: Speedy Hire issues 2nd profit warning in 3 months

[kingston78] 26/9/2015 00:06

The new CEO is pursuing the same strategy of rolling out new branches. I suppose this is because the company will be opening a new Central Distribution Service Centre, servicing many branches. This business model will work well if each branch is making a contribution, ie profit making, in order to cover the very expensive overheads of a central distribution centre. If these branches do not make sufficient profit the company will be burdened with an expensive distribution centre. That's why sometimes it is better to be small and profitable.

There is a lot of pain in growing a company, and there are many pitfalls along the way. The company has concentrated on large customers. Now they realise that the smaller customers are equally important, without whom what is the purpose of opening new branches.

I hope the company will ride out the crisis. Otherwise it will dig itself a bigger hole, in which event a bigger competitor will bid for it on the cheap.

The share chart is hanging on a cliff. Which way to go? I bought a few shares recently because I see the upside is more than the downside. I can either double my money or lose 50% of it.

[nw99] 25/9/2015 19:24

Very sad a company like this going to the wall

[kingston78] 25/9/2015 12:54

The company has pursued an expansion plan which has not so far achieved the desired result. The increased revenue (market share) does not compensate for the increased overheads and higher depreciation, hence putting strains on finance.

The management will need to translate the revenue into bottom line profit, by controlling costs and achieve a better utilisation rate of the hire fleet.

In addition the management might need to revise its business plan by delaying further openings of new branches. The company does not have much headroom left for its drawdown facility. It is difficult for it to raise fresh money from investors at such a depressed share price. Raising fresh capital by a deeply discounted issue will be very unpopular as it will have a dilutive effect, so it will create a vicious circle depressing its share price further.

No doubt the management is reviewing all the options. If a strategy does not work one should be brave enough to admit errors and change tack. That is why a new chief executive from outside the company is usually more welcome than someone from within. As I see it the new CEO is a COO and CFO, so he is both an operation and finance person. So long as he understands finance (which he must do)he should know that we all need to live within our means by not over-stretching the company's balance sheet. I suspect that there might have been internal debate between Operations and Finance, with Operations winning or over-ruling Finance.

I hope they will sort out the operational issues, and finance will be straightened up.

[effortless cool] 25/9/2015 09:42

The company has now lost two of its four executive directors sine the IPO earlier this year.

[effortless cool] 25/9/2015 09:17

kingston78,

Personally, I prefer arriving, so long as I arrive at the right place!

I don't buy into charts, but I do share your view that HSS is currently mispriced and either worth a lot more or a lot less.

Whilst this morning's announcement did provide some reassurance for shareholders, given the CEO's "resignation", I find it hard to imagine that the Board is convinced of a turnaround, and I do anticipate further bad news and, almost certainly, a challenging funding requirement to be met.

[kingston78] 25/9/2015 09:00

There is a saying that it is better to travel than to arrive. The share price has been knocked down previously and would have gone down further if more bad news were to emerge. But this morning's news announcement does not reveal a worse situation than before, so it is reassuring news in that context.

Experience tells me that this is actually the time to buy the share with an upside target of 100 p, being a resistance level below the last falling gap (in candles chart). It will take time for the share to climb up to this level, probably by the end of January 2016.

[expletive deleted] 25/9/2015 08:20

But what do I know!?I guess the market has taken reassurance from the "meeting expectations" statement.

[effortless cool] 25/9/2015 07:06

You're certainly very prescient, kingston78:



Although I expect this to move the price down, rather than up.

[nw99] 25/9/2015 07:06

CEO resigns no surprise given share price performance and the company's results

[kingston78] 24/9/2015 22:46

I acknowledge that the share chart is poor and is on a down trend, but the down trend has now stabilised. I also recognise that there has been mismanagement of the business and the business model may not achieve the desired result with ambitious expansion, which if it goes wrong, digs themselves a bigger hole.

Purely looking at the share chart, the decline from 210p is significant and has gone down in stages. I would point out that we are now at a critical juncture. It is hard to say whether the share price will recover or fall further from here. Either way, the move will be big. I am talking about 50% movement from the current level.

There are two big falling gaps, the latest one from 140 to 100. A gap in a share chart will ultimately be filled unless the company goes bust or continues to under-perform. In other words, with a good management and/or improving economic situation the company will recover one day. Also, market sentiment makes a big difference.

If the share price were to go down to 30p, I suspect the company will be bid for. Someone will pick it up on the cheap. Alternatively, if there is a change of senior management the share price will be likely to go up from here.

[nw99] 24/9/2015 17:53

Sliding back down

[effortless cool] 24/9/2015 09:29

New thread, all welcome.

[effortless cool] 24/9/2015 09:28

HSS is a business that seems to have a chronic cash flow problem. I am SHORT at an average of 55.9p (so down just now) and looking to add if things develop as I expect.

I first became aware of HSS through Matt Earl’s write-up, found at the link below, which I thought presented a compelling short proposition. As a result, I decided to review the numbers in detail.



In their interims, HSS indicated that they anticipated 2015 revenue to show 8-11% growth over 2014. July had met expectations but August had fallen short, hence I have assumed 8%, which gives H2 revenue of £160.9m. I think the risk here is to the downside.

Assuming costs versus revenue are in a similar range to past experience and adjusting out the exceptional administration and finance costs in the historical data, HSS could even turn a profit in 2015 H2. I have a PTP of £4.4m, versus a £14.1m loss in 2014 H2.

I admit, this hardly seems a strong basis for a short, but HSS’s problem arises when you look at cash flow.

They have extremely high borrowings - £173.0m at the half-year stage. At the same point in time, their undrawn committed facilities were just £17.6m, down from £37.7m just six months earlier. Even assuming they cut cap ex drastically (as indicated in the interims), I have negative cash flow through each of the next three half years, with undrawn borrowing facilities being exhausted during the final quarter of 2015.

In short, I believe that HSS will need to raise more cash before the year-end. The business cannot tolerate any more debt, so this is likely to take the form of a deeply discounted equity issue. That is the basis of my short position.

All constructive comments welcome, from long or short perspectives.

======================
Update 4 December 2015
======================

The 25 November trading update was better than I had projected in all key aspects. Revenue was a bit higher, EIBTDA was a bit higher (even after adjusting for the revenue overshoot), and cash flow was a bit better, although still materially negative. They have also given themselves more headroom on debt through increased finance lease facilities.

As a result, I closed my short at 49.12 and reversed into a long position. However, having subsequently updated my projections fully, I am still projecting negative cash flow for this half year and the next two.

Overall, I still consider HSS a poorly managed company with a toxic balance sheet, and certainly do not believe that one set of less bad figures means it is out of the woods yet. I have therefore taken advantage of today's rise to close my long position at 54.86.

I feel HSS is walking a survival tightrope and, when it does move, will move dramatically. I'm just not sure whether this will be up or down and present, and intend to watch from the sidelines until I get the full year figures to work with.

[jonwig] 23/9/2015 14:35

tsmith2 "Graphing suggesting this is Defo turning" ... isn't there something in charting which says that if a graph wobbles about with no progress for a while, it will eventually break out?

In this case, though, which direction? We're hardly in a bull market, so that's my answer!

[effortless cool] 15/9/2015 15:59

Thanks kingston78 - not used to seeing notes on the cash line.