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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Hss Hire Group Plc | LSE:HSS | London | Ordinary Share | GB00BVFD4645 | ORD GBP0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.28 | -4.91% | 5.42 | 5.42 | 5.98 | 5.42 | 5.42 | 5.42 | 88,031 | 14:27:50 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Equip Rental & Leasing, Nec | 349.11M | 4.24M | 0.0060 | 9.03 | 40.52M |
From Dec 2022 to Dec 2024
TIDMHSS
RNS Number : 9101N
HSS Hire Group PLC
28 September 2023
HSS Hire Group Plc
Continued strategic progress, well placed for future growth
HSS Hire Group plc ("HSS" or the "Group") today announces results for the 26 week period ended 1 July 2023
Hot Features
Premium
Financial Highlights (Unaudited) H1 2023 H1 2022 Change
(26 weeks to 1 July 2023) (26 weeks to 2 July 2022)
---------------------------------- --------------------------- --------------------------- ---------
Revenue GBP170.1m GBP159.9m 6.3%
---------------------------------- --------------------------- --------------------------- ---------
Adjusted EBITDA(1) GBP32.1m GBP32.9m (2.6)%
Adjusted EBITA(2) GBP11.8m GBP13.6m (12.9)%
Adjusted profit before tax(3) GBP5.9m GBP8.4m GBP(2.5)m
Adjusted basic EPS 0.66p 0.96p (0.30)p
---------------------------------- --------------------------- --------------------------- ---------
ROCE(4) 20.0% 23.8% (3.8)pp
Net debt leverage(5) - non IFRS16 1.0x 0.9x (0.1)x
Net debt leverage(5) - IFRS16 1.6x 1.5x (0.1)x
---------------------------------- --------------------------- --------------------------- ---------
Operating profit GBP10.8m GBP10.2m GBP0.6m
Profit before tax GBP5.5m GBP6.5m GBP(1.0)m
Basic EPS 0.78p 0.86p (0.08)p
Financial Highlights
-- Solid trading performance with H1 23 revenue growth +6.3%, ahead of market(6)
o Continued strong growth in capital-light Services segment(7) , +14%, enabled by technology and expanded supplier partner network
o Rental growth of 2% with fleet utilisation maintained at 56%
-- Adjusted EBITDA post material strategic investment broadly in line with H1 22
o GBP2.2m invested in additional operating expenditure, including new central sales team, and GBP2.4m technology platform capex, both to drive future growth through new routes to market
o Adjusted EBITDA and Adjusted EBITA up 4% excluding the GBP2.2m strategic opex
o Continued strong returns with ROCE at 20%, in line with Group medium term target
-- Robust balance sheet with non-IFRS16 leverage of 1.0x (H1 22: 0.9x)
o Material liquidity headroom to support ongoing strategic investment
-- Interim dividend increased by 6% to 0.18 pence per share(8)
Operational Highlights
-- Good progress with transformational marketplace growth strategy
o 67 customers successfully transitioned to our HSS Pro self-service platform with 50% average revenue growth compared to H1 22
o 28% of Group transactions(9) (H1 22: 21%) are now originated through our self-serve technology platforms: HSS Pro and HSS.com
o Data-driven central sales team delivered 25% growth on targeted customer portfolios
-- Low-cost builders merchant network expanded to 67 locations (June 22: 54) and delivered 23% growth on a same stores basis(10)
o Accelerating migration of remaining HSS branches to this model with 16 to be closed in H2 23 delivering cGBP1m annualised cost saving
-- ESG plan remains on track to meet key milestones -- 2040 Net Zero action plan and targets(11) validated by SBTi(12) -- Achieved ISO27001 cyber-security accreditation
Current trading and outlook
-- The Group has delivered solid results in H1 23, ahead of the market(6) , and demonstrated positive progress against its strategic initiatives.
-- However, the weak macro environment has caused trading in the first twelve weeks of H2 23 to slow considerably to 2% (H1 23: 6.3%), albeit with significant week on week variation.
-- While the Group's Services segment has continued to deliver double-digit growth, Rental has been impacted by demand softness across certain customer segments including RMI and fit-out, exacerbated by seasonal product weakness.
-- Management has responded quickly with targeted action to minimise costs. This is expected to deliver benefits of approximately GBP6m in H2 23, including accelerating the branch migration to the builders merchant model.
-- Forward visibility is limited given the weekly volume volatility that the Group has recently experienced, and as such the Board currently expects full year Adjusted EBITA to be in the range of GBP23m to GBP30m. Even at the lower end of this range, the Group will deliver the second highest Adjusted Profit Before Tax in its listed history.
-- The Board remains very confident in its transformation strategy to evolve HSS into a leading marketplace for equipment services. It will therefore continue to maintain the appropriate balance between shorter term profitability and future growth. With the early positive results coming from this strategy despite challenging market conditions, GBP6.5m strategic operating expenditure investment and GBP6m technology roadmap capex for the full year will remain as planned.
Steve Ashmore, Chief Executive Officer, said:
"I am pleased to report another consecutive period of growth with strong underlying performance driven by continued double-digit growth in our capital-light Services segment. We have made great strides delivering our strategy in the first half of 2023 as our marketplace proposition continues to develop for our customers and suppliers. The early results underpin our confidence in our transformational strategy to be the leading marketplace for equipment services and as such we will continue to invest in the balance of 2023 to build upon this success.
"The macro environment has become more challenging from July; we have experienced significant volatility of demand in our Rental segment over the last few weeks which has widened the range of possible performance outcomes for the balance of the year. However, this will be temporary, and we therefore plan to leverage our robust balance sheet to sustain investment in the business, implementing our strategy to ensure that HSS can take full advantage of the market when it recovers."
Notes
1) 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
2) Adjusted EBITA defined as Adjusted EBITDA less depreciation
3) Adjusted Profit before tax defined as profit before tax excluding amortisation of brand and
customer lists and exceptional items
4) ROCE is calculated as Adjusted EBITA for the 52 weeks to 1 July 2023 divided by the average
of total assets less current liabilities (excluding intangible assets, cash and debt items)
over the same period
5) Net debt leverage is calculated as closing net debt divided by adjusted EBITDA for the 52
weeks to 1 July 2023 (prior year 52 weeks to 2 July 2022).
6) European Rental Association forecast +3.3%, ONS Construction Output H1 23 +3.4%
7) Historic operating segments will continue to be reported to provide year-on-year comparative
performance as the Group transitions to its new operating segments
8) 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 5 October
2023
9) Contracts raised through HSS.com and HSS Pro as a percentage of total contracts raised in
August 2023
10) Merchant locations open for comparable period in both H1 23 and H1 22
11) Net Zero action plan as shared in the 2(nd) edition of the HSS ESG Impact Report published
in Q2 23
12) Science Based Targets initiative
-Ends-
Disclaimer:
This announcement has been prepared solely to provide additional information to shareholders and meets the relevant requirements of the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority. This announcement should not be relied on by any other party or for any other purpose.
This announcement contains forward-looking statements relating to the business, financial performance and results of HSS Hire Group plc and the industry in which HSS Hire Group plc operates. These statements may be identified by words such as "expect", "believe", "estimate", "plan", "target", or "forecast" and similar expressions, or by their context. These statements are made on the basis of current knowledge and assumptions and involve risks and uncertainties. Various factors could cause actual future results, performance or events to differ materially from those described in these statements and neither HSS Hire Group plc nor any other person accepts any responsibility for the accuracy of the opinions expressed in this presentation or the underlying assumptions. No obligation is assumed to update any forward-looking statements.
Notes to editors
HSS Hire Group plc provides tool and equipment hire and related services in the UK and Ireland through a nationwide network of Group companies and third-party suppliers. It offers a one-stop shop for all equipment through a combination of its complementary rental and re-hire business to a diverse, predominantly B2B customer base serving a range of end markets and activities. Over 90% of its revenues come from business customers. HSS is listed on the AIM Market of the London Stock Exchange. For more information please see www.hsshiregroup.com .
For further information, please contact:
HSS Hire Group plc Tel: 020 3757 9248 (on 28 September
2023)
Steve Ashmore, Chief Executive Thereafter, please email: Investors@hss.com
Officer
Paul Quested, Chief Financial
Officer
Phil Golding, Head of Group
Finance
Teneo
Tom Davies Tel: 07557 491 860
Charles Armitstead Tel: 07703 330 269
Numis Securities (Nominated Tel: 020 7260 1000
Adviser and Broker)
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 Paul Quested, Chief Financial Officer.
Chief Executive Officer's Report
The Group has progressed well during the first six months of 2023, delivering a solid set of numbers alongside increased strategic investment, a combination of additional operating expenditure including the new central sales team, and technology capex building a platform for continued growth and high returns.
Our two main businesses, HSS ProService and HSS Operations, continue to work alongside each other, but with their own objectives and performance frameworks. Both businesses have performed well in the first half of 2023.
HSS ProService
We have invested in both our technology platform and our sales channels, to extend the range of services we offer and enable more customers to self-serve, improving loyalty and increasing share of wallet. During the last six months we have seen the benefits of this investment start to materialise, with changing customer behaviours and improvement across all these metrics. We expect to see our investments drive market share growth over the next two years, enabling margin improvement as the business scales and leverages our technology platform.
Self-Serve
We now have 67 customers signed up to our HSS Pro platform. The platform allows these customers to fulfil their own requirements with no need for active intervention with a HSS colleague unless they wish to. This convenience is supporting an increase in share of wallet with growth of 50% on average across these specific customers, significantly faster than those not using the platform.
In the last three months we have successfully migrated our biggest single customer on to our HSS Pro platform. During the rest of the year, we plan to move more of our key accounts on to and drive further volumes through the self-serve platform.
28% of all contracts are now transacted through our HSS Pro and HSS.com self-serve technology platforms. This has increased from 21% in H1 22.
Central Sales
Our data-driven central sales team formed of 95 colleagues now manage a portfolio of over 10,000 customers, utilising our ProPOS platform and our new Microsoft Dynamics CRM software, This team is promoting our full and expanding range of products and services through increased customer contact. Revenue from this portfolio of 10,000 customers is up 25% year to date, with a large proportion of the growth delivered through our rehire partner network.
Following a significant increase in the first half of the financial year, we believe the team is now at optimum size. As the team matures and productivity improves, we will add more customers to their portfolio. This capacity will also be increased as the central sales colleagues migrate customers to self-serve at the appropriate time.
Training vertical
We continue to deliver strong growth through our training vertical, achieving an increase of 17% in H1 23 compared to the prior year. We are seeing customers across a broad range of end-markets consolidate their training requirements, taking advantage of our one-stop-shop solution, through a combination of self-delivered and third-party channels. We have strong digital penetration with 33% of training revenue now booked online and over 10% of the courses delivered online. We have enhanced our 'Training Plus' marketplace proposition (third-party delivered) by expanding our seller network (up 48% year on year) and therefore our course catalogue (now 750 unique courses).
New Verticals
During the first half of this year we launched two new product verticals: Equipment Sales and Building Materials. Independent research of our customer base had previously highlighted that 70-80% of all buyer groups are interested in an online marketplace offering a range of products and services. We are now seeing this demand materialise, with customers purchasing both equipment and building materials, and our supply chain is fulfilling their requirements well. Our network of builders merchant partners is well placed to supply our customer base and our sales of materials to date has already surpassed GBP1m. On Equipment Sales, we have so far fulfilled over GBP2m worth of customer requirements this year. We look forward to adding further product verticals next year.
HSS Operations
Our Operations business continues to benefit from the route optimisation software, Satalia, that it rolled out in H1 of last year, with improved vehicle productivity and reduced carbon footprint. As part of our continuous improvement and efficiency initiatives, the Operations business has rolled out further technology in our workshops. We have created a digital service portal for our technicians to use when servicing our equipment providing enhanced information, improving process adherence and ultimately driving higher equipment quality.
We have continued to invest in the HSS Operations equipment fleet, maintaining strong levels of utilisation.
Network Optimisation
We continue to see good performance through our builders merchant locations. During the first six months of the year we added a further four locations, bringing the total to 67. We are now accelerating the migration of the remaining HSS branches to this lower and variable cost model. By the end of 2023 we plan to add a further 20 builders merchants and close 16 traditional branches, with annual cost savings of cGBP1m and redeployment of all impacted colleagues. There will be some one-off exceptional costs associated with this change which will mainly be non-cash in nature, namely the impairment of existing branch assets.
ESG Progress
We were pleased to receive validation of our Net Zero strategy from the Science Based Targets Initiative in H1 23, an endorsement of our ESG plans. We continue to be focussed on a 'zero harm' safety environment and have seen continuous improvement in our safety metrics. Our wider ESG plan continues to make progress this year with a new improved waste reduction strategy and the launch of new customer dashboards providing information on carbon footprint. We have also recently published the second edition of our HSS ESG Impact Report, which is being well received by customers.
Market Outlook
The construction market provides us with a challenging outlook, with mixed performance across sectors in the first half, and weakening forecasts for the second half of 2023. Activity in the housing sector has been particularly weak and further softening is expected in the short term. Infrastructure has seen growth in the first half, but this is also expected to soften as the government has put several major projects on hold. The contrasting fortunes are evident in the July PMI index showing a range in sentiment from house-building (43.0) to civil engineering (53.9).
Despite the challenging market, we continue to benefit from the broad spectrum of customers we serve, the wide range of end markets that they work in, and the large product range offered through a combination of owned and rehire assets. The continued strength of our balance sheet and our increasingly flexible business model mean that we are well positioned to address ongoing market challenges and uncertainty.
Summary
In summary, during H1 2023 we have accelerated investment in our strategic initiatives and they are starting to demonstrate success. We strive to strike the appropriate balance between shorter term profitability and strategic investment for future transformational growth. Based on the proof points to date, we remain confident that the strategy will drive long term growth with improved returns and therefore will continue to invest to scale these initiatives as planned. These changes will ensure that the Group is well placed when market conditions normalise.
Group Financial Performance
Revenue and segmental contribution
The H1 23 results are based on 26 weeks of trading, consistent with H1 22.
Revenue in H1 23 was GBP170.1m, 6.3% higher than the previous period (H1 22: GBP159.9m), a solid trading performance delivered through effective strategy execution against the backdrop of a more challenging macro-environment.
Turning to our segmental performance, historically our segments have been Rental and Services. However, following the legal and organisational change (July 22 and January 23 respectively), our new segments are ProService, Operations and Ireland. However, given that it is not feasible to measure H1 FY22 in these segments, FY23 will be a transitional year for segment reporting.
Based on our historic segments, Rental and related revenues were GBP101.2m in H1 23 (H1 22: GBP99.3m), 1.9% higher than in H1 22, with high utilisation maintained at 56% despite a larger fleet. Contribution is GBP67.5m (H1 22: GBP64.9m). Margin increased to 66.7% (H1 22: 65.3%) with continued price management and focus on operational efficiency.
Services revenue has increased by 13.7% to GBP68.9m (H1 22: GBP60.6m). Contribution increased to GBP10.4m (H1 22: GBP9.1m). This double-digit growth continues to evidence demand for an easy to access one-stop-shop that has been further delivered by improved customer experience via ongoing technology enhancements and broadening the third party rehire supply chain. Margins continue to be maintained at record high levels of 15.1% (H1 22: 15.1%).
Following our new segments, H1 23 revenues were ProService GBP151.6m, Operations GBP68.4m and Ireland GBP13.5m, partly offset by intercompany eliminations of GBP63.4m in Central. The H1 23 EBITDA were ProService GBP9.7m, Operations GBP27.5m, Ireland GBP3.7m less GBP8.8m Central (being intercompany revenue eliminations and central management costs).
Costs
Cost of sales increased to GBP85.9m during the period (H1 22: GBP81.3m) mainly driven by the growth in the rehire revenue reflecting the continued demand for the Group's one stop shop.
Distribution costs increased by GBP1.2m to GBP15.6m (H1 22: GBP14.4m). Costs continue to be tightly managed but have increased due to volume driven uplift in activity and the combined impact of higher vehicle costs (including rising fuel and maintenance costs) along with higher salaries.
Administrative expenses increased by GBP3.4m to GBP56.6m (H1 22: GBP53.2m). This reflects additional overhead investment in the Group's strategy and higher inflation.
Net finance expenses
Net finance expenses have increased by GBP1.5m to GBP5.2m (H1 22: GBP3.7m ) due to the impact of UK base rate changes on our GBP70m senior finance facility and our lease liabilities.
Other operating income
Other operating income of GBP0.1m (H1 22: GBP0.3m) relates to sub-let income on property space not required by the Group.
Exceptional items
Total exceptional items of GBP0.3m have been recognised in the period. GBP0.2m relate to the final costs associated with the Group's restructuring and GBP0.2m unwinding of the discount within the onerous contract provision, partly offset by GBP0.1m sublease income from vacant stores.
Profitability
With the early positive results of HSS ProService's strategic initiatives, the Group has invested additional overhead in H1 2023 of GBP2.2m which has had an expected impact on profit performance. Without this investment for future returns, profit measures would have increased.
Adjusted EBITDA of GBP32.1m in H1 23 is slightly lower than the prior period (H1 22: GBP32.9m) by 3%. Whilst Adjusted EBITA decreased to GBP11.8m (H1 22: GBP13.6m) with margin decreasing from 8.5% in H1 22 to 6.9% in the current year.
The positive performance in Operating Profit of GBP10.8m, GBP0.6m higher than GBP10.2m H1 FY22 was aided by an extension to our Useful Economic Lives (UEL) of intangible and tangible fixed assets with more detail covered in notes 9 and 10 to the interim financial statements. This resulted in lower depreciation and amortisation during H1 23 of GBP1.0m and GBP1.3m respectively.
The reduced profitability led to the adjusted basic earnings per share decreasing to 0.66p in H1 23 from 0.96p in the prior period. Both the basic earnings per share and diluted basic earnings per share were lower than the prior period at 0.78p (H1 22 0.86p) and 0.76p (H1 22 0.84p) respectively.
Return on Capital Employed
ROCE decreased to 20% from 24% in the prior year. This has been driven by a lower EBITDA from strategic initiative led overhead investment and higher capital employed following continued targeted investment in fleet and materials and equipment for hire. ROCE is calculated as Adjusted EBITA (last twelve months) divided by average capital employed, where capital employed is total assets except intangibles, derivatives and cash, less current liabilities excluding current debt items.
Net debt
Net debt on 1 July 2023 was GBP110.6m, an increase of GBP7.4m from the H1 22 (GBP103.2m), contributed by the Group's strategic investment (both overhead and software development) and increased net interest paid following the well documented rate rises. Continued strong working capital management has resulted in leverage only marginally increasing to 1.6x from 1.5x (H1 22 as reported, FY 22: 1.3x).
The debt facilities consist of a GBP70.0m senior finance facility and an undrawn revolving credit and overdraft facility of GBP25.0m, both maturing in November 2025 but with an option to extend for a further 12 months. Including cash balances of GBP36.6m, the Group had access to GBP61.6m of combined liquidity at 1 July 2023.
Dividend
The Board has decided to continue with a progressive dividend policy and an interim dividend of 0.18p per share was approved by the Board on 27 September 2023 and will be paid during November 2023.
Going concern
At 27 September 2023 the Group had sufficient liquidity to operate within banking covenants for the next fifteen months even under a 'reasonable worst case' scenario. The reasonable worst case scenario models lower underlying revenue performance, lower value from strategic initiatives, increase in debtor days and further interest rate increases.
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 2023 financial year have not changed significantly from those described in the Group's 2022 Annual Report and are summarised in note 17 of this interim report.
Global inflationary pressures and associated interest rate increases continue to impact macroeconomic risk and therefore this risk will continue to be closely monitored for its effect on demand and colleague welfare so that we can take appropriate actions.
By order of the Board
Steve Ashmore
Director
28 September 2023
HSS Hire Group plc
Unaudited condensed consolidated income statement
Note 26 weeks ended 26 weeks ended
1 July 2023 2 July 2022
------------------------- ----- ------------------------------------ ------------------------------------
Underlying Exceptional Total Underlying Exceptional Total
items items
(note (note
5) 5)
------------------------- -----
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
------------------------- ----- ----------- ------------ --------- ----------- ------------ ---------
Revenue 3 170,093 - 170,093 159,937 - 159,937
Cost of sales (85,872) - (85,872) (81,254) - (81,254)
-
Gross profit 84,221 - 84,221 78,683 - 78,683
------------------------- ----- ----------- ------------ --------- ----------- ------------ ---------
-
Distribution costs (15,562) - (15,562) (14,425) - (14,425)
Administrative
expenses (56,347) (209) (56,556) (52,414) (746) (53,160)
Impairment loss
on trade receivables
and contract assets (1,454) - (1,454) (1,204) - (1,204)
Other operating
income 4 - 112 112 57 258 315
-
------------------------- ----- ----------- ------------ --------- ----------- ------------ ---------
Operating profit 10,858 (97) 10,761 10,697 (488) 10,209
-
Financial expense 7 (5,035) (187) (5,222) (3,608) (66) (3,674)
------------------------- ----- ----------- ------------ --------- ----------- ------------ ---------
Profit before
tax 5,823 (284) 5,539 7,089 (554) 6,535
------------------------- ----- ----------- ------------ --------- ----------- ------------ ---------
Income tax charge (45) - (45) (449) (449)
------------------------- ----- ----------- ------------ --------- ----------- ------------ ---------
Profit for the
financial period 5,778 (284) 5,494 6,640 (554) 6,086
------------------------- ----- ----------- ------------ --------- ----------- ------------ ---------
Alternative performance 26 weeks 26 weeks
measures GBP000s ended ended
1 July 2 July
2023 2022
GBP000s GBP000s
Adjusted EBITDA 18 32,065 32,917
Adjusted EBITA 18 11,814 13,558
Adjusted profit
before tax 18 5,885 8,376
Earnings per
share (pence)
Adjusted basic
earnings per share 8 0.66 0.96
Adjusted diluted
earnings per share 8 0.64 0.94
Basic earnings
per share 8 0.78 0.86
Diluted earnings
per share 8 0.76 0.84
The notes form part of these condensed consolidated financial statements.
HSS Hire Group plc
Unaudited condensed consolidated statement of comprehensive income
26 weeks 26 weeks
ended ended
1 July 2 July
2023 2022
GBP000s GBP000s
Profit for the financial period 5,494 6,086
Items that may be reclassified
to profit or loss:
Foreign currency translation
differences arising on consolidation
of foreign operations (368) 7
Other comprehensive gain/(loss)
for the period, net of tax (368) 7
--------- ---------
Total comprehensive profit
for the period 5,126 6,093
========= =========
Attributable to owners of the
Group 5,126 6,093
========= =========
The notes form part of these condensed consolidated financial statements.
HSS Hire Group plc
Unaudited condensed consolidated statement of financial position
At 1 At 31
July December
2023 2022
Note GBP000s GBP000s
ASSETS
Non-current assets
Intangible assets 9 151,178 147,867
Property, plant and equipment
- Hire equipment 10 80,539 73,613
- Non-hire assets 10 12,908 14,162
Right of use assets
- Hire equipment 11 3,061 2,736
- Non-hire assets 11 50,993 49,077
Deferred tax asset 7,968 7,515
306,647 294,970
Current assets
Inventories 4,020 3,779
Trade and other receivables 12 85,679 86,068
Cash 36,622 47,709
-------- ----------
126,321 137,556
Total assets 432,968 432,526
LIABILITIES
Current liabilities
Trade and other payables 13 78,526 88,302
Lease liabilities 14 15,025 13,182
Borrowings 15 5,834 5,168
Provisions 16 4,380 4,258
Current tax liabilities 405 290
-------- ----------
104,170 111,200
Non-current liabilities
Lease liabilities 14 44,690 43,110
Borrowings 15 80,814 78,591
Provisions 16 15,510 17,045
Deferred tax liabilities 113 117
141,127 138,863
Total liabilities 245,297 250,063
Net assets 187,671 182,463
======== ==========
EQUITY
Share capital 7,050 7,050
Share premium 45,552 45,552
Merger reserve 97,780 97,780
Foreign exchange translation reserve (790) (422)
Retained earnings 38,079 32,503
Total equity 187,671 182,463
======== ==========
The notes form part of these condensed consolidated financial statements.
HSS Hire Group plc
Unaudited condensed consolidated statement of changes in equity
Foreign
exchange
Share Share Merger translation Retained Total
capital premium reserve reserve earnings equity
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
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 operations - - - (368) - (368)
Total comprehensive profit
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
========= ========= ========= ============= ========== ========
Foreign
exchange
Share Share Merger translation Retained Total
capital premium reserve reserve earnings equity
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
At 2 January 2022 7,050 45,552 97,780 (754) 12,273 161,901
Profit for the period - - - - 6,086 6,086
Foreign currency translation
differences arising on consolidation
of foreign operations - - - 7 - 7
Total comprehensive profit
for the period - - - 7 6,086 6,093
--------- --------- --------- ------------- ---------- --------
Transactions with owners
recorded directly in equity
Share-based payment charge - - - - 358 358
At 2 July 2022 7,050 45,552 97,780 (747) 18,717 168,352
========= ========= ========= ============= ========== ========
The notes form part of these condensed consolidated financial statements.
HSS Hire Group plc
Unaudited condensed consolidated statement of cash flows
Note Restated(1)
26 weeks
26 weeks
ended ended
1 July 2 July
2023 2022
GBP000s GBP000s
Profit for the financial period 5,494 6,086
Adjustments for:
- Tax 45 449
- Amortisation 6 956 2,851
- Depreciation 6 17,881 17,749
- Accelerated depreciation relating to
hire stock customer losses and hire stock
write offs 6 2,808 1,666
- Profit on disposal of property, plant
and equipment and right of use assets 6 (438) (64)
- Share-based payment charge 82 358
- Foreign exchange gains on operating
activities (161) (40)
- Finance expense 7 5,222 3,674
Changes in working capital (excluding
the effects of disposals and exchange
differences on consolidation):
- Inventories (241) (423)
- Trade and other receivables 12 617 (1,775)
- Trade and other payables 13 (9,994) 1,954
- Provisions 16 (1,772) (1,800)
Net cash flows from operating activities
before purchase of hire equipment 20,499 30,685
Purchase of hire equipment 10 (14,163) (14,404)
Cash generated from operating activities 6,336 16,281
Net interest paid (4,471) (3,228)
Income tax (paid)/received (614) (1,238)
---------- -------------
Net cash generated from operating activities 1,251 11,815
---------- -------------
Cash flows from investing activities
Purchases of non-hire property, plant,
equipment and software 10,11 (5,147) (3,670)
Proceeds on disposal of non-hire property,
plant and equipment 6 315 -
---------- -------------
Net cash used in investing activities (4,832) (3,670)
---------- -------------
Cash flows from financing activities
Capital element of lease liability payments
and hire purchase arrangements 14 (7,506) (11,725)
---------- -------------
Net cash paid in financing activities (7,506) (11,725)
---------- -------------
Net decrease in cash (11,087) (3,580)
Cash at the start of the period 47,709 42,269
---------- -------------
Cash at the end of the period 36,622 38,689
---------- -------------
(1) As discussed in Note 3 of these interim financial statements, restatements have been made to comparative figures regarding the treatment of certain leases between right of use and hire purchase arrangements.
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 1 July 2023.
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 27 September 2023.
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 31 December 2022 were approved by the Board on 26 April 2023 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 1 July 2023 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 31 December 2022, which were prepared in accordance with IFRS as adopted by the UK (IFRS).
Accounting policies are consistent with those in the Statutory Accounts for the year ended 31 December 2022 except where specifically included below.
Going concern
At 1 July 2023, the Group's financing arrangements consisted of a drawn senior finance facility of GBP70.0m, an undrawn revolving credit facility of GBP19.0m and undrawn overdraft facilities of GBP6.0m. Cash at 1 July 2023 was GBP36.6m, providing liquidity headroom of GBP61.6m. 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.
The Directors continue to model via a number of scenarios current macroeconomic factors such as increasing inflation and interest rates. At 27 September 2023 the Group had sufficient liquidity to operate within banking covenants for the period to 28 December 2024 even under a 'reasonable worst case' scenario. The reasonable worst case scenario models lower underlying revenue performance, lower value from strategic initiatives, increase in debtor days and further interest rate increases.
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 fifteen months from the date of approval of these financial statements. Accordingly, they continue to adopt the going concern basis in preparing these unaudited condensed consolidated financial statements.
Prior period restatement
In the Group's 2022 Annual Report, it identified the need to restate the balance sheets at 1 January 2022 and 26 December 2020 where hire equipment subsequently financed by hire purchase agreements had been reclassed to Property, Plant and Equipment from Right of Use assets. This reclassification includes the corresponding adjustment between lease liabilities and borrowings. This restatement has no impact on income statement, net assets or reserves.
The only restatements included within these interim financial statements that were not in the 2022 Annual Report relate to certain tabular disclosures in respect of movements on the balance sheet and presentation of items within the cash flow statement during the comparative period ended 2 July 2022.
Change in Accounting Estimates
Intangible Assets
During the period, the estimate for the useful economic lives of software assets has been reviewed and updated from not exceeding four years in the previous year, to not exceeding ten years. More details of the change in accounting estimate can be found in the Intangible Assets note (see note 9).
Tangible Fixed Assets
In addition to the change noted above, the Group has conducted a review of the useful economic lives of hire stock assets and has extended the lives of certain types of assets. More details of the change in accounting estimate can be found in the Tangible Fixed Assets note (see note 10).
3. Segmental reporting
As disclosed in the Group's 2022 Annual Report, the Group completed a significant internal restructuring exercise to support its long-term strategic objectives. This included the creation of a new divisional structure, separating out the ProService and Operations businesses:
-- HSS ProService - Digital marketplace business focussed on customer and supplier acquisition. Technology driven, extremely scalable and uniquely differentiated including training services.
-- HSS Operations - Fulfilment business including power generation, focused on health and safety and quality, with circular economy credentials, comprehensive national footprint and high customer satisfaction.
Since the start of the current financial period the Group's Chief Operating Decision Maker, identified as the Board of Directors, have changed their internal reporting to reflect the two divisions that have been created.
During the review of operating segments, the Group has identified that one operating segment, HSS Operations Ireland ('Ireland'), the Group's operations in the Republic of Ireland, has exceeded the IFRS 8 threshold test for separate presentation and has therefore not been aggregated with the wider Operations segment and is instead shown as a standalone segment. The Group continues to present separately costs relating to central management within the "Central" heading in the segments disclosure. This also includes the elimination of revenue between trading segments. Under the new divisional structure, it is possible to allocate more costs against the relevant underlying segments and accordingly the level of central costs shown within this category has fallen, making it not directly comparable with the former 'Central' heading previously used by the Group.
As a result of this the Group's operating segments have changed from those presented in the prior year. Under IFRS 8 Operating Segments, comparatives should be restated when reportable segments change as a result of internal restructuring. The Group has not previously had the ability to reliably separate the results, assets and cash flows of the business between the Operations and ProService divisions. IFRS 8 Operating Segments allows for comparatives to be omitted where the information is unavailable and would involve excessive cost to create. The availability of information prior to the restructure is such that the Group are not able to present comparatives under the newly identified reportable segments.
To ensure that comparable segmental information is available to the users of the financial statements, the Group have presented two segmental reporting disclosures for the current period's results. After the period of transition for FY23, the Group will only present the newly identified reportable segments.
The reportable segments identified in the previous period were '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. These ceased to be reportable segments in FY23 and will not be presented in the FY24 Annual Report.
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 1 July 2023 (26 weeks ending 2 July 2022: None).
26 weeks ending 1 July 2023
ProService Operations Ireland Central Total
GBP000s GBP000s GBP000s GBP000s GBP000s
Total revenue (including
intergroup) 151,641 68,361 13,541 (63,450) 170,093
----------- ----------- -------- --------- ---------
Adjusted EBITDA 9,746 27,479 3,678 (8,838) 32,065
Less: Depreciation (801) (17,982) (1,371) (97) (20,251)
Adjusted EBITA 8,945 9,497 2,307 (8,935) 11,814
Less: Exceptional items
(non-finance) (97)
Less: Amortisation (956)
Operating profit 10,761
Net finance expenses (5,222)
---------
Profit before tax 5,539
---------
Central includes the elimination of revenue between trading segments, the largest being between HSS Operations and HSS ProService, along with central management costs to support the businesses.
As at 1 July 2023
ProService Operations Ireland Central Total
GBP000s GBP000s GBP000s GBP000s GBP000s
Additions to non-current
assets
Property, plant and equipment 228 15,284 3,256 - 18,768
Right of use assets 1,147 8,922 312 245 10,626
Intangible assets 3,762 484 - - 4,246
----------- ----------- -------- ---------- ----------
Non-current assets net
book value
Property, plant and equipment 580 83,419 9,448 - 93,447
Right of use assets 3,573 47,470 2,628 383 54,054
Intangible assets 67,503 75,980 7,510 185 151,178
Deferred tax assets 7,968 7,968
Current assets 126,321 126,321
Current liabilities (104,170) (104,170)
Non-current liabilities (141,127) (141,127)
Net assets 187,671
----------
Included within intangible assets is goodwill of GBP115.9m. Historically, the Group's goodwill has been allocated to HSS Core - UK, HSS Core - Ireland and HSS Power. Under the newly identified reporting segments, the Group has now allocated HSS Core - UK goodwill between ProService and Operations of GBP35.1m and GBP67.2m respectively. There has been no change to the goodwill allocated to HSS Core - Ireland or HSS Power.
This allocation is based on the current estimated value in use for the segments and will be updated at the year end once a full year of trading results are available.
26 weeks ending 1 July 2023 (Historic
segments)
Rental
(and related
revenue) Services Central Total
GBP000s GBP000s GBP000s GBP000s
Total revenue from external
customers 101,174 68,919 - 170,093
-------------- --------- --------- ---------
Contribution 67,525 10,404 - 77,929
Branch and selling costs (30,507) (30,507)
Central costs (15,357) (15,357)
Adjusted EBITDA 32,065
Less: Exceptional items
(non-finance) (97) (97)
Less: Depreciation and
amortisation (10,831) (766) (9,610) (21,207)
Operating profit 10,761
Net finance expenses (5,222)
Profit before tax 5,539
---------
As at 1 July 2023 (Historic segments)
Rental
(and related
revenue) Services Central Total
GBP000s GBP000s GBP000s GBP000s
Additions to non-current assets
Property, plant and equipment 17,788 5 975 18,768
Right of use assets 1,012 269 9,345 10,626
Intangible assets - 3,762 484 4,246
-------------- --------- ---------- ----------
Non-current assets net book value
Property, plant and equipment 80,541 125 12,781 93,447
Right of use assets 3,061 726 50,267 54,054
Intangible assets 138,160 10,467 2,551 151,178
Deferred tax asset 7,968 7,968
Current assets 126,321 126,321
Current liabilities (104,170) (104,170)
Non-current liabilities (141,127) (141,127)
Net assets 187,671
----------
26 weeks ended 2 July 2022 (Historic
segments)
Rental
(and related
revenue) Services Central Total
GBP000s GBP000s GBP000s GBP000s
Total revenue from external customers 99,311 60,626 - 159,937
-------------- --------- --------- ---------
Contribution 64,872 9,129 - 74,001
Branch and selling costs (26,740) (26,740)
Central costs (14,344) (14,344)
Adjusted EBITDA 32,917
Less: Exceptional items (non-finance) (488) (488)
Less: Depreciation and amortisation (12,295) (224) (9,701) (22,220)
Operating profit 10,209
Net finance expenses (3,674)
Profit before tax from continuing
operations 6,535
---------
As at 31 December 2022 (Historic
segments)
Rental
(and related
revenue) Services Central Total
GBP000s GBP000s GBP000s GBP000s
Additions to non-current assets
Property, plant and equipment 30,436 49 5,461 35,935
Right of use assets 2,220 521 7,672 10,413
Intangible assets 3,052 35 2,505 5,592
-------------- --------- ---------- ----------
Non-current assets net book value
Property, plant and equipment 73,613 138 14,024 87,775
Right of use assets 2,736 614 48,463 51,813
Intangible assets 145,430 67 2,370 147,867
Deferred tax assets 7,515 7,515
Current assets 137,556 137,556
Current liabilities (111,200) (111,200)
Non-current liabilities (138,863) (138,863)
182,463
----------
4. Other operating income
26 weeks 26 weeks
ended ended
1 July 2023 2 July 2022
GBP000s GBP000s
Sublease rental and service
charge income 112 315
------------- -------------
During the period sub-let rental income of GBP0.1m (26 weeks ended 2 July 2022: GBP0.3m) 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 1 July 2023 the Group has recognised exceptional items as follows:
Total
Included 26 weeks
Included in other Included ended
in administrative operating in finance 1 July
expenses income expense 2023
GBP000s GBP000s GBP000s GBP000s
Onerous property
costs/(credits) 10 (112) 18 (84)
Costs relating to restructure 208 - - 208
Onerous contract (9) - 169 160
------------------- ----------- ------------ ----------
Total 209 (112) 187 284
=================== =========== ============ ==========
During the 26 weeks ended 2 July 2022, the Group recognised exceptional items analysed as follows:
Included Total 26
Included in other Included weeks ended
in administrative operating in finance 2 July
expenses income expense 2022
GBP000s GBP000s GBP000s GBP000s
Onerous property
costs/(credits) 12 (258) 13 (233)
Costs relating to restructure 945 - - 945
Onerous contract (211) - 53 (158)
------------------- ----------- ------------ -------------
Total 746 (258) 66 554
=================== =========== ============ =============
Costs related to onerous properties: branch and office closures (incurred in 2023 and 2022)
In the 26 weeks ended 1 July 2023 an exceptional credit of GBP0.1m has been recognised within other operating income, this mainly relates to sublease income on vacant stores (2022: credit of GBP0.3m).
Cost relating to restructuring (incurred in 2023 and 2022)
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 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, additional fees of GBP0.2m (2022: costs of GBP0.9m) have been incurred in respect of liquidation for the now dormant holding companies and accession to the banking group for new group companies as part of this legal restructure. The remaining costs of this programme are not expected to be material.
6. Depreciation and amortisation expense
26 weeks 26 weeks
ended ended
1 July 2023 2 July 2022
GBP000s GBP000s
Amortisation 956 2,861
Depreciation 20,251 19,359
====================== ================
As restated(1)
Amounts charged in respect 26 weeks ending 1 July 26 weeks ending 2 July
of depreciation: 2023 2022
Property, Right Property, Right
plant and of use plant of use
equipment assets Total and equipment assets Total
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
Depreciation (notes
10,11) 9,897 7,984 17,881 10,039 7,710 17,749
Accelerated depreciation
relating to hire stock
lost by customers or
written off (notes 10,11) 2,680 128 2,808 1,371 295 1,666
Loss on disposal of
other assets (notes
10,11) 259 115 374 56 - 56
Total depreciation per
notes 10,11 12,836 8,227 21,063 11,466 8,005 19,471
----------- -------- ---------- --------------- -------------- ----------
Profit on surrender
of leases (163) (340) (503) (120) - (120)
Proceeds on disposal
of property, plant and
equipment (315) - (315) - - -
Dilapidations profit
on surrender of leases (4) - (4) - - -
Accelerated depreciation
included in exceptionals 10 - 10 8 - 8
Total depreciation
per the income statement 12,364 7,887 20,251 11,354 8,005 19,359
=========== ======== ========== =============== ============== ==========
(1) As discussed in Note 3 of these interim financial statements, certain notes have been changed following a prior period restatement relating to the classification of leases within the Group's FY22 Annual Report between property, plant and equipment and right of use assets.
Amounts charged in respect of amortisation:
26 weeks
ended 26 weeks ended
1 July 2023 2 July 2022
GBP000s GBP000s
Intangible assets
Amortisation (note
9) 935 2,851
Loss on write off 21 10
Total amortisation 956 2,861
------------- ---------------
7. Finance income and expense
26 weeks 26 weeks
ended ended
1 July 2023 2 July 2022
GBP000s GBP000s
Senior finance facility 2,462 1,269
Amortisation of debt issue costs 254 254
Lease liabilities and hire purchase
arrangements 2,094 1,936
Interest unwind on discounted
provisions 358 94
Revolving credit facility, including
commitment fees 108 132
Other interest received (54) (11)
Net finance expense 5,222 3,674
============= =============
8. Earnings per share
Basic earnings per share:
Weighted
average Earnings
Profit number of after tax
after tax shares per share
GBP000s 000s pence
----------- ----------- -----------
26 weeks ended 1 July 2023 5,494 704,988 0.78
26 weeks ended 2 July 2022 6,086 704,988 0.86
=========== =========== ===========
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:
Weighted
average Earnings
Profit after number of after tax
tax shares per share
GBP000s 000s pence
------------- ----------- -----------
26 weeks ended 1 July 2023 5,494 726,283 0.76
26 weeks ended 2 July 2022 6,086 722,559 0.84
============= =========== ===========
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 2 July 2022: 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 26 weeks
ended 1 July ended 2
2023 July 2022
Pence pence
Basic earnings per share 0.78 0.86
Add back:
Exceptional items per share 0.04 0.08
Amortisation of customer relationships
and brands per share 0.01 0.18
Tax per share 0.01 0.06
Charge:
Tax charge at prevailing rate (0.18) (0.22)
Adjusted basic earnings per
share 0.66 0.96
============== ===========
The following is a reconciliation between the diluted earnings per share and the adjusted diluted earnings per share:
26 weeks 26 weeks
ended 1 July ended 2 July
2023 2022
pence pence
Diluted earnings per share 0.76 0.84
Add back:
Adjustment to basic loss per
share for the impact of dilutive
securities
Exceptional items per share 0.04 0.08
Amortisation of customer relationships
and brands per share 0.01 0.18
Tax per share 0.01 0.06
Charge:
Tax charge at prevailing rate (0.18) (0.22)
Adjusted diluted earnings per
share 0.64 0.94
============== ==============
The weighted average number of shares for the purposes of calculating the diluted earnings per share are as follows:
26 weeks 26 weeks
ended ended
1 July 2023 2 July 2022
Weighted Weighted
average number average number
of shares of shares
000s 000s
Basic 704,988 704,988
LTIP share options 3,003 4,687
Restricted stock grant 18,209 12,801
CSOP options 83 83
Diluted 726,283 722,559
================ ================
9. Intangible assets
Customer
Goodwill relationships Brands Software Total
GBP000s GBP000s GBP000s GBP000s GBP000s
Cost
At 1 January
2023 115,855 25,400 22,585 32,764 196,604
Additions - - - 4,246 4,246
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
Disposals - - - (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
========= ================ ======== ========= ========
Customer
Goodwill relationships Brands Software Total
GBP000s GBP000s GBP000s GBP000s GBP000s
Cost
At 2 January
2022 115,855 25,400 22,590 31,856 195,701
Additions - - - 2,764 2,764
At 2 July 2022 115,855 25,400 22,590 34,620 198,465
--------- ---------------- -------- --------- --------
Amortisation
At 2 January
2022 - 23,301 298 24,454 48,053
Charge for the
period - 1,270 17 1,564 2,851
At 2 July 2022 - 24,571 315 26,018 50,904
--------- ---------------- -------- --------- --------
Net book value
At 2 July 2022 115,855 829 22,275 8,602 147,561
========= ================ ======== ========= ========
Customer
Goodwill relationships Brands Software Total
GBP000s GBP000s GBP000s GBP000s GBP000s
Cost
At 2 January
2022 115,855 25,400 22,590 31,856 195,701
Additions - - - 5,592 5,592
Disposals - - (5) (4,684) (4,689)
At 31 December
2022 115,855 25,400 22,585 32,764 196,604
--------- --------------- -------- --------- --------
Amortisation
At 2 January
2022 - 23,301 298 24,454 48,053
Charge for the
period - 1,990 34 3,290 5,314
Disposals - - (5) (4,625) (4,630)
At 31 December
2022 - 25,291 327 23,119 48,737
--------- --------------- -------- --------- --------
Net book value
At 31 December
2022 115,855 109 22,258 9,645 147,867
========= =============== ======== ========= ========
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.
During the year, as part of a routine review of the useful lives of assets, the Group considered how the new Operations and ProService divisional structure impacted the intended use, and by extension the lifespan, of certain Intangible assets. Specifically, the Group considered their core operating systems used by Operations and ProService, Spanner and Brenda, and related intangible assets.
In response to the new divisional structure and following an extensive review process, the Directors revised the estimated useful economic life of both assets from four to ten years. The D irectors consider this to reflect the most reliable estimate of the minimum period of operation for the systems in their current form.
The impact of this change was a reduction in amortisation for these assets of GBP1.3m during the current financial period. Details of the total impact on the change for the 2023 financial year will be included in the Group's 2023 Annual Report.
10. Property, plant and equipment
Materials
& equipment
Land Plant held for
& buildings & machinery hire Total
GBP000s GBP000s GBP000s GBP000s
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)
Remeasurement - - - -
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 period 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
============= ============= ============= =========
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 Materials
& buildings & equipment
Plant held for
& machinery hire Total
GBP000s GBP000s GBP000s GBP000s
Cost
----------------------------------- ------------- ------------- ------------- --------
At 2 January 2022 - as previously
reported 37,303 43,163 133,674 214,140
Restatement(1) - - 26,457 26,457
------------------------------------ ------------- ------------- ------------- --------
At 2 January 2022 - as restated 37,303 43,163 160,131 240,597
Transferred to right of
use assets - - (1,504) (1,504)
------------------------------------ ------------- ------------- ------------- --------
Transferred from right of
use - as previously reported - - 4,498 4,498
Restatement(1) - - (3,761) (3,761)
------------------------------------ ------------- ------------- ------------- --------
Transferred from right of
use - as restated - - 737 737
------------------------------------ ------------- ------------- ------------- --------
Additions - as previously
reported 221 685 15,416 16,322
Restatement(1) - - 2,352 2,352
------------------------------------ ------------- ------------- ------------- --------
Additions - as restated 221 685 17,768 18,674
------------------------------------ ------------- ------------- ------------- --------
Disposals - as previously
reported (266) (41) (7,086) (7,393)
Restatement(1) - - (13) (13)
------------------------------------ ------------- ------------- ------------- --------
Disposals - as restated (266) (41) (7,099) (7,406)
------------------------------------ ------------- ------------- ------------- --------
Remeasurement - as previously
reported (790) - - (790)
Restatement(1) - - 1,504 1,504
------------------------------------ ------------- ------------- ------------- --------
Remeasurement - as restated (790) - 1,504 714
Foreign exchange differences 4 9 71 84
At 2 July 2022 36,472 43,816 171,608 251,896
------------- ------------- ------------- --------
Accumulated depreciation
----------------------------------- ------------- ------------- ------------- --------
At 2 January 2022 - as previously
reported 25,453 39,408 89,342 154,203
Restatement(1) - - 7,666 7,666
------------------------------------ ------------- ------------- ------------- --------
At 2 January 2022 - as restated 25,453 39,408 97,008 161,869
------------------------------------ ------------- ------------- ------------- --------
Transferred from right of
use assets - as previously
reported - - 2,140 2,140
Restatement(1) - - (1,403) (1,403)
------------------------------------ ------------- ------------- ------------- --------
Transferred from right of
use assets - as restated - - 737 737
------------------------------------ ------------- ------------- ------------- --------
Charge for the period -
as previously reported 1,163 833 6,091 8,087
Restatement(1) - - 1,952 1,952
------------------------------------ ------------- ------------- ------------- --------
Charge for the period -
as restated 1,163 833 8,043 10,039
------------------------------------ ------------- ------------- ------------- --------
Disposals - as previously
reported (209) (42) (5,682) (5,933)
Restatement(1) - - (47) (47)
------------------------------------ ------------- ------------- ------------- --------
Disposals - as restated (209) (42) (5,729) (5,980)
Foreign exchange differences - - 1 1
At 2 July 2022 26,407 40,199 100,060 166,666
------------- ------------- ------------- --------
Net book value
At 2 July 2022 10,065 3,617 71,548 85,230
============= ============= ============= ========
(1) As discussed in Note 3 of these interim financial statements, certain notes have been changed following a prior period restatement relating to the classification of leases within the Group's FY22 Annual Report between property, plant and equipment and right of use assets.
Materials
& equipment
Land Plant held for
& buildings & machinery hire Total
GBP000s GBP000s GBP000s GBP000s
Cost
At 2 January 2022 37,303 43,163 160,131 240,597
Transferred from right
of use assets - - 283 283
Additions 4,919 592 30,435 35,946
Disposals (4,606) (14,561) (16,686) (35,853)
Remeasurement (2,497) - - (2,497)
Foreign exchange differences 28 2 243 273
Transfers (102) - 102 -
At 31 December 2022 35,045 29,126 174,508 238,749
------------- ------------- ------------- ---------
Accumulated depreciation
At 2 January 2022 25,453 39,408 97,008 161,869
Transferred from right
of use assets - - 261 261
Charge for the year 2,433 1,501 16,654 20,588
Disposals (3,927) (14,621) (13,189) (31,737)
Foreign exchange differences (2) (5) - (7)
Transfers - (161) 161 -
At 31 December 2022 23,957 26,122 100,895 150,974
------------- ------------- ------------- ---------
Net book value
At 31 December 2022 11,088 3,074 73,613 87,775
============= ============= ============= =========
During the year, as part of a routine review of the useful lives of assets, the Group revised the useful economic lives of assets included within the "material and equipment held for hire" class of property, plant and equipment. As part of this review, the Group have considered the levels of disposals and write offs for these assets, as well as their period of service in the business and anticipated remaining useful economic lives.
The product of this review was that certain assets useful lives were extended but remained within the original estimates as disclosed in note 4f of the Group's 2022 Annual Report, with one exception. The Group's powered access equipment had previously been depreciated over between five and ten years but has been revised to between five and fifteen years from the start of the current period.
The impact of this change was a reduction in depreciation for these assets of GBP1.0m during the current financial period. Details of the total impact on the change for the 2023 financial year will be included in the Group's 2023 Annual Report.
11. Right of use assets
Equipment
for internal Equipment
Property Vehicles use for hire Total
GBP000s GBP000s GBP000s GBP000s GBP000s
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 58,978 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) - - (13)
At 1 July
2023 24,559 21,921 319 1,137 47,935
--------- --------- --------------- ---------- --------
Net book value
At 1 July
2023 34,419 16,573 1 3,061 54,054
========= ========= =============== ========== ========
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.
Equipment
for internal Equipment
Property Vehicles use for hire Total
GBP000s GBP000s GBP000s GBP000s GBP000s
Cost
------------------ ------------------ --------- --------- -------------- ---------- ---------
At 2 January 2022 - as
previously reported 56,847 26,283 520 25,339 108,989
Restatement(1) - - - (23,011) (23,011)
-------------------------------------- --------- --------- -------------- ---------- ---------
At 2 January 2022 - as
restated 56,847 26,283 520 2,328 85,978
-------------------------------------- --------- --------- -------------- ---------- ---------
Additions - as previously
reported - 1,451 - 3,700 5,151
Restatement(1) - - - (2,352) (2,352)
-------------------------------------- --------- --------- -------------- ---------- ---------
Additions - as restated - 1,451 - 1,348 2,799
-------------------------------------- --------- --------- -------------- ---------- ---------
Remeasurements - as previously
reported - - - 1,504 1,504
Restatement(1) - - - (1,504) (1,504)
-------------------------------------- --------- --------- -------------- ---------- ---------
Remeasurements - as restated - - - - -
-------------------------------------- --------- --------- -------------- ---------- ---------
Transferred to property,
plant and equipment - - - (3,761) (3,761)
Restatement(1) - - - 3,761 3,761
-------------------------------------- --------- --------- -------------- ---------- ---------
Transferred to property, - - - - -
plant and equipment - as
restated
-------------------------------------- --------- --------- -------------- ---------- ---------
Disposals - as previously
reported (71) (334) - (489) (894)
Restatement(1) - - - 13 13
-------------------------------------- --------- --------- -------------- ---------- ---------
Disposals - as restated (71) (334) - (476) (881)
Foreign exchange differences 4 12 - - 16
At 2 July
2022 56,780 27,412 520 3,200 87,912
--------- --------- -------------- ---------- ---------
Accumulated depreciation
-------------------------------------- --------- --------- -------------- ---------- ---------
At 2 January 2022 - as
previously reported 15,104 12,773 444 4,688 33,009
Restatement(1) - - - (4,220) (4,220)
-------------------------------------- --------- --------- -------------- ---------- ---------
At 2 January 2022 - as
restated 15,104 12,773 444 468 28,789
-------------------------------------- --------- --------- -------------- ---------- ---------
Transferred to property,
plant and equipment - as
previously reported - - - (1,403) (1,403)
Restatement(1) - - - 1,403 1,403
-------------------------------------- --------- --------- -------------- ---------- ---------
Transferred to property, - - - - -
plant and equipment - as
restated
-------------------------------------- --------- --------- -------------- ---------- ---------
Charge for the period -
as previously reported 3,878 3,296 29 2,459 9,662
Restatement(1) - - - (1,952) (1,952)
----------------------- ------------- --------- --------- -------------- ---------- ---------
Charge for the period -
as restated 3,878 3,296 29 507 7,710
-------------------------------------- --------- --------- -------------- ---------- ---------
Disposals - as previously
reported (71) (334) - (227) (632)
Restatement(1) - - - 47 47
-------------------------------------- --------- --------- -------------- ---------- ---------
Disposals - as restated (71) (334) - (180) (585)
At 2 July
2022 18,911 15,735 473 795 35,914
--------- --------- -------------- ---------- ---------
Net book
value
At 2 July
2022 37,869 11,677 47 2,405 51,998
========= ========= ============== ========== =========
(1) As discussed in Note 3 of these interim financial statements, certain notes have been changed following a prior period restatement relating to the classification of leases within the Group's FY22 Annual Report between property, plant and equipment and right of use assets.
Equipment
for internal Equipment
Property Vehicles use for hire Total
GBP000s GBP000s GBP000s GBP000s GBP000s
Cost
At 2 January 2022 56,847 26,283 520 2,328 85,978
Additions 2,290 5,903 - 2,220 10,413
Transferred to property,
plant and equipment - - - (293) (293)
Disposals (2,273) (548) - (649) (3,470)
Foreign exchange differences 31 (25) - - 6
At 31 December
2022 56,895 31,613 520 3,606 92,634
--------- --------- -------------- ---------- --------
Accumulated depreciation
At 2 January 2022 15,104 12,773 444 468 28,789
Transfers to property,
plant and equipment - - - (271) (271)
Charge for the
year 7,458 6,522 58 868 14,906
Disposals (2,022) (386) - (195) (2,603)
At 31 December
2022 20,540 18,909 502 870 40,821
--------- --------- -------------- ---------- --------
Net book value
At 31 December
2022 36,355 12,704 18 2,736 51,813
========= ========= ============== ========== ========
Disclosures relating to lease liabilities are included in note 14.
12. Trade and other receivables
26 week period ended 1 July 2023
Provision
Provision for credit Net of
Gross for impairment notes provision
GBP000s GBP000s GBP000s GBP000s
Trade receivables 74,452 (3,479) (5,969) 65,004
Accrued income 8,911 (92) - 8,819
-------- ---------------- ------------ -----------
Trade receivables and contract
assets 83,363 (3,571) (5,969) 73,823
Net investment in sublease 677 - - 677
Other debtors 4,357 - - 4,357
Prepayments 6,822 - - 6,822
-------- ---------------- ------------ -----------
Total trade and other receivables 95,219 (3,571) (5,969) 85,679
======== ================ ============ ===========
Year ended 31 December 2022
Provision
Provision for credit Net of
Gross for impairment notes provision
GBP000s GBP000s GBP000s GBP000s
Trade receivables 77,308 (3,343) (5,554) 68,411
Accrued income 10,543 (106) - 10,437
-------- ---------------- ------------ -----------
Trade receivables and contract
assets 87,851 (3,449) (5,554) 78,848
Net investment in sublease 712 - - 712
Other debtors 3,493 - - 3,493
Prepayments 3,015 - - 3,015
-------- ---------------- ------------ -----------
Total trade and other receivables 95,071 (3,449) (5,554) 86,068
======== ================ ============ ===========
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
1 July 2023 31 December 2022
Provision Provision
Provision for credit Provision for credit
for impairment notes for impairment notes
GBP000s GBP000s GBP000s GBP000s
Balance at the beginning
of the period (3,449) (5,554) (3,931) (3,225)
Increase in provision (1,454) (4,750) (1,667) (6,278)
Utilisation 1,332 4,335 2,149 3,949
Balance at the end
of the period (3,571) (5,969) (3,449) (5,554)
================ ============ ================ ============
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 1 July 2023 0-60 61-365 1-2
days days years
past past past
Current due due due Total
Trade receivables and contract
assets 66,330 7,574 8,210 1,249 83,363
Expected loss rate 1.1% 3.0% 19.0% 83.7% 4.3%
Provision for impairment
charge 740 224 1,561 1,046 3,571
At 31 December 2022 0-60 61-365
days days 1-2 years
past past past
Current due due due Total
Trade receivables and contract
assets 71,292 7,747 7,262 1,550 87,851
Expected loss rate 0.9% 2.8% 20.9% 69.4% 3.9%
Provision for impairment
charge 638 218 1,517 1,076 3,449
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 2022, 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 1.25x (2022: 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 11.4% of trade receivables and contract assets at 1 July 2023 (31 December 2022: 10.2%).
13. Trade and other payables
1 July 31 December
2023 2022
GBP000s GBP000s
Current
Trade payables 42,785 41,693
Other taxes and social security
costs 4,447 4,718
Other creditors 1,712 2,010
Accrued interest on borrowings 677 534
Accruals 27,622 38,689
Deferred income 1,283 658
78,526 88,302
14. Lease liabilities
1 July 31 December
2023 2022
GBP000s GBP000s
Current
Lease liabilities 15,025 13,182
Non-current
Lease liabilities 44,690 43,110
59,715 56,292
The interest rates on the Group's lease liabilities are as follows:
1 July 31 December
2023 2022
Equipment for 10.6 to 11.1 to
hire Fixed 19.1% 19.1%
3.5 to 3.5 to
Other Fixed 9.5% 6.0%
The weighted average interest rates on the Group's lease liabilities are as follows:
1 July 31 December
2023 2022
Lease liabilities 6.2% 6.1%
The Group's leases have the following maturity profile:
1 July 31 December
2023 2022
GBP000s GBP000s
Less than one year 19,124 16,227
Two to five years 38,763 36,798
More than five years 13,542 15,133
71,429 68,158
Less interest cash
flows: (11,714) (11,866)
Total principal cash
flows 59,715 56,292
The maturity profile, excluding interest cash flows of the Group's leases is as follows:
1 July 31 December
2023 2022
GBP000s GBP000s
Less than one year 15,025 13,182
Two to five years 33,544 30,690
More than five years 11,146 12,420
59,715 56,292
The lease liability movements Equipment
are detailed below: for hire
and internal
Property Vehicles use Total
GBP000s GBP000s GBP000s GBP000s
At 1 January 2023 39,268 13,472 3,552 56,292
Additions 2,153 7,462 994 10,609
Discount unwind 1,196 305 290 1,791
Payments (including interest) (4,502) (2,695) (1,637) (8,834)
Disposals (34) (106) - (140)
Foreign exchange differences (3) - - (3)
At 1 July 2023 38,078 18,438 3,199 59,715
Equipment
for hire
and internal
Property Vehicles use Total
GBP000s GBP000s GBP000s GBP000s
At 2 January 2022 44,879 14,247 2,339 61,465
Additions 2,290 5,903 2,090 10,283
Discount unwind 2,460 444 3 2,907
Payments (including interest) (10,144) (7,023) (880) (18,047)
Disposals (217) (107) - (324)
Foreign exchange differences - 8 - 8
At 31 December 2022 39,268 13,472 3,552 56,292
15. Borrowings
1 July 31 December
2023 2022
GBP000s GBP000s
Current
Hire purchase arrangements 5,834 5,168
Non-current
Hire purchase arrangements 11,947 9,978
Senior finance facility 68,867 68,613
80,814 78,591
The senior finance facility is stated net of transaction fees of GBP1.1m (31 December 2022: GBP1.4m) which are being amortised over the loan period.
The nominal value of the Group's loans at each reporting date is as follows:
1 July 31 December
2023 2022
GBP000s GBP000s
Hire purchase arrangements 17,781 15,146
Senior finance facility 70,000 70,000
The interest rates on the Group's borrowings are as follows:
1 July 31 December
2023 2022
Hire purchase arrangements % above NatWest 2.2% to 2.3 to
Floating base rate 2.5% 2.9%
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:
1 July 31 December
2023 2022
% above NatWest
Hire purchase arrangements Floating base rate 6.9% 6.0%
Revolving credit
facility Floating % above SONIA 7.9% 6.4%
Senior finance
facility Floating % above SONIA 7.9% 6.4%
The Group had undrawn committed borrowing facilities of GBP36.3m at 1 July 2023 (2022: GBP36.3m), including GBP11.3m (2022: GBP11.3m) of finance lines to fund hire fleet capital expenditure not yet utilised. Including net cash balances, the Group had access to GBP72.9m of combined liquidity from available cash and undrawn committed borrowing facilities at 1 July 2023 (2022: GBP84.0m).
The Group's borrowings have the following maturity profile:
1 July 2023 31 December 2022
Hire purchase Senior finance Hire purchase Senior finance
arrangements facility arrangements facility
GBP000s GBP000s GBP000s GBP000s
Less than one year 6,656 5,550 5,718 2,235
Two to five years 12,976 77,740 10,670 74,245
19,632 83,290 16,388 76,480
Less interest cash
flows: (1,851) (13,290) (1,242) (6,480)
Total principal cash
flows 17,781 70,000 15,146 70,000
16. Provisions
Onerous
property Onerous
costs Dilapidations contracts Total
GBP000s GBP000s GBP000s GBP000s
At 1 January 2023 117 11,380 9,806 21,303
Additions 128 12 - 140
Utilised during the
period (128) (85) (1,645) (1,858)
Unwind of provision 2 187 169 358
Impact of change - - - -
in discount rate
Releases (27) (1) - (28)
Foreign exchange - (25) - (25)
At 1 July 2023 92 11,468 8,330 19,890
Of which:
Current 41 1,307 3,032 4,380
Non-current 51 10,161 5,298 15,510
92 11,468 8,330 19,890
Onerous
property Onerous
costs Dilapidations contracts Total
GBP000s GBP000s GBP000s GBP000s
At 2 January 2022 186 10,174 13,463 23,823
Additions - 4,430 - 4,430
Utilised during the
period (7) (58) (3,289) (3,354)
Unwind of provision 1 113 - 114
Impact of change in
discount rate (6) (2,822) (368) (3,196)
Releases (57) (467) - (524)
Foreign exchange - 10 - 10
At 31 December 2022 117 11,380 9,806 21,303
Of which:
Current 47 1,232 2,979 4,258
Non-current 70 10,148 6,827 17,045
117 11,380 9,806 21,303
Onerous property costs
The provision for onerous property costs represents the current value of contractual liabilities for future rates payments and other unavoidable costs (excluding lease costs) on leasehold properties the Group no longer uses. The releases are the result of early surrenders being agreed with landlords - the associated liabilities are generally limited to the date of surrender but were provided for to the date of the first exercisable break clause to align with the recognition of associated lease liabilities.
Onerous contract
The onerous contract represents amounts payable in respect of the agreement reached in 2017 between the Group and Unipart to terminate the contract to operate the NDEC.
17. 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 38 to 41 of the Group's 2022 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').
With global inflationary pressures and associated interest rate increases the main risk expected to affect the Group in the remaining 26 weeks for the 2023 financial year is macroeconomic conditions.
The conflict in Ukraine, pandemic recovery and Brexit have contributed to labour shortages, inflation and interest rate rises. Therefore, this risk will continue to be closely monitored for its effect on demand and colleague welfare so that we can take appropriate actions.
18. 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 26 weeks
ended ended
1 July 2023 2 July 2022
GBP000s GBP000s
Operating profit 10,761 10,209
Add: Depreciation of property, plant and
equipment and right of use assets 20,251 19,359
Add: Amortisation of intangible assets 956 2,861
EBITDA 31,968 32,429
Add: Exceptional items (non-finance) 97 488
Adjusted EBITDA 32,065 32,917
Adjusted EBITA is calculated as follows:
26 weeks 26 weeks
ended ended
1 July 2023 2 July 2022
GBP000s GBP000s
Operating profit 10,761 10,209
Add: Amortisation of intangible assets 956 2,861
EBITA 11,717 13,070
Add: Exceptional items (non-finance) 97 488
Adjusted EBITA 11,814 13,558
Adjusted profit before tax is calculated as follows:
26 weeks 26 weeks
ended ended
1 July 2023 2 July 2022
GBP000s GBP000s
Profit before tax 5,539 6,535
Add: Amortisation of customer relationships
and brands 62 1,287
Profit before tax and amortisation of customer
relationships and brands 5,601 7,822
Add: Exceptional items (finance and non-finance) 284 554
Adjusted profit before tax 5,885 8,376
19. Post Balance Sheet Events
Based on the ongoing successful performance of the Group's builders merchant locations, the decision was made to accelerate the migration to this lower variable cost model over the next twelve months. To this end, in September the closure of sixteen branches located in England and Wales was announced. This specific change will reduce ongoing costs by cGBP1m per annum with expected exceptional costs of between GBP2.1m and GBP2.4m, the majority non-cash and asset impairment related. All impacted branch colleagues have been informed of the changes and it is anticipated that they will all migrate to new roles within this model. Work is now underway with the Group's property restructuring specialist to review all possible options with the remaining property leases.
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END
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