Hss Hire Share Discussion Threads

[strategicinvestor2] 29/11/2015 14:44

Intangibles like any asset needs to be revalued but any write down is merely accounting. Given the cash generation this business is likely to be generating in 2016 I would expect to see this over £1 also in the medium term. Reducing fixed costs, growing top line, increasing market share and a lot of asset investment already incurred cash flows can only accelerate massively and borrowings reduce from H2 2016. I like the approach the management are beginning to implement. Suspect borrowing rates will be relatively easy to renegotiate lower for HSS.

[my retirement fund] 29/11/2015 14:30

Kingston78, the Auditor has a duty to access whether the Intangible assets are impaired and a duty to revalue accordingly. How an earth are they supporting the current valuation going forward given the gross overheads ? These intangibles are complete bull, the equity could be worthless, on what basis do you imagine the creditors would have been supporting the business upon, ? I'll give you a clue its not cash flow.

[strategicinvestor2] 29/11/2015 14:14

Agreed Kingston. Strong cash flow generation makes HSS very appealing going forward. Writing down intangibles , I don't see why this would be required and is merely an accounting acceleration of amortisation so no cash or underlying profit impact. Investment in new central distribution in h1 is very well funded and borrowings should decline fast thereafter due to ever growing top line, full year contributions of specialist acquisitions that seem to be out performing combined with reducing relative cost base and growing asset utilisation to make this a stand out at these level IMHO.

[kingston78] 29/11/2015 14:06

HSS has quoted EBITDA and EBITA figures frequently, so without delving into their accounts I may assume that these are the figures to be used to comply with loan covenants.

Intangibles are sunk costs and they will not affect cash flow. It is more of an accounting issue that the company needs to include amortisation as an expense. So long as the company is cash flow positive it will survive difficult situations until trading improves.

[my retirement fund] 29/11/2015 12:14

For the life of my I cannot see how this is possible, they are going to need to write down the intangibles which is obviously not conducive to this, moreover it will threaten the existing covenants and without the backing of existing creditors HSS could quickly lose the support of its bank.

I cannot see how the two later problems can be addressed without significant further fundraising, let alone begin to dream of renegotiated rates!

[strategicinvestor2] 29/11/2015 10:18

HSS borrowing I expect to be renegotiated at lower rates, I think they referred to this in one of their updates. Speedy are struggling with sales while HSS continue to increase their market share while reducing cost and improving efficiency. HSS will need to reduce borrowings and with very strong EBITDA and reducing capital requirements I expect them to do this aggressively in h2 2016 onwards. 2016 will have full contribution from acquisitions which appear to be performing very well while diversifying the business mix for HSS. I see HSS as being a far better investment than Speedy IMHO DYOR

[r ball] 29/11/2015 08:19

It's worth looking at the accounts HSSs borrowing costs are 7.15% compared to a range of 2.98-3.45% over libor for speedy. The key for HSS should be the ability to repay expensive debt but this is unlikely as Speedy are chasing margin and pushing the price down in response to their Middle East fraud/reporting issues.

[strategicinvestor2] 28/11/2015 21:13

Would be very surprised if you have to wait a year for £1.00 to be reached but suppose depends on general market sentiment etc. There must be a very good chance of further consolidation in this sector which gives huge potential upside for HSS.

Not sure there is much stock available which could mean positive sentiment causes a disproportionate rise in the share price..

[kingston78] 28/11/2015 18:10

I agree with Strategicinvestor2. It has great recovery potential in its share price. It will fill the falling gap at 100 p, which is my minimum target. I am willing to hold for a year to see that happen.

[strategicinvestor2] 28/11/2015 17:28

HSS posted a great trading update dispelling the myths many were generating. They are increasing the top line while reducing costs going forward and improving EBITDA and asset utilisation. Having invested there capital requirements will reduce and the investment in a central distribution centre should generate even better returns. Strong cash flow generation looks likely in 2016 with real profit kickers - full year contribution from acquisitions and profitable new stores for one.

We were at 60 a 70p but fell back on no volumes on no volume. I see this above the 70p range on the back of the positive news and 80-90p would not be a daft trading range as we move into 2016 and await profit kickers delivering.

I am in for more of these on Monday if I can sub 60p.

[my retirement fund] 25/11/2015 09:37

What makes you think its cash flow positive? How do you think intangible writedowns could sensibly be undertaken without compromising covenant policies with creditors?

[effortless cool] 25/11/2015 09:08

So did I!

Business is okay and they seem to have got cash flow under control. They are still walking a very fine line, but I think that the balance of probabilities has now switched to the positive.

In a singularly ill-timed transaction, given this morning's price action, I closed my short at 49.12 and opened a (smaller) long position at the same price.

I'll update the header later.

[dealy] 25/11/2015 07:40

I also thought it looked ok. The last 30p drop has been on very low volume and no new news

[joseph moran] 25/11/2015 07:20

The update seems okay, let's hope the share price goes up for a change.

[effortless cool] 19/11/2015 09:24

Marty,

I like to put my analysis in the header and keep it up to date, hence the new thread.

I'm afraid I don't know what a renko trend and Ichimoku indicators are! I go long or short on fundamentals only, and ride the volatility so long as my original investment hypothesis remains intact.

[pugugly] 19/11/2015 09:10

MRF: Too many outlets for the size of the market - Please check your data.

Agreed they may have paid too much BUT this does not change the macro environment.

imo there is very little shareholders can do when management appear to have gone on an overpriced buying spree. Seen this too often - Poundland today could be a good example.

[my retirement fund] 19/11/2015 08:57

Theres no problem with the hire business, the problem is they got where they did by expensive acquisitions. Their business may well generate enough income to make a decent living a provide a necessary service, but it sure as hell don't generate enough income to pay for a mass of expensive acquisitions.

That's your job as a shareholder to do, so put up or shut up!

[pugugly] 19/11/2015 08:53

Been watching this for some time along with Speedy - The problem (imo) is that basically there are too many hire facilities for the size of the market.

Turnover per outlet is usually not sufficient to generate acceptable gross revenue.

In order for the SP's of all participants to improve there needs to be significant consolidation.

That is not to say that greater attention paid to customer needs will not help BUT there are too many similarites to the grocery trade - too many outlets.

Declaration> I am watching all main paricipants but not yet invested in any - (imo) significant further downside .

[dealy] 19/11/2015 08:10

falling on very low volume.

[rickyvader] 18/11/2015 21:14

I agree, something has got people spooked here, 2 days of a drop.I have searched the web but can't find any info but half a comment of director quitting , not sure it was a credible source though.I have followed this and speedy for 6 months and was intending buying this week but the drop has got me a little nervous!

[effortless cool] 18/11/2015 19:35

Thanks. I'll look forward to it.

[dros1] 18/11/2015 18:04

trading statment next wendsday

[effortless cool] 18/11/2015 17:36

No new news in the public domain, but two successive days of falls after a long period of stability.

I wonder if they are out marketing a fund raise?