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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.29 | 3.47% | 8.64 | 8.30 | 8.98 | 8.32 | 8.30 | 8.32 | 461,454 | 16:35:16 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Equip Rental & Leasing, Nec | 332.78M | 20.48M | 0.0290 | 2.86 | 58.51M |
From May 2019 to May 2024
TIDMHSS
RNS Number : 2403Z
HSS Hire Group PLC
30 August 2018
HSS Hire Group Plc
Interim report: Half year results for the 26 week period ended 30 June 2018
Significant progress made against strategic priorities
HSS Hire Group plc ("HSS" or the "Group") today announces results for the 26 week period ended 30 June 2018.
Hot Features
Premium
H1 2018 H1 2017 Change
Financial Highlights (26 weeks) (26 weeks)
Revenue GBP169.8m GBP160.5m 5.8%
----------- ----------- --------
Adjusted EBITDA(1) GBP29.9m GBP17.1m 74.7%
----------- ----------- --------
Adjusted EBITDA margin 17.6% 10.6% 7.0pp
----------- ----------- --------
Adjusted EBITA(2) GBP6.8m (GBP7.3m) GBP14.1m
----------- ----------- --------
Adjusted EBITA margin 4.0% (4.5%) 8.5pp
----------- ----------- --------
Adjusted loss before (GBP0.7m) (GBP14.2m) GBP13.5m
tax
----------- ----------- --------
Adjusted earnings per
share (0.32p) (6.74p) 6.42p
----------- ----------- --------
Interim dividend - - -
----------- ----------- --------
Reported loss before (GBP7.1m) (GBP30.1m) GBP23.0m
tax
----------- ----------- --------
Reported loss per share (4.45p) (17.81p) 13.36p
----------- ----------- --------
Highlights for H1 18
-- Adjusted EBITDA growth of 74.7%
o Rental revenue growth and cost initiatives improved margins by 7.0pp to 17.6%
o LTM Adjusted EBITDA of GBP61.7m
-- Revenue growth of 5.8% driven by improved availability and sales initiatives
o Underlying(3) revenue growth of 8.7%
o Underlying(3) core rental revenue growth of 3.7%
o LTM utilisation(4) has increased in Tool Hire to 52.3% (H1 17: 49.5%) and remained consistently high in Specialist businesses at 73.6% (H1 17: 73.6%).
o Continued strength in Services with revenue +13.9% and contribution +30.8%
-- Significant reduction in net leverage to 3.7x (FY17: 4.3x)
o Net debt has reduced by GBP7.5m during the first half of the year
o Cash and total facility headroom greater than GBP35m as at 30 June 2018
-- Secured successful refinancing
o Appropriate facilities in place to continue delivering on our strategic priorities and the Group's full potential
-- Network reconfiguration implementation complete
o Full implementation of new supply chain model complete with expected savings of c.GBP11m
Current Trading and Outlook
-- Trading momentum continued for the 8 weeks to 25 August 2018
o Underlying(3) revenue grew more than 5% against the comparable prior year period
o Underlying(3) core rental revenue grew more than 4% against the comparable prior year period
o Continued growth in EBITDA
-- Secured shareholder approval for proposed sale of UK Platforms Limited
o Total Enterprise Value of GBP60.5 million
o Net cash proceeds from the Disposal will be approximately GBP47.5 million
o At least 80% will be used to repay debt, with the balance to be invested in the tool hire business
o Subject to CMA approval
-- Reducing Group leverage continues to be a key focus
o Cash and RCF headroom increased by GBP18m post successful refinancing
o Looking ahead, we expect further deleveraging to occur during the second half of 2018 following the continued implementation of the identified strategic actions and the use of proceeds from the proposed sale of UK Platforms Limited
Steve Ashmore, Chief Executive Officer of HSS Hire, said:
"We are eight months into our new strategy and the Group has made significant progress. In this time we transitioned seamlessly to a new distribution model, refinanced the Group giving us long-term stability and announced the sale of our UK Platforms business, allowing us to focus on the tool hire business and further reduce our debt.
Alongside this strong operational progress, trading has been much improved, helped by our increased focus on our tool hire business and by customer demand for our extensive range of relevant seasonal products.
With significant operational change behind us and continued momentum in current trading, we look forward with confidence as our attention turns to driving improved performance from the tool hire business and strengthening the Group's commercial proposition."
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 is defined as operating profit before amortisation and exceptional items
3) Underlying revenue is total revenue adjusted for the impact of business divestments in 2017
4) Utilisation calculated over the last twelve months to the end of H1 2018
-Ends-
Disclaimer:
This announcement contains forward-looking statements relating to the business, financial performance and results of HSS Hire Group plc and the industry in which HSS Hire Group plc operates. These statements may be identified by words such as "expect", "believe", "estimate", "plan", "target", or "forecast" and similar expressions, or by their context. These statements are made on the basis of current knowledge and assumptions and involve risks and uncertainties. Various factors could cause actual future results, performance or events to differ materially from those described in these statements and neither HSS Hire Group plc nor any other person accepts any responsibility for the accuracy of the opinions expressed in this presentation or the underlying assumptions. No obligation is assumed to update any forward-looking statements.
Notes to editors
HSS Hire Group plc provides tool and equipment hire and related services in the UK and Ireland through a nationwide network of over 250 locations. Focusing primarily on the maintain and operate segments of the market, over 90% of its revenues come from business customers. HSS is listed on the Main 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 30 August
2018)
Steve Ashmore, Chief Executive Thereafter, please email: Investors@hss.com
Officer
Paul Quested, Chief Financial
Officer
Jonathan Edwards, Investor Relations,
Treasury and Special Projects
Manager
Teneo Blue Rubicon Tel: 020 3757 9248
Robert Morgan
Shona Buchanan
Group financial performance
Revenue
Revenue in H1 18 was GBP169.8m, 5.8% above the previous year (H1 17: GBP160.5m). This year on year increase reflects improved trading in H1 18 across both our Rental and Services segments.
Rental and related revenues were GBP122.7m in H1 18 (H1 17: GBP119.3m), GBP3.4m or 2.9% higher than in H1 17. This was driven by improved performance in our core tool hire business delivered through focused sales initiatives, improved availability following the smooth implementation of strategic network changes moving test and repair of equipment back into our branches and the implementation of strategic profitability initiatives. Contribution was GBP80.5m (H1 17: GBP73.9m), an increase of 8.8% on H1 17 representing a 65.6% margin (H1 17: 62.0%) largely driven by improved revenues and lower operating costs following the network changes made earlier in the year.
Services revenues were GBP47.0m in H1 18 (H1 17: GBP41.3m), reflecting a strong performance in our OneCall and Training businesses with customers continuing to value the "one stop shop" service offer. Contribution increased significantly to GBP6.7m (H1 17: 5.2m), with margins improving to 14.3% (H1 17: 12.6%), reflecting ongoing focus on pricing discipline and effective supply chain management.
Costs
Cost of sales grew by GBP2.8m to GBP78.8m during the period (H1 17: GBP76.0m) primarily as a result of the growth in our rehire revenues and associated costs. Distribution costs decreased by GBP2.7m to GBP20.7m (H1 17: GBP23.4m) benefiting from increased efficiency following the strategic network changes made earlier in 2018. Administrative expenses decreased by GBP14.8m to GBP70.1m (H1 17: GBP84.9m) due to the benefit of cost actions taken in 2017 and 2018 combined with lower exceptional costs.
Gross exceptional costs in H1 18 were considerably lower at GBP3.3m (H1 17: GBP12.6m), including GBP1.6m of costs which relate to onerous leases on branch closures, GBP0.5m impairment of fixed assets associated with these closures, GBP0.7m relating to the implementation of the cost reduction programme across the Group and GBP0.7m of third party costs to complete the strategic review. In H1 17, exceptional costs were GBP12.6m, of which GBP6.2m related to the impairment of property, plant and equipment and GBP5.0m related to onerous leases. Exceptional income during H1 18 was GBP0.2m (H1 17: GBP0.5m) and related to fully or sub-let non-trading stores. This decrease was as a result of sub-let agreements coming to the end of their tenure.
Net finance expenses were GBP0.5m higher at GBP7.4m (H1 17: GBP6.9m) reflecting a higher level of drawdown on the revolving credit facility.
Profitability
Adjusted EBITDA of GBP29.9m in H1 18 was 74.7% higher than the prior year (H1 17: GBP17.1m), with adjusted EBITDA margins improving 7.0pp to 17.6% (H1 17: 10.6%). The improving profitability was driven by increased revenues in the period and lower costs due to actions taken in 2017 and 2018, including the successful implementation of the network changes which is expected to realise around GBP11m of annualised ongoing cost benefit as well as improved availability.
Adjusted EBITA increased from a loss of GBP7.3m in H1 17 to a profit of GBP6.8m in H1 18, with the margin improving to 4.0% (H1 17 -4.5%), for the reasons described above, and is in line with management expectations.
Loss before tax reduced by 76.5% to GBP7.1m, from GBP30.1m in H1 17, reflecting stronger underlying performance year on year, together with lower exceptional costs.
The basic and diluted loss per share improved to a loss of 4.45p in H1 18 from 17.81p in H1 17, reflecting the lower loss before tax during H1 18.
The adjusted basic and diluted earnings per share saw a small loss of 0.32p per share in H1 18, improving from a loss of 6.74p in H1 17. This reflects an improvement in the adjusted loss before tax position in H1 18 of GBP0.7m, compared to a loss of GBP14.2m in H1 17.
Net debt
Net debt at 30 June 2018 was GBP225.2m, GBP7.5m lower than December 17 (FY 17: GBP232.7m) through improved Group profitability and continued focus on working capital efficiency. Headroom in the Group's total facilities including net cash was GBP35.4m.
On 10 July 2018 the Group successfully refinanced with GBP245m of new debt facilities replacing the existing senior secured notes and revolving credit facility.
The new debt facilities consist of a GBP220m term loan facility, with GBP200m maturing in June 2023 and GBP20m in December 2020, along with a new revolving credit facility of GBP25m maturing in December 2022.
In connection with the provision of this new term facility, on 20 June 2018 the Company granted 8,510,300 warrants to subscribe for new ordinary shares to the lenders under the facility, exercisable at GBP0.01 per share. The fair value of the warrants at the date of grant was GBP2.7m.
Total other lender and advisory fees incurred in respect of the new facilities amount to around GBP11m and have been included in accruals at 30 June 2018. These costs and the fair value of the warrants have been deferred in the balance sheet and will be reclassified to debt issue costs in H2 2018. They will then be amortised to the income statement over the life of the facility. Debt issue costs of GBP1.5m were written off in H2 2018 in relation to the facilities that these arrangements replaced.
Proposed sale of UK Platforms Limited
On 19 July 2018, the Group announced that it had entered into a conditional agreement with Nationwide Platforms Limited for the sale of UK Platforms Limited for a total Enterprise Value of GBP60.5m and expected net cash proceeds of GBP47.5m, the majority of which will be used to pay down debt.
HSS shareholder approval for the transaction was granted on 7 August 2018.
Completion of the disposal, contingent upon confirmation that the proposed transaction is not referred to the Competition and Mergers Authority and retention of key managers, is expected to occur in Q4 2018.
Dividend
The Board remains firmly focused on reducing net debt in line with the clear priorities set out in our Strategic Review. As such, it believes that the interests of the shareholders of the Group are best served by not paying a dividend until the net debt leverage ratio falls below 2.5x at the earliest. This is in line with the new term loan facility agreement.
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 2018 financial year have not changed significantly from those described in the Group's 2017 Annual Report and are summarised in note 14 of this interim report.
Responsibility Statement
We confirm to the best of our knowledge that:
(a) the condensed interim set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union;
(b) the Interim Report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
(c) the Interim Report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).
By order of the Board
Steve Ashmore
Director
30 August 2018
HSS Hire Group plc
Unaudited condensed consolidated income statement
52 weeks
26 weeks ended 30 26 weeks
ended 30 December ended 1
June 2018 2017 July 2017
Note GBP000s GBP000s GBP000s
Revenue 3 169,772 335,780 160,538
Cost of sales (78,794) (154,289) (76,000)
Gross profit 90,978 181,491 84,538
------------------------------- ----- ----------- ---------- -----------
Distribution costs (20,669) (46,140) (23,423)
Administrative expenses (70,142) (207,652) (84,866)
Other operating income 4 182 882 525
Operating profit / (loss) 349 (71,419) (23,226)
------------------------------- ----- ----------- ---------- -----------
3,
Adjusted EBITDA(1) 17 29,864 48,944 17,095
Less: Adjusted depreciation
(1) (23,111) (47,159) (24,394)
------------------------------- ----- ----------- ---------- -----------
Adjusted EBITA(1) 17 6,753 1,785 (7,299)
Less: Exceptional items 4 (3,335) (66,567) (12,643)
Less: Amortisation(1) 7 (3,069) (6,637) (3,284)
------------------------------- ----- ----------- ---------- -----------
Operating profit / (loss) 349 (71,419) (23,226)
------------------------------- ----- ----------- ---------- -----------
Net finance expense 5 (7,420) (13,743) (6,915)
Loss before tax (7,071) (85,162) (30,141)
------------------------------- ----- ----------- ---------- -----------
Adjusted loss before tax (667) (11,958) (14,214)
Less: Exceptional items 4 (3,335) (66,567) (12,643)
Less: Amortisation 7 (3,069) (6,637) (3,284)
------------------------------- ----- ----------- ---------- -----------
Loss before tax (7,071) (85,162) (30,141)
------------------------------- ----- ----------- ---------- -----------
Taxation (502) 5,240 (175)
Loss for the financial period (7,573) (79,922) (30,316)
------------------------------- ----- ----------- ---------- -----------
Loss per share
Basic and diluted loss per
share 6 (4.45) (46.96) (17.81)
Adjusted basic and diluted
loss per share(2) 6 (0.32) (5.68) (6.74)
------------------------------- ----- ----------- ---------- -----------
(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. Adjusted EBITA is defined as operating profit before amortisation and exceptional items.
(2) Adjusted earnings per share is defined as profit before tax with amortisation and exceptional costs added back less tax at the prevailing rate of corporation tax divided by the weighted average number of ordinary shares.
The notes form part of these condensed consolidated financial statements.
HSS Hire Group plc
Unaudited condensed consolidated statement of comprehensive income
26 weeks 52 weeks 26 weeks
ended ended ended
30 June 30 December 1 July
2018 2017 2017
GBP000s GBP000s GBP000s
Loss for the financial period (7,573) (79,922) (30,316)
Items that may be reclassified
to profit or loss:
Foreign currency translation
differences arising on consolidation
of foreign operations (51) 104 144
Other comprehensive loss for
the period, net of tax (51) 104 144
----------------------------------------- --------- ------------- ---------
Total comprehensive loss for
the period (7,624) (79,818) (30,172)
========================================= ========= ============= =========
Attributable to owners of the
Company (7,624) (79,818) (30,172)
========================================= ========= ============= =========
The notes form part of these condensed consolidated financial statements.
HSS Hire Group plc
Unaudited condensed consolidated statement of financial position
30 June 30 December 1 July
2018 2017 2017
Note GBP000s GBP000s GBP000s
ASSETS
Non-current assets
Intangible assets 7 170,201 172,509 177,277
Property, plant and equipment 8 136,464 150,915 161,945
Deferred tax assets 358 358 532
307,023 323,782 339,754
Asset held for resale - 1,500 -
Current assets
Inventories 6,153 5,519 7,817
Trade and other receivables 9 110,192 96,503 97,874
Cash 10,056 2,151 7,070
---------- ------------ ----------
126,401 104,173 112,761
Total assets 433,424 429,455 452,515
LIABILITIES
Current liabilities
Trade and other payables 10 (93,263) (82,452) (83,209)
Borrowings 11 (74,000) (69,000) (68,500)
Provisions 12 (10,303) (16,684) (6,236)
Current tax liabilities (47) (90) (500)
(177,613) (168,226) (158,445)
Non-current liabilities
Trade and other payables 10 (12,110) (14,105) (17,185)
Borrowings 11 (134,470) (134,242) (133,733)
Provisions 12 (37,522) (36,510) (12,032)
Deferred tax liabilities (3,036) (2,800) (7,911)
(187,138) (187,657) (170,861)
Total liabilities (364,751) (355,883) (329,306)
Net assets 68,673 73,572 123,209
------------------------------- ----- ---------- ------------ ----------
EQUITY
Share capital 1,702 1,702 1,702
Merger reserve 97,780 97,780 97,780
Warrant reserves 2,694 - -
Foreign exchange translation
reserve 374 425 321
Retained earnings (33,877) (26,335) 23,406
Total equity attributable to
owners of the group 68,673 73,572 123,209
------------------------------- ----- ---------- ------------ ----------
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 Merger Warrant translation Retained Total
capital reserve reserve reserve earnings equity
Note GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
At 30 December 2017 1,702 97,780 - 425 (26,335) 73,572
Total comprehensive
loss for the period
Loss for the period - - - - (7,573) (7,573)
Foreign currency translation
differences arising
on consolidation of
foreign operations - - - (51) - (51)
Total comprehensive
loss for the period - - - (51) (7,573) (7,624)
---------- ---------- ---------- ------------- ----------- ---------
Transactions with owners
recorded directly in
equity
Transfer to warrant
reserve 15 - - 2,694 - - 2,694
Share based payment - - - - 31 31
At 30 June 2018 1,702 97,780 2,694 374 (33,877) 68,673
========== ========== ========== ============= =========== =========
Foreign
exchange
Share Merger Warrant translation Retained Total
capital reserve reserve reserve earnings equity
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
At 1 January 2017 1,702 97,780 - 321 53,583 153,386
Loss for the period - - - - (30,316) (30,316)
Foreign currency translation
differences arising
on consolidation of
foreign operations - - - - 144 144
Total comprehensive
loss for the period - - - - (30,172) (30,172)
---------- ---------- ---------- ------------- ----------- ---------
Transactions with owners
recorded directly in
equity
Share based payment - - - - (5) (5)
At 1 July 2017 1,702 97,780 - 321 23,406 123,209
========== ========== ========== ============= =========== =========
Foreign
exchange
Share Merger Warrant translation Retained Total
capital reserve reserve reserve earnings equity
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
At 1 January 2017 1,702 97,780 - 321 53,583 153,386
Loss for the period - - - - (79,922) (79,922)
Foreign currency translation
differences arising
on consolidation of
foreign operations - - - 104 - 104
Total comprehensive
loss for the period - - - 104 (79,922) (79,818)
========== ========== ========== ============= =========== =========
Transactions with owners
recorded directly in
equity
Share based payment
charge - - - - 4 4
At 30 December 2017 1,702 97,780 - 425 (26,335) 73,572
========== ========== ========== ============= =========== =========
The notes form part of these condensed consolidated financial statements.
HSS Hire Group plc
Unaudited condensed consolidated statement of cash flows
26 weeks 52 weeks 26 weeks
ended ended ended
30 June 30 December 1 July
2018 2017 2017
Cash flows from operating activities GBP000s GBP000s GBP000s
Loss before tax (7,071) (85,162) (30,141)
Adjustments for:
- Amortisation 3,069 6,637 3,284
- Depreciation 17,462 37,006 18,894
- Net book value of hire stock losses
and write offs 5,474 10,066 5,500
- Impairment of property, plant and
equipment 450 11,230 6,225
- Impairment of intangible assets - 1,239 -
- Loss on disposal of property, plant
and equipment 175 87 -
- Loss on disposal of intangible assets - 3 -
- Loss on disposal of subsidiary - 4,919 -
- Share based payment charge 31 4 (5)
- Net finance expense 7,420 13,743 6,915
Changes in working capital (excluding
the effects of disposals and exchange
differences on consolidation):
- Inventories (634) 804 81
- Trade and other receivables (11,001) 6,560 5,853
- Trade and other payables 14,187 (5,764) (3,350)
- Provisions (5,586) 31,504 984
Net cash flows from operating activities
before changes in hire equipment 23,976 32,876 14,240
Purchase of hire equipment (5,837) (22,787) (11,852)
Cash generated from operating activities 18,139 10,089 2,388
--------- ------------- ---------
Net interest paid (6,902) (12,494) (6,884)
Tax paid (240) (59) (219)
Net cash generated from / (used in)
operating activities 10,997 (2,464) (4,715)
--------- ------------- ---------
Cash flows from investing activities
Proceeds on disposal of businesses, - 1,138 -
net of cash disposed of
Proceeds on disposal of assets held 1,500 - -
for sale
Purchases of non-hire property, plant,
equipment and software (2,862) (7,260) (4,114)
Net cash used in investing activities (1,362) (6,122) (4,114)
--------- ------------- ---------
Cash flows from financing activities
Bank arrangement fees (400) - -
Share issue costs - - (226)
Proceeds from borrowings (third parties) 8,000 18,000 3,500
Repayments of borrowings (3,000) (15,000) (1,000)
Cash received from refinancing hire
stock - 5,030 5,030
Capital element of finance lease payments (6,330) (12,504) (6,616)
Net cash received from financing activities (1,730) (4,474) 688
--------- ------------- ---------
Net increase / (decrease) in cash 7,905 (13,060) (8,141)
Cash at the start of the period 2,151 15,211 15,211
Cash at the end of the period 10,056 2,151 7,070
========= ============= =========
The notes form part of these condensed consolidated financial statements.
HSS Hire Group plc
Notes forming part of the condensed consolidated financial statements
1. General information
The Company is a public limited company which is listed on the London Stock Exchange and is incorporated and domiciled in the United Kingdom. The address of the registered office is Oakland House, 76 Talbot Road, Old Trafford, Manchester, England, M16 0PQ.
The condensed consolidated financial statements as at, and for the 26 weeks ended 30 June 2018 comprise the Company and its subsidiaries (the 'Group').
The Group is primarily involved in providing tool and equipment hire and related services in the United Kingdom and the Republic of Ireland.
The condensed consolidated financial statements were approved for issue by the Board on 29 August 2018.
The condensed consolidated financial statements do not comprise Statutory Accounts within the meaning of Section 434 of the Companies Act 2006. The comparative financial information for the 26 weeks ended 30 June 2018, and the 52 weeks ended 30 December 2017, do not constitute statutory accounts for those periods, respectively. Statutory Accounts for the year ended 30 December 2017 were approved by the Board on 5 April 2018 and delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified, did not include a reference to any matter by way of emphasis and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.
2. Basis of preparation
The condensed consolidated financial statements for the 26 weeks ended 30 June 2018 have been prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority and relevant International Financial Reporting Standards ('IFRS') as adopted by the European Union (including IAS 34 Interim Financial Reporting). The condensed consolidated financial statements should be read in conjunction with the Group's Annual Report and Accounts for the year ended 30 December 2017, which were prepared in accordance with IFRS as adopted by the European Union.
IFRS 9 Financial instruments and IFRS 15 Revenue from contracts with customers have been adopted in these condensed consolidated financial statements but neither these IFRS nor any IFRIC Interpretations that are effective for the first time for this interim period have had a material impact on the Group. The accounting policies and judgements and estimates, applied in the condensed consolidated financial statements are therefore consistent with those set out in the Group's Annual Report and Accounts for the year ended 30 December 2017.
For the year ending 28 December 2019, the Group will adopt IFRS 16 Leases. Having performed an initial review of this standard, the Directors expect it will have a material impact on reported assets and liabilities, EBITDA, operating profit and interest expense as more assets (called right of use assets) are capitalised on to the balance sheet in relation to the lease contracts the Group has entered into.
Going concern
The Directors have reviewed the Group's current performance, forecasts and projections, taking account of reasonably possible changes in trading performance and considering senior debt and interest repayments, combined with expenditure commitments. In particular the directors have considered the adequacy of the Group's debt facilities with specific regard to the following factors:
- the financial covenants relating to the new term loan facility of GBP220 million and revolving credit facility of GBP25 million secured by the Group
- the maturity of the term loan facility (GBP20m in December 2020, GBP200m in June 2023) and revolving credit facility in December 2022
After reviewing the above, taking into account current and future developments and principal risks and uncertainties, and making appropriate enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly they continue to adopt the going concern basis in preparing these condensed consolidated interim financial statements.
3. Segmental reporting
The Group's operations are segmented into the following reportable segments:
- Rental and related revenue. - Services.
Rental and related revenue comprises the rental income earned from owned tools and equipment, including powered access, power generation, cleaning 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 rehire business (HSS OneCall) and HSS Training. HSS One Call provides customers with a single point of contact for the hire of products that are not typically held within HSS' fleet and are obtained from approved third party partners; HSS Training provides customers with specialist safety training across a wide range of products and sectors.
Contribution is defined as segment operating profit before branch and selling costs, central costs, depreciation, amortisation and exceptional items.
All segment revenue, operating profit, assets and liabilities are attributable to the principal activity of the Group being the provision of tool and equipment hire and related services in, and to customers in, the United Kingdom and the Republic of Ireland. Revenue from one customer exceeded 10% of Group turnover in the period ending 30 June 2018 (26 week ending 1 July 2017: one).
26 weeks ended 30 June 2018
Rental
(and related
revenue) Services Central Total
GBP000s GBP000s GBP000s GBP000s
Total revenue from external
customers 122,740 47,032 - 169,772
-------------- --------- ---------- ----------
Contribution 80,459 6,749 - 87,208
Branch and selling costs (43,237) (43,237)
Central costs (14,107) (14,107)
Adjusted EBITDA 29,864
Less: Exceptional items - - (3,335) (3,335)
Less: Depreciation and
amortisation (20,888) (81) (5,211) (26,180)
Operating loss 349
Net finance expenses (7,420)
Loss before tax (7,071)
----------
Additions to non-current
assets
Property, plant and equipment 6,894 46 2,324 9,264
Intangibles - 124 635 759
Non-current assets net
book value
Property, plant and equipment 106,050 224 30,190 136,464
Intangibles 134,974 365 34,860 170,199
Unallocated corporate
assets
Non-current deferred
tax assets 358 358
Current assets 126,401 126,401
Current liabilities (177,613) (177,613)
Non-current liabilities (187,138) (187,138)
----------
Net assets 68,671
----------
26 weeks ended 1 July 2017
Rental
(and related
revenue) Services Central Total
GBP000s GBP000s GBP000s GBP000s
Total revenue from external
customers 119,252 41,286 - 160,538
-------------- --------- ---------- ----------
Contribution 73,930 5,158 - 79,088
Branch and selling costs - - (41,315) (41,315)
Central costs - - (20,678) (20,678)
Adjusted EBITDA 17,095
Less: Exceptional items - - (12,643) (12,643)
Less: Depreciation and
amortisation (21,499) (164) (6,028) (27,678)
Operating loss (23,226)
Net finance expenses (6,915)
Loss before tax (30,141)
----------
Additions to non-current
assets
Property, plant and equipment 11,623 18 2,289 13,930
Intangibles - 109 1,697 1,806
Non-current assets net
book value
Property, plant and equipment 125,611 343 35,991 161,945
Intangibles 168,336 549 8,392 177,277
Unallocated corporate
assets
Non-current deferred
tax assets 532 532
Current assets 112,761 112,761
Current liabilities (158,445) (158,445)
Non-current liabilities (170,861) (170,861)
----------
Net assets 123,209
----------
4. Exceptional items
Items of income or expense have been shown as exceptional either because of their size or nature or because they are non-recurring. An analysis of the amount presented as exceptional items in the consolidated income statement is given below.
During the period ended 30 June 2018, the Group has recognised net exceptional costs as follows:
Included 26 weeks
Included in other ended
in administrative operating 30 June
expenses income 2018
GBP000s GBP000s GBP000s
Onerous leases 1,634 - 1,634
Impairment of property, plant & equipment 450 - 450
Cost reduction programme 711 - 711
Strategic review 722 - 722
Sub-let rental income on onerous leases - (182) (182)
Exceptional items 3,517 (182) 3,335
=================== =========== =========
During the period ended 30 December 2017, the Group has recognised net exceptional costs as follows:
Included Year
Included Included Included in other ended
in cost in distribution in administrative operating 30 December
of sales costs expenses income 2017
GBP000s GBP000s GBP000s GBP000s GBP000s
Onerous leases - - 6,903 - 6,903
Impairment of property,
plant and equipment - - 8,279 - 8,279
Business divesture - - 4,919 - 4,919
Cost reduction programme 176 131 3,432 - 3,739
Senior management changes - - 1,031 - 1,031
Strategic review - - 1,172 - 1,172
Network reconfiguration - - 40,692 - 40,692
Preparatory refinancing
cost - - 714 - 714
Sub-let rental income
on onerous leases - - - (882) (882)
Exceptional items 176 131 67,142 (882) 66,567
========== ================= =================== =========== ===============
During the period ended 1 July 2017, the Group has recognised net exceptional costs as follows:
Included 26 weeks
Included Included Included in other ended
in cost in distribution in administrative operating 1 July
of sales costs expenses income 2017
GBP000s GBP000s GBP000s GBP000s GBP000s
Branch and distribution
centre closure onerous
leases - - 4,969 - 4,969
Impairment of property,
plant and equipment - - 6,225 - 6,225
Cost reduction programme 95 162 1,717 - 1,974
Sub-let rental income on
onerous leases - - - (525) (525)
Exceptional items 95 162 12,911 (525) 12,643
========== ================= =================== =========== =========
Onerous leases: branch and distribution centre closures
The number of branches has been reduced to remove less profitable locations with activity centralised into fewer locations. 12 branches were closed during the 26 weeks ended 30 June 2018 (26 weeks ending 1 July 2017: 50; 52 weeks ended 30 December 2017: 55). An exceptional cost of GBP1.6 million relating to dark stores and onerous leases has been recorded in the period (26 weeks ending 1 July 2017: GBP5.0 million; 52 weeks ended 30 December 2017: GBP6.9 million). Sub-let rental income on onerous leases for the period amounted to GBP0.2 million (52 weeks ended 30 December 2017: GBP0.9 million; 26 weeks ending 1 July 2017: GBP0.5 million).
Cost reduction programme and network reconfiguration
Following the Strategic Review in the second half of the 2017 financial year, the Group has embarked upon a plan to deliver annual cost savings estimated to be between GBP10 million and GBP14 million. Principal to this were annual savings of between GBP7 million and GBP10 million to be achieved through the reconfiguration of the Group's supply chain model by moving the testing and repair of all fast moving products closer to our customers. In order to realise these benefits, network reconfiguration costs of GBP40.7 million was recognised in the year ended 30 December 2017 including the impairment, totalling GBP7.6m, of certain assets.
The annual cost savings also include a reduction in central overhead estimated to be between GBP3 million and GBP4 million. To realise these benefits, largely relating to redundancy costs, an exceptional item of GBP0.7 million has been recorded during the 26 weeks ended 30 June 2018.
The Group announced plans in the first half of the financial year 2017 to deliver significant cost reductions primarily by reducing head office headcount by redundancy and restructuring costs at the NDEC to drive operational efficiencies in the supply chain. These initiatives gave rise to exceptional items of GBP3.7 million and GBP2.0 million for the 52 weeks ended 30 December 2017 and 26 weeks ended 1 July 2017 respectively.
Strategic review
Non-recurring third party consultancy costs of GBP0.7 million were incurred by the Group towards its strategic review. (52 weeks ended 30 December 2017: GBP1.2 million; 26 weeks ending 1 July 2017: GBPnil)
Impairment of closed branch property, plant and equipment
Following the branch closures management conducted an impairment review of property plant and equipment in closed branches to determine what can be reused across the network. During the 26 weeks ended 30 June 2018 an impairment of GBP0.5m was recorded in relation to branches closed in the period (26 weeks ended 1 July 2017: GBP6.2 million; year ended 30 December 2017 GBP8.3 million).
Business divesture
The Group sold businesses not considered core to the strategy during the 52 weeks ended 30 December 2017. The Reintec branded fleet of cleaning machines and the associated Tecserv equipment maintenance business were sold on 16 November 2017 for a consideration of GBP1.5 million. After transaction costs net proceeds were GBP1.2 million. This gave rise to a loss of GBP4.9 million including goodwill written off of GBP0.8 million.
5. Finance income and expense
26 weeks 52 weeks 26 weeks
ended ended ended
30 June 30 December 1 July
2018 2017 2017
GBP000s GBP000s GBP000s
Interest received on cash deposits - - (1)
Finance income - - (1)
--------- ------------- ---------
Bank loans and overdrafts 1,658 2,118 1,020
Senior secured notes 4,577 9,155 4,577
Finance leases 511 1,392 761
Interest unwind on discounted
provisions 46 31 38
Debt issue costs 628 1,047 520
Finance expense 7,420 13,743 6,916
--------- ------------- ---------
Net finance expense 7,420 13,743 6,915
========= ============= =========
6. Earnings per share
Basic and diluted earnings per
share
-----------------------------------------
Weighted average
Loss after number of Loss per
tax shares share
GBP000s 000s pence
----------- ----------------- ---------
26 weeks ended 30 June 2018 (7,573) 170,207 (4.45)
26 weeks ended 1 July 2017 (30,316) 170,207 (17.81)
52 weeks ended 30 December
2017 (79,922) 170,207 (46.96)
Basic loss per share is calculated by dividing the result attributable to equity holders by the weighted average number of ordinary shares in issue for that period.
Diluted loss per share is calculated using the loss for the year divided by the weighted average number of shares outstanding assuming the conversion of its potentially dilutive equity derivatives outstanding, being nil cost share options (LTIP shares) and Sharesave Scheme options, as disclosed in note 21 in the Annual Report and Financial Statements for the year ended 30 December 2017 and share warrants as disclosed in note 15 of this report.
All of the Group's potentially dilutive equity derivatives (the LTIP shares, Sharesave Scheme options and warrants) were anti-dilutive for the periods ended 30 June 2018 and 1 July 2017, and the year ended 30 December 2017, respectively, for the purpose of calculating the weighted average number of shares and hence the diluted loss per share.
The following is a reconciliation between the basic loss per share and the adjusted basic loss per share.
52 weeks
Basic and ended 26 weeks
diluted earnings 30 December ended
per share 2017 1 July 2017
Basic and diluted loss per
share (pence) (4.45) (46.96) (17.81)
Add back:
Exceptional items per share
(1) 1.96 39.11 7.43
Amortisation per share (2) 1.80 3.90 1.93
Tax charge per share 0.29 (3.08) 0.10
Charge:
Tax at prevailing rate 0.08 1.35 1.61
Adjusted basic and diluted
loss per share (pence) (0.32) (5.68) (6.74)
=================== ============== ==============
(1) Exceptional items per share are calculated as total finance and non-finance exceptional items divided by the weighted average number of shares in issue through the period.
(2) Amortisation per share is calculated as the amortisation charge divided by the weighted average number of shares in issue through the period.
7. Intangible assets
Customer
Goodwill relationships Brands Software Total
GBP000s GBP000s GBP000s GBP000s GBP000s
Cost
At 30 December
2017 128,991 26,744 24,102 20,481 200,318
Additions - - - 761 761
At 30 June 2018 128,991 26,744 24,102 21,242 201,079
--------- --------------- -------- --------- --------
Amortisation
At 30 December
2017 - 13,346 526 13,937 27,809
Charge for the
period - 1,326 71 1,672 3,069
At 30 June 2018 - 14,672 597 15,609 30,878
--------- --------------- -------- --------- --------
Net book value
At 30 June 2018 128,991 12,072 23,505 5,633 170,201
========= =============== ======== ========= ========
At 30 December
2017 128,991 13,398 23,576 6,544 172,509
========= =============== ======== ========= ========
Cost
At 31 December
2016 129,744 27,482 24,142 19,968 201,336
Additions - - - 1,806 1,806
At 1 July 2017 129,744 27,482 24,142 21,774 203,142
--------- --------------- -------- --------- --------
Amortisation
At 31 December
2016 - 10,940 391 11,250 22,581
Charge for the
period - 1,388 72 1,824 3,284
At 1 July 2017 - 12,328 463 13,074 25,865
--------- --------------- -------- --------- --------
Net book value
At 1 July 2017 129,744 15,154 23,679 8,700 177,277
========= =============== ======== ========= ========
At 31 December
2016 129,744 16,542 23,751 8,718 178,755
========= =============== ======== ========= ========
8. Property, plant and equipment
Materials
& Equipment
Land & Plant & held for
Buildings Machinery hire Total
GBP000s GBP000s GBP000s GBP000s
Cost
At 30 December 2017 71,771 60,282 237,498 369,551
Foreign exchange differences (7) (26) (293) (326)
Additions 676 1,694 6,894 9,264
Disposals (571) (70) (14,339) (14,980)
At 30 June 2018 71,869 61,880 229,760 363,509
----------- ----------- ------------- ---------
Accumulated depreciation
At 30 December 2017 48,115 51,585 118,936 218,636
Foreign exchange differences - (20) (152) (172)
Charge for the period 2,323 1,348 13,791 17,462
Impairment loss - 450 - 450
Disposals (432) (34) (8,865) (9,331)
At 30 June 2018 50,006 53,329 123,710 227,045
----------- ----------- ------------- ---------
Net book value
At 30 June 2018 21,863 8,551 106,050 136,464
=========== =========== ============= =========
At 30 December 2017 23,656 8,697 118,562 150,915
=========== =========== ============= =========
Cost
At 31 December 2016 69,187 58,673 247,295 375,155
Foreign exchange differences 10 41 396 447
Additions 1,132 1,175 11,623 13,930
Disposals (759) (49) (14,817) (15,625)
At 1 July 2017 69,570 59,840 244,497 373,907
----------- ----------- ------------- ---------
Accumulated depreciation
At 31 December 2016 37,095 46,214 113,373 196,682
Foreign exchange differences - 30 244 274
Charge for the period 2,359 1,949 14,586 18,894
Impairment loss 6,225 - - 6,225
Disposals (758) (38) (9,317) (10,113)
At 1 July 2017 44,921 48,155 118,886 211,962
----------- ----------- ------------- ---------
Net book value
At 1 July 2017 24,649 11,685 125,611 161,945
=========== =========== ============= =========
At 31 December 2016 32,092 12,459 133,922 178,473
=========== =========== ============= =========
9. Trade and other receivables
30 June 30 December 1 July
2018 2017 2017
GBP000s GBP000s GBP000s
Gross trade receivables 81,413 85,270 77,575
Less provision for impairment (4,284) (4,429) (3,879)
--------- ------------ --------
Net trade receivables 77,129 80,841 73,696
Other debtors 836 271 417
Prepayments and accrued income 19,043 15,391 23,761
Prepaid finance fees on loan facility 13,184 - -
Total trade and other receivables 110,192 96,503 97,874
========= ============ ========
30 June 30 December 1 July
2018 2017 2017
Movements in provision GBP000s GBP000s GBP000s
Balance at the beginning of the
period (4,429) (3,740) (3,740)
Movement in provision 145 (689) (139)
Balance at the end of the period (4,284) (4,429) (3,879)
========= ============ ========
10. Trade and other payables
30 June 30 December 1 July
2018 2017 2017
GBP000s GBP000s GBP000s
Current
Obligations under finance leases 9,174 11,892 12,126
Trade payables 39,694 39,729 43,550
Other taxes and social security costs 5,128 5,792 6,831
Other creditors 1,003 916 1,936
Accrued interest on borrowings 3,910 3,904 3,844
Accruals and deferred income 34,354 20,219 14,922
93,263 82,452 83,209
======== ============ ========
Non-current
Obligations under finance lease 12,110 14,105 17,185
======== ============ ========
11. Borrowings
30 June 30 December 1 July
2018 2017 2017
GBP000s GBP000s GBP000s
Current
Revolving credit facility 74,000 69,000 68,500
========= ============ ========
Non-current
6.75% Senior secured notes 134,470 134,242 133,733
========= ============ ========
The interest rates on the Group's variable interest loans are as follows:
30 June 30 December 1 July
2018 2017 2017
% above % above % above
LIBOR LIBOR LIBOR
Revolving credit facility 2.50% 2.50% 2.50%
--------- ------------ --------
The following table shows the fair value of the Group's Senior Secured Notes:
30 June 30 December 1 July
2018 2017 2017
GBP000s GBP000s GBP000s
Financial liabilities
6.75% Senior secured notes 135,603 128,778 134,980
======== ============ ========
The Group has undrawn committed borrowing facilities of GBP25.3 million at 30 June 2018 (1 July 2017: GBP28.3 million) under its facilities in place at that date (see note 15). Including net cash balances, the Group had access to GBP35.4 million of combined liquidity from available cash and undrawn committed borrowing facilities at 30 June 2018.
12. Provisions
Onerous Onerous
leases Dilapidations Contracts Total
GBP000s GBP000s GBP000s GBP000s
At 30 December 2017 6,607 13,975 32,612 53,194
-------- -------------- ----------- --------
Additions 1,508 65 - 1,573
Utilised during the period (1,889) (546) (4,125) (6,560)
Unwind of provision 13 32 - 45
Released (427) - - (427)
At 30 June 2018 5,812 13,526 28,487 47,825
======== ============== =========== ========
Of which:
Current 2,176 2,641 5,486 10,303
Non-current 3,636 10,885 23,001 37,522
-----------
5,812 13,526 28,487 47,825
======== ============== =========== ========
At 31 December 2016 5,398 11,745 - 17,143
-------- -------------- ----------- --------
Additions 4,353 160 - 4,513
Utilised during the period (2,018) (1,052) - (3,070)
Unwind of provision 16 23 - 39
Released (104) (253) - (357)
At 1 July 2017 7,645 10,623 - 18,268
======== ============== =========== ========
Of which:
Current 3,617 2,619 - 6,236
Non-current 4,028 8,004 - 12,032
-------- -------------- ----------- --------
7,645 10,623 - 18,268
======== ============== =========== ========
13. Commitments and contingencies
The Group's commitments under non-cancellable operating leases are set out below:
30 December
30 June 2017 1 July
2018 2017
GBP000s GBP000s GBP000s
Land and buildings
Within one year 14,810 15,030 15,972
Between two and five years 44,119 45,316 48,550
After five years 31,457 33,084 34,920
90,386 93,430 99,442
---------- ------------ ---------
Other
Within one year 8,574 9,074 9,162
Between two and five years 14,762 15,263 14,451
After five years - 7 56
23,336 24,344 23,669
---------- ------------ ---------
113,722 117,774 123,111
========== ============ =========
14. 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 2018 financial year have not changed significantly from those set out on pages 14 to 17 of the Group's 2017 Annual Report, which is available at www.hssannualreport2017.com. These risks and uncertainties include, but are not limited to the following:
1) Macroeconomic conditions; 2) Competitor challenge; 3) Distribution Network; 4) IT infrastructure; 5) Insufficient liquidity headroom; 6) Equipment supply, maintenance & availability; 7) Customer retention and brand reputation; 8) Outsourcing of services; 9) Inability to attract and retain personnel; and
10) Legal and regulatory requirements
The main risk expected to affect the Group in the remaining 26 weeks of the 2018 financial year is macroeconomic conditions, which includes the impact that the Brexit related developments could have on the prevailing demand from new and existing customers within the numerous and diverse market sectors which HSS serves.
15. New finance arrangements and share warrants
HSS Hire Group plc entered into a new five year, GBP220 million term loan facility, provided by HPS Investment Partners on 20 June 2018 and which completed on 10 July 2018. In connection with this term loan facility, the Company granted the lenders under the facility, 8,510,300 Warrants on 20 June 2018 to subscribe for new ordinary shares in the Company exercisable at a price of GBP0.01 per share and valued at GBP2.7m. The warrants can be exercised for five years subject to certain conditions that include full repayment of the term loan facility itself. Total lender and advisory fees incurred in respect of the new facility amount to cGBP11m and have been included in accruals at 30 June 2018. The warrant valuation and prepaid finance fees on loan facility, together totalling GBP13.2m net of amounts already accrued, have been deferred in the balance sheet and will be reclassified to debt issue costs in H2 2018; they will be amortised to the income statement over the life of the facility. Debt issue costs of GBP1.5m were written off in H2 2018 in relation to the facility that these arrangements replaced.
16. Post balance sheet event
On 19 July 2018, the Group announced the proposed sale of UK Platforms Limited to Nationwide Platforms Limited, a wholly-owned subsidiary of Loxam Group, for an enterprise value of GBP60.5m. The proposed disposal, which was not highly probable as at 30 June 2018, is subject to Competition and Markets Authority approval and is expected to complete in quarter 4 of 2018. The Group will use at least 80% of any proceeds from the sale to pay down debt and UK Platforms Limited will be treated as a discontinued operation in the results for the year ending 29 December 2018.
17. Adjusted EBITDA and Adjusted EBITA
Adjusted EBITDA is calculated as follows:
26 weeks 52 weeks 26 weeks
ended ended ended
30 June 30 December 1 July
2018 2017 2017
GBP000s GBP000s GBP000s
Operating profit / (loss) 349 (71,419) (23,226)
Add: Depreciation of property,
plant and equipment 17,462 37,006 18,894
Add: Net book value of hire stock
losses and write offs 5,649 10,153 5,500
Add: Amortisation 3,069 6,637 3,284
EBITDA 26,529 (17,623) 4,452
Add: Exceptional items 3,335 66,567 12,643
Adjusted EBITDA 29,864 48,944 17,095
========= ============= =========
Adjusted EBITA is calculated as follows:
26 weeks 52 weeks 26 weeks
ended ended ended
30 June 30 December 1 July
2018 2017 2017
GBP000s GBP000s GBP000s
Operating profit / (loss) 349 (71,419) (23,226)
Add: Amortisation 3,069 6,637 3,284
EBITA 3,418 (64,782) (19,942)
Add: Exceptional items 3,335 66,567 12,643
Adjusted EBITA 6,753 1,785 (7,299)
========= ============= =========
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR URUVRWOAWORR
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