Revenue rises but earnings fall as HSS Hire removes guidance

HSS Hire Group reported first-half revenue growth of 3.2% on Tuesday, to £170.8m, although its earnings fell, and the board withdrew its guidance amid an operational restructure.

The AIM-traded firm said its profitability was impacted by seasonal product weakness, leading to declines in adjusted EBITDA and EBITA, which stood at £26.9m and £7.3m, respectively.

Adjusted profit before tax fell to £1.2m, down £3.8m from the same period last year, while adjusted earnings per share dropped to 0.13p.

The company said its net debt leverage excluding IFRS 16 remained stable at 1.0x, adding that the sale of its Power businesses generated £20m, which was used to reduce debt and further strengthen financial stability.

HSS said it had liquidity headroom of £75m to support its ongoing strategic initiatives, as the board maintained the interim dividend at 0.18p per share.

The group announced the next phase of its strategy, following the legal separation of its ProService and Operations divisions in 2022.

Each entity would now operate independently, with separate management teams and growth strategies.

ProService, a digital marketplace for building services, had seen strong momentum, with over 2,200 buyers transacting on its platform, generating 38% average buyer revenue growth year-on-year.

It was aiming to increase its buyer base to 7,000 in the medium term.

Operations, HSS’s tool hire business, was meanwhile continuing to expand, with its low-cost builders merchant network growing to 104 locations, delivering 13% growth on a same-store basis.

The company was targeting over 150 trading locations in the medium term, focusing on delivering high-quality service and operational efficiency.

Despite ongoing challenges in the seasonal products segment affecting early second-half performance, HSS was still optimistic about its prospects, buoyed by positive trends in UK construction and recent large account wins.

Capital markets days for both businesses were scheduled for next year, where management would further outline their growth strategies and market opportunities.

“The group delivered a solid first-half performance against a challenging market backdrop, with above-market growth in our ProService marketplace business and continued good utilisation in Operations,” said chief executive officer Steve Ashmore.

“Today we are meaningfully progressing our growth strategy with the announcement of the commercial and operational separation of ProService and Operations.

“This will enable each business to pursue complementary growth strategies under independent leadership teams with greater control over resources and investment decisions.”

Looking ahead, Ashmore said HSS was “well-placed” to capitalise on any change to market conditions, and in the meantime had a number of new contracts mobilising in the second half.

“However, as a result of the new group structure and the period of transition that this will involve, the board believes it is prudent to remove guidance until further notice.

“The board and I are excited about this next stage in the development of our strategy, which we are confident will fully unlock the growth potential of each business and provide greater optionality to maximise future value for shareholders.”

At 1013 BST, shares in HSS Hire Group were down 4.58% at 6.66p.

Reporting by Josh White for Sharecast.com.