HSS Hire warns over 2016 earnings

HSS Hire slumped on Thursday as the company warned that adjusted earnings before interest, taxes and amortisation in 2016 would be above the prior year but below the range of market expectations.

In a trading update for 40 week period ended 1 October, the supplier of tool and equipment hire said revenue was up 10.9% to £256m, while adjusted earnings before interest, taxes, depreciaton and amortisation were up 2.3% to £52.4m. Adjusted EBITA, meanwhile, was 5.8% higher at £14.6m.

HSS said that given the scale, complexity and investment in the operational change being rolled out across the group, it has decided to extend the implementation period through the first quarter of 2017.

This will have an impact on its core Rental and related revenue growth and cut the speed at which it can optimise its remaining network and reduce operating costs. As a result, trading in the fourth quarter will be at the low end of management’s expectations.

“Whilst the board strongly believe the investment in the group's operational model will best position the business to serve the UK tool and equipment hire market, as a result of the impact on Rental and related revenue and the extended implementation timetable, they now expect adjusted EBITA for the year to be above the prior year, but below the range of market expectations.”

Numis Securities noted the company’s strategic progress but downgraded the stock to ‘reduce’ from ‘hold’ on the profit warning.

The brokerage said it now forecasts £17.5m EBITA in 2016 versus £22.2m previously.

At 0918 GMT, HSS shares were down 6.3% to 89p.