HSS Hire Group CEO Chris Davies has targeted cost savings of up to £15 million (€20.5 million) in the final quarter of 2015 and next year - despite announcing increased half-year revenues.
The UK-based rental company’s revenue for the six months ending 27 June was up 12% year-on-year at £146.4 million (€200 million), with organic growth of more than 10% and the balance coming from Apex Generators and the recently acquired All Seasons Hire.
However, revenue growth was slower than in the first quarter and adjusted EBITDA remained flat at £28.9 million (€39.5 million) after taking into account the costs of the company’s Stock Exchange listing in February and starting up 27 new branches in the first half of the year. The company made a loss before tax of £14.1 million (€19.3 million).
HSS’s share price fell by 35% as investors reacted to the results.
The report also said that although the half-year figures were broadly in line with expectations, the group had experienced softer market trading conditions during August. Full year revenue growth for 2015 is now projected at between 8% and 11%, with earnings below current market expectations.
Mr Davies said: “Our results for the first half of 2015 are in line with our update at the end of June, with revenue growth of 12% and further gains in market share. However, as others have reported, trading continues to be unpredictable, and after a reasonable July, we have seen softer market conditions in August. This is obviously disappointing.
“As a result we are cautious on the outlook for the balance of the year and now expect full year earnings to be below current market expectations.”
In percentage terms, the major growth was in the group’s specialist businesses, which comprises power, climate control, powered access, cleaning hire equipment and cleaning maintenance services. It was up 31.5% to £21.3 million, (€29 million). The core business covering tool and equipment hire and related services rose by just over 9% to £125.1 million (€171 million).
Despite the profit warning, Mr Davies said the company remained confident in its strategy; “We are seeing strong growth in the specialist businesses as a result of our investment. We are building our Key Accounts pipeline and our roll-out of local branches is progressing to plan with 50 openings [by the end of] this year.
“We are making good progress in our plans to open a new National Distribution Centre in the first half of 2016, which will further increase availability for customers. This will also enable us to fully exploit our market-leading online proposition. Furthermore, this development will allow our existing hub and spoke network to concentrate exclusively on customer deliveries and collections, enhancing service levels.
“It will also contribute to the rebasing of costs in the range of £8 million (€10.9 million) and £12 million (€16.4 million) in 2016 with between £1.5 million (€2.1 million) and £3 million (€4.1 million) being delivered in the fourth quarter of 2015.
“Despite the softer August we remain confident in the medium and long term growth prospects for the business.”