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HSS Hire – “Trading and Strategy Progress Update”, what about the balance sheet?

By Steve Moore | Wednesday 14 February 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

A Trading and Strategy Progress Update announcement from tool, equipment hire and related services group HSS Hire (HSS) includes that “since HSS last updated the market on 29th November 2017, trading has been positive with the group maintaining solid momentum. The board is pleased to reaffirm that full year performance is in line with guidance given in August, of H2 adjusted EBITA of between £8m and £11m”. The shares have responded currently 3% higher to 25p – though I note this compares to more than 80p at the start of 2017 and 210p on February 2015 IPO!...

The 29th November announcement was headlined “Decisive actions return Group to profitability” - though saw me note both underlying EBITA and revenue were down on the corresponding 2016 period and ‘EBITA profit’ is not bottom-line profit, particularly so given the balance sheet here.

On this, it is now announced that agreement has been reached with lenders “to extend the £80m revolving credit facility, which will now mature in July 2019. Management continues to make good progress towards refinancing the group and expects to complete this during 2018”. In terms of cost - inparticular supply chain - savings, CEO Steve Ashmore states, “with clear implementation plans and highly engaged teams, who have responded positively to the proposed changes, we are confident in achieving savings towards the top end of our targeted range. This operational progress, combined with the extension of our bank facilities and positive Q4 performance, creates a strong platform to build upon in 2018 and beyond”.

However, there is no update on the present balance sheet - and this despite the November announcement emphasising “net debt reduction remains key focus”!

It’s thus seemingly now until a 5th April-scheduled 2017 results announcement for that insight. I though currently continue to consider that June-commenced CEO Ashmore has a very difficult task – especially given the balance sheet inherited, and this currently remains on the bargepole list.

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