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Beaufort Securities Breakfast Alert: HSS Hire Group

Published: 08:30 01 Sep 2016 BST

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Markets

Europe
The FTSE-100 finished yesterday's session 0.58% lower at 6,781.51, whilst the FTSE AIM All-Share index closed 0.26% lower at 791.32. In continental Europe, markets ended in the red, as losses in basic resource stocks offset the gains in banking stocks. Investors digested mixed economic data from the region. Germany’s DAX and France’s CAC 40 shed 0.6% and 0.4%, respectively.
Wall Street
Wall Street ended lower, as oil prices plunged after a report released by the US Energy Information Administration showed a higher-than-expected increase in domestic crude supplies last week. Investors awaited the release of a key jobs report scheduled for Friday. The S&P 500 declined 0.2%, with the energy sector dropping the most.
Asia
Equities are trading higher, as investors awaited the release of US nonfarm payroll data. The Nikkei 225 gained 0.2%, while the Hang Seng was trading 0.7% up at 7:00 am, after positive economic data released in China.
Oil
Yesterday, WTI prices decreased 3.6% to US$44.70 per barrel, while Brent oil prices fell 2.7% to US$47.04 per barrel.

Headlines

UK house prices up in July
As per a report by the Nationwide Building Society, house prices in the UK increased 5.6% y-o-y in August, after rising 5.2% in July, marking the fastest growth in five months. On an m-o-m basis, house prices rose 0.6% vis-à-vis 0.5% growth in July.
China manufacturing PMI improves in August
As per the National Bureau of Statistics, China’s official manufacturing PMI, which primarily tracks large state-owned companies, rose to 50.4 in August from 49.9 in July, marking the highest reading since October 2014. Markit’s manufacturing PMI, which focuses on small and mid-sized firms, dropped to 50.0 from 50.6 in July.

Company news

HSS Hire Group (HSS.L, 80.0p) - Hold
HSS Hire Group (HSS Hire) declared results for the 27-week period ended 2nd July 2016 (H1 2016). The group reported a 13.5% y-o-y rise in revenue to £166.2m and an 11.1% y-o-y increase in adjusted EBITDA to £32.1m for H1 2016. Adjusted earnings per share stood at 0.10p in H1 2016 (H1 2015: loss per share of 2.27p). Reported pre-tax loss narrowed to £9.8m in H1 2016 from £14.1m in H1 2015. Loss per share declined to 6.62p in H1 2016 from 10.51p in H1 2015. As at 2nd July 2016, HSS Hire Group’s net debt was £238.7m, £20.6m higher than at the end of 2015. The utilisation rates for the core business increased to 50% from 48% and for the specialist business rose to 76% from 73%. On the operational front, HSS Hire remains on track to complete the construction of its new National Distribution and Engineering Centre (NDEC) in 2016. The group declared an interim dividend of 0.57p, similar to the level announced for H1 2015, payable on 6th October 2016.

Our view: HSS Hire registered a good performance for H1 2016. The group reported a sharp rise in revenue, driven by gains in earnings from key accounts and services. HSS Hire reported a 41% rise in revenue from key accounts and a £6.5m increase in earnings from existing key accounts. The group received £12.0m worth of revenue from new key accounts. HSS Hire has a net promoter score (NPS) of 42, which is in the top third of the TNS NPS Benchmark. The group’s focus on capital and operational efficiencies led to an increase in the utilisation rate and an improvement in EBITDA margin. HSS Hire‘s steps to simplify operating structures within its core, powered access and power within England and Wales, would lead to cost reduction and sales efficiencies. Moreover, the new NDEC would enable the optimisation of the existing network and a reduction in the number of distribution centres. Moreover, trading in Q3 2016 ha started ahead of Q3 2015, in line with management expectations. We are encouraged by HSS Hire Group’s progress in H1 2016 and would like to monitor further progress. Meanwhile, we maintain our Hold rating on the shares.

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