Numis Securities has got off the fence – sort of – and plumped for a very definite “hold” recommendation for HSS Hire Group PLC (LON:HSS).
HSS's house broker previously had its rating for the tool hire group under review but with Wednesday's third quarter trading update revealing the group had enjoyed its fifth successive month of positive earnings before interest, tax and amortisation (EBITA), Numis now reckons there is scope for a meaningful profits recovery in 2018-19.
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Underlying rental revenue (adjusted for branch closures and some asset sales in the final quarter of last year) was flat year-on-year, after declines of around 5% in the first quarter of this year and around 1.5% in the second quarter.
Year-on-year services revenue growth was 12% in the third quarter versus 10% in the first half of the year.
“Management's cost savings initiatives (£13mln reduction by the end of 3Q vs 1Q17 run-rate) have contributed to an improving profits trend,” Numis noted.
The group has closed 76 branches in the last 12 months and the cost base is now a lot leaner.
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With the dislocation of the move to a new operating model behind it, HSS is steadying the ship and laying to rest some concerns bout breaching debt covenants.
The target price is 30p, which after today's 4.8% rise to 29.35p is round about where the share price is currently trading.