Revenue warning sees HSS shares plummet

Tool hire giant blames poor performance on bad weather and general election uncertainty

SHARES in tool hire group HSS plunged almost 40pc after it posted interim numbers that warned annual revenue and profit would be below expectations.

The bad news, blamed on “unpredictable” trading in the first six months, is the second time the company has warned about its performance in the six months since it floated, with a downbeat trading update in June blaming the poor performance on bad weather and uncertainty caused by the election.

Yesterday’s announcement drove the shares down 50p to 79p – far below the 210p they floated at in February.

HSS, which rents out tools and equipment ranging from drills to cherrypickers from its almost 300 depots to both the trade and public, said it now expects sales to rise between 8pc and 11pc over the full year, with earnings also below City forecasts.

Chris Davies, chief executive, said: “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.”

In the six months to June 27, HSS, which was floated by private equity group Exponent, said revenue rose 12.1pc to £146.4m, while earnings adjusted for amortisation, depreciation and exceptionals including acquisitions, restructuring and flotation costs were flat at £28.9m. However, on a statutory basis, the pre-tax loss rose to £14.1m from £11.1m last time.

HSS said that its strategy to gain market share was working and it was getting ready to open a new distribution centre next year, which it hopes will make more readily available the tools it has in stock, a problem which it said was holding it back in the first profit warning.

Julian Cater, analyst at HSS’s house broker Numis, said: “After the IPO this is a pretty depressing start but the revenue growth in the first half – 12pc and guiding to high single digit or low double digit number in the full-year, most of which is organic, is encouraging. Not many other companies in the sector are growing revenue at the same pace.”

He said HSS’s investment in the hope of delivering future growth had combined with the lower growth to deliver a heavy hit to profit. “With the benefit of hindsight some could say expectations might have been too high when it was floated, with not enough spare capacity in the tank,” Mr Cater added.