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HSS in profit warning after efficiency plan delayed

HSS Hire has warned that revenue and profit will be hit after announcing it would extend the roll-out its efficiency plan into next year.

The hire firm set up an efficiency plan in 2015, with a new national distribution centre established to improve product availability and productivity.

The original timetable was for all of HSS branches to benefit from the distribution centre by the end of the year.

However, only branches in England and Wales are now being serviced from the centre as of November. Scottish branches will only begin using the distribution centre in Q1 2017.

The firm warned that this extended roll-out of operational changes would impact revenue growth and would reduce the speed of the group’s optimisation and cost reduction strategy.

As a result, HSS said Q4 trading would be “at the lower end” of management expectations.

Chief executive John Gill said the decision to extend the programme had been made due to its “scale and complexity”.

“While we are seeing some impact on performance in the full-year 2016 results, the board remains confident that the initiatives being pursued will position the business to drive improved shareholder returns in what remains a competitive and fragmented marketplace,” he said.

“Looking ahead to 2017 we will continue the optimisation of our network across both distribution centres and local branches to deliver the benefits of our new operating platform, delivering an enhanced customer proposition, with a primary focus to drive EBITA margin growth.”

The extension of the national distribution centre programme has also added more exceptional costs to the firm’s balance sheet.

The company posted an 11 per cent year-on-year increase in revenue for the 40 weeks to 1 October 2016, with revenue rising to £256m, up from £230.8m a year earlier.

EBITDA was also up by 2.3 per cent, rising to £52.4m from £51.2m over the same period.

HSS also announced that 18 underperforming branches had been closed during October, while four distribution centres have been closed so far in the second half of the year.

However, Julie Palmer, partner at financial services and restructuring firm Begbies Traynor, warned that HSS’s investors ”should prepare themselves for more turbulence in 2017”.

”HSS Hire is continuing to battle against tough market conditions and has made only limited headway in implementing its revised strategy and cost cutting plan over recent months,” she said.

Earlier this week, fellow plant firm Hewden went into administration with more than 250 job losses.

A-Plant has acquired Hewden’s access and power generation assets, the onsite plant business, and the business and assets of Interlift.

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