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HSS posts £4.5m loss as new CEO named

HSS has posted a loss of £4.5m for the first three months of 2017.

The hire firm, which confirmed the appointment of Wolseley’s UK managing director Steve Ashmore as its new CEO, reported a loss of £4.5m in Q1 2017, down from a profit of £4.9m in Q1 2016, in a trading update to the City this morning.

The group also saw revenue slip by 4.9 per cent compared with the same period a year earlier, while net debt reduced by £7.7m over the same period to sit at £226.3m.

HSS said the results were in line with expectations, with the losses attributed to “parallel running costs” in the first quarter of the year.

The group said these would reduce once its efficiency plan and operating model changes are completed, with Mr Ashmore set to take up the reins in his new role on 1 June.

His appointment follows the departure of long-serving CEO John Gill in April this year. 

HSS also posted a profit warning in November last year after announcing its efficiency plan roll-out had been extended in 2017.

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 2016.

However, this has since been extended in 2017, and HSS 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.

The group added that cost initiatives were in place to deliver annualised cost savings of between £11m and £13m, while initial sales figures pointed to a growth in revenue year on year.

Despite this, Julie Palmer, partner at insolvency firm Begbies Traynor, said the firm had “seen its fortunes go from bad to worse” since 2015.

“Clearly investors in the construction equipment and tool hire business have been voting with their feet, with the group’s share price halving over the past 12 months alone,” she said.

“With group revenues down 4.9 per cent and only a modest reduction in net debt, incoming CEO Steve Ashmore still has a difficult task on his hands to turn the business around, given the historic issues he has inherited.”

City analysts also warned on the hire firm’s prospects, with analysts Liberum arguing the trading update “reinforces a number of concerns”.

The analyst chalked up the losses to “the over-reliance on lower-margin Services revenues and a weak performance with its SME client base”.

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