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HSS Hire issues profit warning amid distribution centre delays

Published 24/11/2016

HSS warned that an extended timeline for its new centre will impact core rental and revenue growth and slow its efficiency drive
HSS warned that an extended timeline for its new centre will impact core rental and revenue growth and slow its efficiency drive

Tool supplier HSS Hire has issued a profit warning as it faces delays in the planned integration of a new national distribution and engineering centre.

The beleaguered firm said it now expects to have fully integrated the centre within the first quarter of 2017, but warned that extended timeline will impact core rental and revenue growth and slow its efficiency drive.

The board said it now expects adjusted operating profit for the full year to be below market expectations.

That is despite a 10.9% rise in revenue in the nine months to October 1 to £256 million, and a 2.3% rise in adjusted operating profit to £52.4 million.

HSS said it closed 18 "underperforming" branches in October and has shuttered four distribution centres since mid-year, as part of wide cost cutting plans.

However, net debt rose to £240.4 million due to a rise in exceptional costs, which were largely related to the new distribution centre.

Shares tumbled 6.3% in early trading.

It is the latest in a string of profit warnings from HSS, which reported a pre-tax loss totalling £13.8 million in 2015 amid weaker demand and higher costs.

Chief executive John Gill said: "Given the scale and complexity of this transformational operational change within the group, we have taken the decision to extend the implementation into Q1 17.

"While we are seeing some impact on performance in FY16, the b oard remains confident that the initiatives being pursued will position the business to drive improved shareholder returns in what remains a competitive and fragmented marketplace."

Rahim Krain, a support services analyst at Liberum, said he was surprised by the delay of the national distribution centre's integration.

"At the recent site visit management had indicated that the integration had been progressing smoothly so its delay in completion till 1Q17 is a surprise.

These operational issues might explain how the other companies, including Speedy (Hire), have been able to increase market share without having to take a major hit on pricing."

HSS, which has over 300 branches across the UK employing more than 3,200 people, floated on the London Stock Exchange in February last year.

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