When Steve Ashmore joined HSS as chief executive in June 2017 he initiated an extensive review of the business, analysing the profitability of each customer, product and branch.
The three priorities are: reduce debt by cutting costs, fix the tool hire business and strengthen the commercial proposition.
In addition to the £13m savings already set in train, HSS Hire has identified £10m to £14m of additional savings that will enable it to reduce leverage further. HSS has been saddled with a huge debt burden by its former venture capitalist owners – £231m net debt as of July 2017, against annual revenue of £342m last year.
The review has also identified potential for improved profits in the heritage tool hire business by focusing on profit opportunities in relation to customers, products and branches.
The board said that it had also identified several actions to strengthen its commercial proposition. “Targeted sales plans based on customer segmentation will provide focus on the most profitable opportunities and the prioritisation of local markets, with the group continuing to build on its digital competitive advantage,” the company said.
It also set out its financial targets to achieve by 2020:
- grow revenue in line with the market
- grow rental revenue ahead of the market
- EBITDA margin above 20%
- EBITA margin above 9%
- leverage of less than 3x
- return on assets of above 20%.
Chief executive Steve Ashmore said: "HSS is a business with attractive qualities and significant potential. Our strategic review, the most detailed in the company's history, has provided us with deep insights on HSS's trading performance and enabled us to devise a clear and actionable set of priorities.
“We have made progress over the past six months to return the business to operating profitability, providing us with a platform from which to make further improvements. Our specialist tool hire and rental businesses are performing well and the additional cost savings we have identified will see a material reduction in leverage in 2018. As we look further ahead, we are excited by the group's potential and confident in our plans."
As previously reported, for the 26-week period ended 1st July 2017 HSS Hire Group lost £30.1m before tax (2016 H1: £7.8m loss) on revenue down 3.4% to £160.5m (2016 H1: £166.2m).