HSS has been losing money every year since it floated on the London Stock Exchange in 2015 and for even longer than that. It has just posted a pre-tax loss of £12.9m for the six months to June 2020.
The Covid-19 crisis has not helped but HSS was loss-making even before then. Revenues dropped to 63% of 2019 levels during lockdown but are now back up to above 90%. First-half revenue was down 22% at £125.8m.
Net debt at end of June 2020 was £236.8m.
HSS shut its branch network on 23rd March when lockdown was called and moved to a delivery-only operation through its network of customer distribution centres and its OneCall re-hire business. The majority of the branch network remains closed today.
The company is now planning to close permanently 134 of its 240 branches. It is talking to around 300 employees whose jobs are in jeopardy (out of a total workforce of 2,600).
Property restructuring advisors have been called in to tune the details of the site reduction.
While shutting half the shops may sound like bad news, the HSS directors are putting a positive spin on it, saying that the business will be ‘leaner, more agile and technology driven’. These days around 30% of all new contracts are raised through digital channels so physical stores are of decreasing importance.
Since April HSS has been supported by £6.6m in grant income as a result of participation in the UK coronavirus job retention scheme and a similar scheme operated in the Republic of Ireland.
Chief executive Steve Ashmore said: "Our primary concern since the outbreak of Covid-19 has been the safety and wellbeing of our colleagues, customers, suppliers and other stakeholders. We responded quickly and decisively to preserve cash, optimise financial performance and ensure continuity of supply to our customers. I am incredibly proud of all our employees for their dedicated hard work in helping do this.
“Whilst Covid-19 had a significant impact on our performance in the first six months, I am encouraged by the resilience of HSS during a very challenging period. Our recent investment in technology has proved critical, allowing us to support our customers during lockdown, our digital channels and click-and-collect service providing low-contact alternatives to branches. As a result, we have now seen revenue return to above 90% of 2019 levels with profitability back to pre-Covid-19 levels.
“While our strategic ambitions remain unchanged, Covid-19 has demonstrated that we are now ready to accelerate our strategy by further investing in our technological platforms. These investments will allow us to reduce our physical footprint which, whilst regrettably resulting in the loss of around 300 roles, allows us to become a more agile, technology-driven business which is essential in our markets as well as reducing costs and enhancing shareholder value. This will build on our already differentiated commercial proposition and create the most advanced, customer-centric offer in an increasingly competitive marketplace."
However, it may not be enough, he acknowledged.
“While we are encouraged by the resilience HSS has shown during this period of unprecedented disruption, we continue to model a number of scenarios on the potential impact that Covid-19 could have on the group results. In certain forecasts, there is an indication that financial covenants could be breached, indicating the existence of a material uncertainty in the adoption of going concern should our lenders not support addressing these areas if they arise,” he said.
Losing lender support is not anticipated though as all of them “express their ongoing commitment and support for the business strategy”, Mr Ashmore said.