After changes meant to make the business more efficient hit sales, HSS Hire warned that profits for the second half of 2017 would be lower than what was initially expected.
HSS said that while pre-tax losses increased to £30.1m compared to £7.8m in the first half of 2016, said revenues in the six months to July 1 had decreased by 3.4pc to £160.5m. The news sent the firm’s shares down 19pc in early trade.
The company provides equipment to various consumers and businesses. It blamed changes to its central distribution facility in Cowley for trading disruption which caused some lost business while moving from the old system to the new one.
Progress has not been as good as the management team of the firm had initially hoped it would be, despite measures to kick-start the rental business’ revenue growth. That means that at the end of the year, profits will be lower.
The results on Wednesday reveal that the performance of the firm in the final period in which John Gill, the former chief executive, was at the helm. Earlier this year, Mr Gill stepped down after HSS’s failure to narrow its losses, capping years of slipping performance.
Since the company listed on the London Stock Exchange in early 2015, the company has struggled. Later that year, it issued two profit warning. Also, it reported full-year losses last year of £17.4m, down from £13.8m in 2015
This year, shares have fallen around 30pc as it was affected by the construction industry’s wider slowdown following the Brexit vote. The company is currently trading at around 49p after having floated at 210p per share initially.
The Exel veteran who assumed the post of chief executive in June, Steve Ashmore, blamed “substantial operating model changes” on the most recent drop in profits.
“Whilst the rate of recovery in our rental revenues has been positive, it has been materially slower than originally targeted, leading to lower than expected profitability over this period,” declared Ashmore.
HSS said that for the second half of 2017, adjusted earnings before interest, taxes, and amortisation would now be between £8m to £11m.
However, analysts warned that the firm’s return to profitability was unpropitious in the next 18 months. An analyst at Peel Hunt, Andrew Nussey, stated that he anticipated the company’s pre-tax loss would be around £14m at the end of 2017. He also expected further loss of £7m in 2018, adding that “challenges remain” for the company.
Mr Ashmore said that the corporation was in the middle of a careful review of its strategy and insisted that the market remained “attractive and fragmented.”
HSS added that HSS plans to reinvigorate revenues through “new sales initiatives” by taking “decisive action.”