HSS Hire Group plc H1 FY17 Results
Agenda Steve Ashmore, CEO John Gill, CEO Strategic progress Headlines Steve Bailey, Interim CFO Paul Quested, CFO H1 17 results H1 results Steve Ashmore, CEO John Gill, CEO Early views and outlook Summary 1
Headlines Headlines Operating model changes have impacted Rental revenue growth and cost base in H1 Management have taken decisive action to improve revenue, profitability and service H1 17 results − Improved revenue / earnings trend through Q2 − Building momentum On track to deliver annualised cost savings of c. £13m compared to Q1 run rate − Enhanced fleet availability; Net Promoter Score has improved to 47 (H1 16: 42) − Improved capital efficiency enabling reduction of £4m - £6m in capex year on year Q&A Group returned to profit (EBITA) in June, July and August Appendix Revenue back in growth from July, however rental revenue rate of recovery materially slower than targeted We now expect H2 Adjusted EBITA profit to be in the range of £8m to £11m 2
Financial summary Headlines Revenue broadly flat on a 26 weeks ended 1 July / 27 weeks ended 2 July comparable 26 week basis after £m 2017 2016 Growth (%) impact of branch closures with improving trend H1 17 results Revenue 160.5 166.2 (3.4%) Adj. EBITDA 1 17.1 32.1 (46.7%) Adj. EBITDA impacted by revenue Adj. EBITDA margin 10.6% 19.3% mix, parallel running costs Building momentum through Q1 and into Q2 Adj. EBITA 2 (7.3) 9.4 Adj. EBITA margin (4.5%) 5.7% Exceptional costs reflect: Exceptional costs 12.6 7.1 Impact of branch closures and Q&A associated fixed assets impairment Implementation of cost reduction Appendix programme 1 Earnings stated before interest, tax, depreciation and amortisation (“EBITDA”) and before exceptional items 2 Adjusted EBITDA less depreciation 3
Segmental analysis Headlines Rental 26 weeks ended 1 July / 27 weeks ended 2 July Revenues impacted by strong comparator £m 2017 2016 Growth period and additional week’s trading in H1 16 Rental (and related revenue) H1 17 results Contribution down by 5.5pp driven by 53rd week (1pp), customer and product mix Revenue 119.3 128.7 (7.3%) (2.8pp) and parallel running costs (1.7pp) Contribution 73.9 86.7 (14.8%) Services Building momentum Contribution margin 61.9% 67.4% Continued growth in OneCall and training revenues Services Annualisation of large MSP contract and Revenue 41.3 37.5 10.1% continued investment in teams to support Contribution 5.2 5.2 0.0% future growth impacting contribution Q&A Contribution margin 12.6% 13.9% Costs Branch and selling costs (41.3) (45.5) Appendix Branch and selling costs reduced reflecting Central costs (20.7) (14.2) cost reduction programmes New operating model costs included in Adj. EBITDA 17.1 32.1 (46.7%) central costs and against Rental contribution 4
Net debt lower year on year Headlines 26 weeks ended 1 July / 27 weeks ended 2 July Lower net debt balance reflects: £m 2017 2016 Lower adjusted Adj. EBITDA 17.1 32.1 H1 17 results EBITDA Exceptional costs (cash) (2.0) (6.3) Equity placing (Dec Working capital (1.1) (10.6) 2016) Capex 1 (18.2) (29.3) Building momentum Improved working Net interest paid (6.9) (6.4) capital management Tax paid (0.2) (0.1) Capital efficiency and Net (increase) decrease in net third party debt (11.2) (20.6) lower investment in non-fleet capex Closing net third party debt 230.6 238.7 Q&A Appendix 1 Gross of finance >£35m headroom in cash and existing facilities lease funding 5
Early views Since joining the business Headlines 1. Established stable of brands with market leading positions in chosen markets H1 17 results 2016 market share 1 Fleet size (# of machines) 2 #2 #2 A-Plant HSS 6% 7% Nationwide 10,430 Speedy 6% HSS 9,503 in the UK tool and in the UK powered VP 4% AFI Uplift 5,694 equipment rental access market by Lavendon VP 3,700 momentum Others Building market by revenue 2% fleet size 76% A-Plant 3,150 1 Company reports, ERA industry reports 2 Cranes & Access Top 30 List 2. Great brand strength and leading levels of customer service Q&A 50 47 Leading NPS Significantly above the 45 42 42 42 score: HSS NPS Score (all top third of the TNS Appendix 40 UK HSS customers) 36 36 35 33 B2B Benchmark 2 35 47 1 30 27 27 score of Benchmark 24 average amongst 25 top third of industry 20 15 Dec / Mar / Jun May / Sep / Dec Jan / Mar Mar / Jun Jun / Aug Dec / Mar 15 15 Aug 15 15 16 16 16 Mar 17 1 Kantar TNS 2 Kantar TNS benchmark includes manufacturing, service providers and utilities sectors 6
Early views Since joining the business (cont…) Headlines 3. Committed and knowledgeable colleagues H1 17 results 512 years’ experience across 64 colleagues in momentum Manchester Piccadilly Building 4. Forward thinking and innovative business Q&A Centralised engineering and Fully mobile distribution capability enabled Appendix transactional customer facing website Purpose built hire fleet refurb centre 7
Building momentum: 4 clear sets of actions Headlines 1 Focus on driving rental revenue growth, initiatives starting to deliver Revenue momentum New sales initiatives in larger markets gaining traction H1 17 results building Re-focus on Specialist businesses to drive profitable market share growth 2 Management expects to achieve top end of annualised target range of £11-13m, against Q1 run rate Delivering cost Majority of cost actions implemented by end of Q2. Benefit will flow through H2 savings momentum Building Management remain focused on further cost opportunities 3 Roll out of centralised engineering and distribution capability now complete Improving customer Enhanced customer proposition, through better availability and fulfilment Q&A experience Evidence of utilisation levels driving operational and capital efficiencies 4 Appendix Improved cash collection through implemented process changes Enhancing working Strong working capital management through harmonising the terms between customers and capital management suppliers Targeting growth in Adjusted EBITA through decisive action 8
1 Revenue Building momentum: momentum building Revenue trend improving Headlines Group revenue growth Revenue growth from July 20.0% H1 17 results 15.0% % revenue growth over same quarter / week in prior year Focus on large core markets (London and NW) 10.0% continues to drive rental revenue growth, especially 5.0% with SMEs 0.0% Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 (5.0%) (8 wks) momentum Re-focus on Specialist businesses to drive market Building (10.0%) share growth in attractive segments Group revenue Rental revenue growth in large core markets Rental revenue momentum building but materially Q&A 25.0% behind target 20.0% 15.0% Management targeting driving profitable rental Appendix 10.0% revenue in H2 5.0% weeks 0.0% 1 5 9 13 17 21 25 29 (5.0%) (10.0%) (15.0%) 1 4-week rolling revenue growth 9 Rental and related revenue growth (large core markets) 1
2 Delivering cost Building momentum: savings Delivering cost savings Headlines Costs actions implemented towards Further operational efficiencies as results of actions in early Q3 17 end of Q2: Actioned in H1 17 H1 17 results Efficiency through NDEC: improved 3.0 productivity and distribution routing 9.9 Closed 13 branches in Q2 17, 68 momentum Building since Q3 16 13.0 Reduced central headcount by 92 Q&A Renegotiated terms with rehire suppliers Appendix Benefits will flow through H2 Supplier Labour Branch Efficiency Cost savings Actions Annualised contract closures implemented implemented targeted cost renegotiation in Q2 in early Q3 savings against Q1 run rate 10
3 Improving customer Building momentum: experience Improving customer experience Headlines Improved availability and capital efficiency Fulfilment levels consistently above 2015 levels H1 17 results 2015 average fulfilment rate (YTD) 2017 average weekly fulfilment rate 16,000 Number of units awaiting maintenance 1 % of fast moving fleet items fulfilled 100% New operating model in place 14,000 95% 12,000 momentum Building 90% 10,000 8,000 85% 6,000 80% Q&A 4,000 75% 2,000 70% - Appendix Jan Feb Mar Apr May Jun Jul Apr May Jun Jul Aug New operating model allows superior maintenance Higher fulfilment levels driving greater consistency in capability, driving availability and realising c.£4-6m capex service and supporting regain of market share savings 1 Tracked across top 500 Improved NPS score of 47 SKUs in business 11
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