Shares in tool and equipment hire specialist HSS Hire (HSS) have accelerated 8.2% to 30p after making significant progress with its turnaround strategy.
Last year, HSS suffered several setbacks, including a slower than expected recovery in sales and an extended restructuring programme.
It appears the company’s strategy of transitioning to a new distribution model and reducing debt is starting to yield rewards.
In the first half of 2018, sales rose 5.8% to £169.8m and pre-tax losses narrowed from £30.1m to £7.1m.
Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) soared 74.7% to £29.9m, driven by sales growth and cost-cutting.
In a bid to further pay down debt, HSS has gained shareholder approval to sell its powered access business UK Platforms.
While positive progress has been made with net leverage declining from 4.3 times to 3.7 times, the level of debt is still at uncomfortably high levels for many investors.
POTENTIAL FOR ‘MEANINGFUL RECOVERY’
Numis analyst Julian Cater says HSS has the potential for a ‘meaningful profits recovery’ thanks to a leaner cost base and focus on profitability.
In the year to 31 December 2018, Cater has hiked EBITDA expectations by 3% to £66.3m and 3% to £72.2m in 2019. In 2020, EBITDA is anticipated to rise a further 5% to £78.2m.
Net debt is expected to fall by approximately £47.5m in the second half of the year, as long as the Competition and Markets Authority does not intervene in the sale of UK Platforms and the disposal completes as planned.
