RNS Number : 0758B
HSS Hire Group PLC
29 September 2022
 

HSS Hire Group Plc

Double digit growth, improved returns and dividend reinstated

HSS Hire Group plc ("HSS" or the "Group") today announces results for the 26 week period ended 2 July 2022

 

Financial Highlights (Unaudited)

Continuing operations1

H1 2022

(26 weeks to 2 July 2022)

H1 2021

(27 weeks to 3 July 2021)

 

Change

 

Like-for-like2 change

Revenue

£159.9m

£146.3m

 

9.3%

11.3%

Adjusted EBITDA3

£32.9m

£32.8m

 

0.4%

5.6%

Adjusted EBITA4

£13.6m

£13.1m

 

3.6%

18.3%

Adjusted profit before tax5

£8.4m

£0.8m

 

£7.6m

£9.2m

Adjusted basic EPS

0.96p

0.09p

 

0.87p

1.10p

ROCE6

23.8%

19.2%

 

4.6pp

 

Net debt leverage7 - non IFRS16

0.9x

1.7x

 

0.8x

 

Net debt leverage7 - IFRS16

1.5x

2.0x

 

0.5x

 

Other statutory extracts (2021 comparators including non-recurring credits8of £9.0m)

Operating profit

£10.2m

£18.1m

 

£(7.9)m

 

Profit before tax

£6.5m

£6.8m

 

£(0.3)m

 

Basic EPS

0.86p

0.96p


(0.10)p

 

 

Like-for-like performance excludes the impact of the following non-recurring benefits in 2021: additional week's trading and COVID related income from a business interruption insurance claim and the Republic of Ireland wage subsidy scheme

 

·  

Solid trading performance with capital-light Services business like-for-like2 growth of 16%

o

H1 22 like-for-like2 revenues 11% ahead of H1 21

o

Services business growth enabled by technology and broadening the rehire partner network

o

Rental revenue like-for-like2 growth of 9% with utilisation of 56%, maintained at high levels on larger fleet

o

Strong price management and cost discipline navigating through inflationary pressures

 

·  

Underlying earnings progression and improved returns.

o

Like-for-like2 Adjusted EBITDA and Adjusted EBITA up 6% and 18% respectively with Adjusted EBITA margin increased 0.5pp to 8.5%

o

Significant increase in Adjusted profit before tax and Adjusted basic EPS through improved margins and lower interest cost

o

Technology-led, lower-cost operating model driving an increase in ROCE to 23.8% (H1 21: 19.2%)

 

·  

Robust balance sheet with leverage at 0.9x9

o

Net debt9 £49.3m, materially lower than H1 21 (£97.6m) following completion of strategic divestitures in 2021

o

Reduced exposure to interest base rate changes following successful 2021 refinancing

 

·  

Delivery of technology roadmap ahead of plan; well positioned to build on strong H1 performance

o

New operating model built around HSS ProService (customer acquisition and enquiry conversion) and HSS Operations (fulfilment and service) driving growth; legal restructuring completed 3 July

o

Low-cost builders merchant network expanded to 60 locations (June 21: 43), and delivered 15% growth on a same stores basis10

o

Continued technology investment improved enquiry conversion to 73% with over 20% of transactions through our online channel

o

Received EcoVadis11 sustainability Advanced award; rated at 91st percentile in our industry

 

·  

Current trading and outlook

o

Revenue growth of 10% in Q3 22 to date with EBITDA and EBITA in line with management expectations

o

Management remains confident that full year EBITA will be in line with market expectations

o

Capex investment forecast for 2022 is unchanged with £5-£10m to support delivery of our technology roadmap

o

Significantly strengthened balance sheet and continued positive trajectory supports reintroduction of dividend with interim dividend of 0.17 pence per share declared, payable on 2 November 2022 to shareholders on the register as at close of business on 7 October 202212

 

Steve Ashmore, Chief Executive Officer, said:

 

"I am very pleased with our performance in the first half of 2022. Despite the volatile macroeconomic backdrop, we achieved double-digit revenue growth with our capital-light, technology-led business providing flexibility and the data to deliver for our customers while effectively managing prices to navigate inflationary pressures. The Board's decision to reinstate the dividend reflects the confidence it has in our long-term growth strategy.

 

We have continued to invest in our digital capabilities, achieving key milestones on our technology roadmap ahead of schedule, which will underpin the future growth of our two businesses: HSS ProService and HSS Operations. The roadmap includes the rollout of our new portal for larger customers - a self-service platform where all hire requirements can be efficiently managed in one place.  Our first customer is already being onboarded with significant expansion to come in the next 12 months.

 

While mindful of the macroeconomic backdrop we are confident that full year EBITA will be in line with market expectations as our operating model continues to drive growth and further cement our position as a technology leader within the industry."

Notes

1)     Results for H1 22 and H1 21 are on a continuing operations basis (excluding Laois Hire Limited and All Seasons Hire Limited sold in April 2021 and September 2021 respectively)

2)     Like-for-like performance excludes the impact of the following in 2021: additional week's trading and non-recurring COVID related benefits associated with a business interruption insurance claim and the Republic of Ireland wage subsidy scheme

3)     Adjusted EBITDA is defined as operating profit before depreciation, amortisation, and exceptional items. For this purpose depreciation includes the net book value of hire stock losses and write offs, and the net book value of other fixed asset disposals less the proceeds on those disposals

4)     Adjusted EBITA defined as Adjusted EBITDA less depreciation

5)     Adjusted Profit before tax defined as profit before tax excluding amortisation of brand and customer lists and exceptional items

6)     ROCE is calculated as Adjusted EBITA for the 52 weeks to 2 July 2022 divided by the average of total assets less current liabilities (excluding intangible assets, cash and debt items) over the same period

7)     Net debt leverage is calculated as closing net debt divided by adjusted EBITDA for the 52 weeks to 2 July 2022 (prior year 53 weeks to 3 July 2021).

8)     Non-recurring credits include release of onerous property cost provisions, business interruption insurance claim and benefit under the Republic of Ireland wage subsidy scheme

9)     Non-IFRS16 basis

10)    Merchant locations open for comparable period in both H1 22 and H1 21

11)    EcoVadis is one of the world's largest providers of business sustainability ratings, assessing over 90,000 companies worldwide

12)    All dividends will be paid in cash and no scrip dividend, other dividend reinvestment plan or scheme or currency election will be offered to shareholders. Ex-dividend date of 6 October 2022

 

-Ends-

 

Disclaimer:

 

This announcement has been prepared solely to provide additional information to shareholders and meets the relevant requirements of the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority. This announcement should not be relied on by any other party or for any other purpose.

 

This announcement contains forward-looking statements relating to the business, financial performance and results of HSS Hire Group plc and the industry in which HSS Hire Group plc operates. These statements may be identified by words such as "expect", "believe", "estimate", "plan", "target", or "forecast" and similar expressions, or by their context. These statements are made on the basis of current knowledge and assumptions and involve risks and uncertainties. Various factors could cause actual future results, performance or events to differ materially from those described in these statements and neither HSS Hire Group plc nor any other person accepts any responsibility for the accuracy of the opinions expressed in this presentation or the underlying assumptions. No obligation is assumed to update any forward-looking statements.

Notes to editors

HSS Hire Group plc provides tool and equipment hire and related services in the UK and Ireland through a nationwide network of Group companies and third-party suppliers. It offers a one-stop shop for all equipment through a combination of its complementary rental and re-hire business to a diverse, predominantly B2B customer base serving a range of end markets and activities. Over 90% of its revenues come from business customers. HSS is listed on the AIM Market of the London Stock Exchange. For more information please see www.hsshiregroup.com.

 

For further information, please contact:

 

HSS Hire Group plc

Tel: 020 3757 9248 (on 29 September 2022)

Steve Ashmore, Chief Executive Officer

Thereafter, please email: Investors@hss.com

Paul Quested, Chief Financial Officer


Greig Thomas, Head of Group Finance


 

Teneo

 

Tom Davies

Charles Armitstead

 

Tel: 07557 491 860

Tel: 07703 330 269

Numis Securities (Nominated Adviser and Broker)

Tel: 020 7260 1000

Stuart Skinner

George Price


 

Chief Executive Officer's Report

The first six months of 2022 has seen the business continue to deliver increasingly impressive results. With strong like-for-like revenue growth on improved Adjusted EBITA margins, combined with further improvement in returns, our operating model is performing well.

Our business reorganisation was finalised with the incorporation of HSS ProService which we completed on 3rd July, creating a business focused on customer acquisition, sales enquiry conversion and leveraging our digital assets. Our technology roadmap is ahead of schedule, helping our asset-light, technology-focused ProService business deliver exciting results and putting us in a strong position for further profitable growth.

Technology Roadmap

In our FY21 results presentation we set out our technology roadmap for 2022 which involved four key milestones for our technology development. I am pleased to report that, following a period of successful development, we are ahead of plan:

1.     Cash transactions through HSS Pro. HSS Pro is the interface colleagues use to fulfil enquiries which we rolled out for all account-based transactions in 2021. We have now added the necessary functionality to allow colleagues to fulfil enquiries for cash customers (including ID-checking and payment-processing). We have just started rolling this out and with significant improvements in the user journey, we forecast much better conversion rates and strengthening enquiry levels, mirroring our experience with the initial rollout of HSS Pro.

2.     Extended rehire range available on hss.com. Our rehire revenues have for a long time grown ahead of the Group, despite limited visibility and no transactional functionality for these products on our website. We are now completing the development of our platform that will allow us to surface an extended range of products on our website and enable customers to complete a seamless end-to-end rehire transaction online. This tech is currently in test, and we expect to roll it out in Q4, driving up page views and conversion rates amongst trade and retail customers.

3.     Enhance the ProService platform. This interface to our technology provides larger customers with the ability to efficiently manage and control their building services requirements on a single platform, including the procurement of equipment hire and other related services such as equipment sales, waste management, training and potentially more. We have commenced the rollout to one of the UK's top 20 construction companies, which will use this platform within its procurement team. We also have agreement with our number one strategic account to transfer their business to this platform in Q1 23. We are very excited about the prospect of offering this technology to many more key accounts next year, increasing our share of their wallets.

4.     Further development of the supplier portal. Following enhancements to the supplier interface, we are now promoting reciprocal business from suppliers who can use the platform to source equipment for their customers that they cannot otherwise fulfil. This allows them to benefit from our network of suppliers, improving their own proposition and returns.

In summary, all four elements of our 2022 roadmap will be rolled out in the near term, leaving the HSS ProService business well poised for its next stage of growth.

Builders Merchant Network Expansion

In H1 2022 we increased the number of builders merchant locations from 53 to 60, and they now typically account for 15-20% of transactions raised in England and Wales. The 60 locations provide customers with a convenient location to collect equipment alongside their building materials, saving them time during their busy working day. We have 18 builders merchant partners all of whom have provided positive feedback on the mutually beneficial partnerships. We continue to benefit from access to the merchants' customer base and footfall, and the combination of our brand and service offering strengthens their overall customer proposition. This channel delivered 15% like-for-like growth in H1 22 and we continue to be delighted with the way in which these partnerships are maturing.

Incorporation of HSS ProService

In 2021 we began to reorganise our business into two divisions to bring new focus on how we acquire customers and then fulfil their requirements. We recently completed the legal separation of the two businesses. Our newly incorporated ProService business is an asset-light, technology-driven marketplace business with 27,000 customers and over 600 suppliers, all connected through our technology platform Brenda. The platform provides customers with access to the full market of hire equipment with, we believe, the broadest range of products and best availability in our industry. The platform provides suppliers with low-cost access to lots of customers, and the ability to drive utilisation and returns. We are very excited about the growth prospects for our ProService business, together with our HSS Operations business which is the primary supplier to it.

HSS Operations

In H1 2022 our HSS Operations business completed the rollout of route optimisation software (Satalia). This technology has been embedded into the operation of our transport teams in Customer Distribution Centres and is delivering improved efficiency as well as maintaining delivery performance at 99%. Average mileage per job has reduced by 12%, helping us to reduce scope one carbon emissions and to counter inflationary pressures. With the technology embedded we can begin the second phase of this project, which will be delivered in 2023 and result in an improved delivery time window proposition being available for customers at the point of order.

Our HSS Operations business continues to deliver strong performance metrics beyond transport efficiency. Accident frequency rates are materially lower than FY21, and these were already at historically low levels. Fleet utilisation remains high at 56%, supporting the Group's excellent ROCE. Click and collect adoption remains strong at 16%.

ESG Progress

In June 2022 we published our first ever ESG Impact report, which sets out our 2040 Net Zero plan, our ESG targets and the progress we are making. The report has been exceptionally well received by a broad selection of stakeholders, who are pleased to see the progress made and the ambitious plans we have set out. In August 2022, following an extensive evidence-based assessment by EcoVadis, we were awarded their 'Advanced' sustainability rating award. EcoVadis is the world's largest provider of business sustainability ratings, assessing over 90,000 companies worldwide, and we are delighted that they have placed us in the 91st percentile of businesses in our industry for ESG performance.

Market Outlook

Despite inflationary pressures and uncertainty created by the war in Ukraine, we have seen resilience across the broad range of end markets our business is exposed to. Whilst uncertainty remains, the construction output forecasts in the market continue to point to growth in 2023 and 2024. We are confident that should the outlook worsen, our flexible, low-cost business model and strong balance sheet puts us in the best possible position to outperform the sector.

In summary, during H1 2022 we finalised the reorganisation of our business, made great advances on our technology roadmap and delivered an impressive set of financial results. All this while operating safely, maintaining high levels of customer service and pursuing our ambitious ESG targets. I would like to thank all stakeholders and in particular our colleagues for their great work and its part in delivering these results.

Group Financial Performance

Results and commentary are presented on a continuing operations basis unless otherwise noted, reflecting the impact of the strategic disposals of Laois and All Seasons Hire in April and September 2021 respectively.

Revenue and segmental contribution

The H1 22 results are based on 26 weeks of trading whereas H1 21 was 27 weeks.  Revenue growth metrics versus H1 21 have been adjusted to exclude the impact of this additional week as well as non-recurring COVID related benefits in H1 21 associated with a business interruption insurance claim and the Republic of Ireland wage subsidy scheme (with the adjusted metric shown in brackets).

Revenue in H1 22 was £159.9m, 9% (11%) higher than the previous period (H1 21: £146.3m), a solid trading performance delivered through effective strategy execution in a difficult macro-environment. The Group has managed well-documented inflationary pressures through continued price management.

Turning to segmental performance, Rental and related revenues were £99.3m in H1 22 (H1 21: £92.9m), 7% (9%) higher than in H1 21, and with a high level of utilisation at 56% despite a larger fleet. Contribution is £64.9m (H1 21: £64.8m). Margin decreased to 65.3% (H1 21: 69.7%) with continued strong price management offset by the increased cost of fuel impacting revenue mix to the detriment of margin.

Services revenue has increased by 13% (16%) to £60.6m (H1 21: £53.4m). Contribution increased to £9.1m (H1 21: £7.7m).  Margins have increased by 0.6pp at 15.1% (H1 21: 14.5%) with the overall performance driven by improved customer experience (via ongoing technology enhancements and broadening the third party rehire supply chain) and record profit levels in the Training business.

Costs

In October 2020 the Group implemented a new digitally led operating model, reducing the fixed cost base by £15m. During H1 21 significant financial benefit was achieved due to the early surrender of property leases (£7.4m) which resulted in the release of related provisions and liabilities. These non-recurring items mask the ongoing benefit from the new operating model and the disciplined cost control that has been maintained since then.

Cost of sales increased to £81.3m during the period (H1 21: £71.0m) driven by the growth in the Services business but also as a result of the increase in resale fuel prices noted in the segmental commentary above.

Distribution costs increased by £2.1m to £14.4m (H1 21: £12.4m). Costs have been tightly managed but have increased due to the combined impact of higher road fuel prices and a volume driven uplift in activity, as well as additional payments made to colleagues in H1 22 to support them through the cost-of-living challenge.

Administrative expenses increased by £8.1m to £53.2m (H1 21: £45.1m) however the prior year benefited by £7.5m from property liability releases following surrender of a significant number of non-trading stores and the current year includes £0.7m of exceptional expenses principally related to the Group's restructure (see below) all of which have been treated as exceptional. Excluding these items, costs are broadly flat despite one-off payments being made to colleagues as part of the cost-of-living support noted above.

Net finance expenses

Net finance expenses have reduced by £7.6m, following the successful refinancing completed in November 2021, which saw the Group reducing its level of senior finance facility to £70m and achieving a significant reduction in the interest rate.

Other operating income

Other operating income of £0.3m relates to sub-let income on property space not required by the Group. In the prior year £1.6m was recognised with £1.2m received under a COVID-19 business interruption insurance claim, £0.2m release of provision held against Irish Temporary Wage Subsidy Scheme 2020 receipts and the balance being sublease rental income.

Exceptional items

Total exceptional items of £0.6m have been recognised in the period. Cost of £0.9m relates to completing the legal separation of the ProService and HSS Operations businesses into separate entities. The separation will create better visibility of results and allow increased focus on delivery within each business. The actual separation took place after the reporting date. Revisiting the discount rate on the Group's onerous contract provision resulted in a credit of £0.2m and £0.2m was released from provisions for closed stores. In the prior year, an exceptional credit of £7.4m was recognised, the result of efforts to negotiate and complete early surrenders on stores closed as part of the Group's acceleration of strategy announced in October 2020.

Profitability

Adjusted EBITDA of £32.9m in H1 22 is slightly higher than the prior period (H1 21: £32.8m), however as noted above, the prior year benefited from an additional week's trading as well as £1.6m of COVID related income and cost recovery.  Adjusting for these items, EBITDA is 6% ahead of the prior year as the Group's lower cost operating model and investments in technology continue to deliver.

Adjusted EBITA increased from £13.1m in H1 21 to £13.6m in H1 22 with margin decreasing slightly from 9% in H1 21 to 8% in the current year. Adjusting for the additional week's trading and non-recurring COVID related income, EBITA margins increased by 0.5pp.

The result of the drivers noted above is that the Group recognised a much-improved Adjusted profit before tax of £8.4m versus £0.8m in the prior period. The Group has changed the definition of Adjusted profit before tax to include amortisation of software (refer to note 19). Profit from continuing operations before tax decreased slightly to £6.5m (H1 21: £6.8m) reflecting the significant impact of exceptional credits in the prior year.

The improved profitability led to the adjusted basic earnings per share increasing to 0.96p in H1 22 from 0.09p in the prior period. Basic earnings per share were 0.86p versus 0.96p in the prior period. The diluted basic earnings per share were only marginally lower at 0.84p versus 0.93p in H1 21, despite the prior period benefitting from the material non-recurring items already highlighted.

Profit from discontinued operations (H1 21)

To enable the Group to strengthen its balance sheet and focus on its strategic priority to Transform the Tool Hire Business, the Group made two strategic divestments during the year ended 1 January 2022:

Laois Hire Services Limited

Laois Hire Services Limited, the Irish large plant hire business, was sold to Briggs Equipment Ireland Limited on 7 April 2021. Proceeds of the disposal, net of transaction costs, were £10.0m generating a profit on disposal of £3.2m.

All Seasons Hire Limited

All Seasons Hire Limited, a cooling and heating provider, was sold to Cross Rental Services Limited with the transaction completing on 29 September 2021. Proceeds of the disposal, net of transaction costs, were £54.3m generating a profit on disposal of £38.0m. In the H1 21 comparator the All Seasons Hire result has been re-presented as profit from discontinued operations.

As part of these transactions, the Group entered into commercial agreements to cross-hire equipment to ensure the broadest possible distribution of, and customer access to, each party's existing fleet.

Return on Capital Employed

ROCE increased to 24% from 19% in the prior year, supported by strong performance in the capital-light Services business, targeted fleet investment using the Group's insight capability and growth through the digitally led low-cost operating model established in 2020. ROCE is calculated as Adjusted EBITA (last twelve months) divided by average capital employed, where capital employed is total assets except intangibles, derivatives and cash, less current liabilities excluding debt items.

Net debt

Net debt on 2 July 2022 was £103.2m, a reduction of £54.5m from the H1 21 (£157.8m). This has been driven by improved EBITDA, strong working capital management, proceeds from the disposal of Laois and ASH and a reduction in lease liabilities following property surrenders. Leverage has reduced to 1.5x from 2.0x (H1 21 as reported, FY 21: 1.5x).

The debt facilities consist of a £70.0m senior finance facility and an undrawn revolving credit and overdraft facility of £23.2m, both maturing in November 2025 but with an option to extend for a further 12 months. Including cash balances of £38.7m, the Group had access to £74.3m of combined liquidity at 2 July 2022.

Dividend

The Group has made great progress in delivering its strategy, including strengthening the balance sheet, which has resulted in increased profitability and cash generation while continuing to invest in the technology roadmap. The Board has therefore decided to implement a progressive dividend policy. An interim dividend of 0.17p per share was approved by the Board on 28 September and will be paid during November 2022.

Going concern

While encouraged by the resilience of the Group during a period of continued disruption, the Directors continue to model via a number of scenarios current macroeconomic factors such as increasing inflation and interest rates. At 28 September 2022 the Group had sufficient liquidity to operate within banking covenants for the next 12 months even under a 'reasonable worst case' scenario. The reasonable worst case scenario models lower than forecast market growth rates, increased inflationary pressures and an increase in debtor days.

After reviewing the above, considering current and future developments and principal risks and uncertainties, and making appropriate enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence over a period of at least twelve months from the date of approval of these financial statements.  Accordingly, they continue to adopt the going concern basis in preparing these unaudited condensed consolidated financial statements.

Risks and uncertainties

The principal risks and uncertainties that could have a material impact upon the Group's performance over the remaining 26 weeks of the 2022 financial year have not changed significantly from those described in the Group's 2021 Annual Report and are summarised in note 18 of this interim report.

The main risk expected to affect the Group in the remaining 26 weeks of the 2022 financial year is macroeconomic conditions, which includes the impact of supply chain pressures, high inflation on energy costs and colleagues, and on demand from new and existing customers within the numerous and diverse market sectors which HSS serves.

 

By order of the Board

 

Steve Ashmore

Director

28 September 2022

 

HSS Hire Group plc 

Unaudited condensed consolidated income statement




26 weeks ended
2 July 2022

As restated

27 weeks ended
3 July 2021


Note


£000s

£000s






Revenue

3


159,937

146,298






Cost of sales



(81,254)

(71,027)






Gross profit



78,683

75,271






Distribution costs



(14,425)

(12,359)

Administrative expenses



(53,160)

(45,106)

Impairment losses on contract assets



(1,204)

(1,283)

Other operating income

4


315

1,554






Adjusted EBITDA

19


32,917

32,788

Less: Depreciation

6


(19,359)

(19,707)

Adjusted EBITA

19


13,558

13,081

Less: Exceptional items (non-finance)

5


(488)

7,539

Less: Amortisation

6


(2,861)

(2,543)






Operating profit

 


10,209

18,077






Finance expense

7


(3,674)

(11,322)






Adjusted profit before tax

19


8,376

764

Less: Exceptional items (non-finance)

5


(488)

7,539

Less: Exceptional items (finance)

5


(66)

(120)

Less: Amortisation of customer relationships and brands

6


(1,287)

(1,428)






Profit on continuing operations before tax

 


6,535

6,755




 


Income tax charge



(449)

(54)




 


Profit from continuing operations

 


6,086

6,701






Profit on disposal of discontinued operations

17


-

3,180

Profit from discontinued operations, net of tax

17


-

4,170

Profit for the financial period

 


6,086

14,051






Earnings per share (pence)

 




Continuing operations

 




Adjusted basic earnings per share

8


0.96

0.09

Adjusted diluted earnings per share

8


0.94

0.09

Basic earnings per share

8


0.86

0.96

Diluted earnings per share

8


0.84

0.93




 


Continuing and discontinued operations

 




Basic earnings per share

8


0.86

2.02

Diluted earnings per share

8


0.84

1.95

 

The notes form part of these condensed consolidated financial statements.

 

 

HSS Hire Group plc 

Unaudited condensed consolidated statement of comprehensive income

 



26 weeks ended
2 July 2022

27 weeks ended
3 July 2021



£000s

£000s





Profit for the financial period

 

6,086

14,051





Items that may be reclassified to profit or loss:

 



Foreign currency translation differences arising on consolidation of foreign operations


7

(654)





Other comprehensive gain/(loss) for the period, net of tax

 

7

(654)





Total comprehensive profit for the period

 

6,093

13,397





Attributable to owners of the Group

 

6,093

13,397

 

The notes form part of these condensed consolidated financial statements.

 

HSS Hire Group plc 

Unaudited condensed consolidated statement of financial position

 




2 July

2022

1 January 2022

 

Note


£000s

£000s






ASSETS

 




Non-current assets

 




Intangible assets

9


147,561

147,648

Property, plant and equipment



 


   - Hire equipment

10


53,177

44,332

   - Non-hire assets

10


13,682

15,605

Right of use assets



 


   - Hire equipment

11


20,776

20,651

   - Non-hire assets

11


49,593

55,329

Deferred tax asset



2,596

2,404




287,385

285,969




 


Current assets

 


 


Inventories



3,105

2,682

Trade and other receivables

12


80,758

78,680

Cash



38,689

42,269




122,552

123,631




 


Total assets

 


409,937

409,600




 


LIABILITIES

 


 


Current liabilities

 


 


Trade and other payables

13


(80,286)

(78,704)

Lease liabilities

14


(17,946)

(19,310)

Provisions

16


(4,532)

(4,713)

Current tax liabilities



-

(293)




(102,764)

(103,020)




 


Non-current liabilities

 




Lease liabilities

14


(53,601)

(57,255)

Borrowings

15


(68,407)

(68,166)

Provisions

16


(16,665)

(19,110)

Deferred tax liabilities



(148)

(148)




(138,821)

(144,679)




 


Total liabilities

 


(241,585)

(247,699)




 

 

Net assets

 


168,352

161,901




 

 

EQUITY

 


 

 

Share capital



7,050

7,050

Share premium



45,552

45,552

Merger reserve



97,780

97,780

Foreign exchange translation reserve



(747)

(754)

Retained earnings



18,717

12,273

Total equity

 


168,352

161,901

 

 

The notes form part of these condensed consolidated financial statements.

 

HSS Hire Group plc 

Unaudited condensed consolidated statement of changes in equity

 


Share capital

Share premium

Warrant reserve

Merger reserve

Foreign exchange translation reserve

Retained earnings

Total equity

 

£000s

£000s

£000s

£000s

£000s

£000s

£000s

 








At 2 January 2022

7,050

45,552

-

97,780

(754)

12,273

161,901

 








Profit for the period

-

-

-

-

-

6,086

6,086

Foreign currency translation differences arising on consolidation of foreign operations

-

-

-

-

7

-

7

Total comprehensive profit for the period

-

-

-

-

7

6,086

6,093

Transactions with owners recorded directly in equity

 







Share-based payment charge

-

-

-

-

-

358

358

At 2 July 2022

7,050

45,552

-

97,780

(747)

18,717

168,352

 








 

 


Share capital

Share premium

Warrant reserve

Merger reserve

Foreign exchange translation reserve

Retained deficit

Total equity


£000s

£000s

£000s

£000s

£000s

£000s

£000s

At 27 December 2020

6,965

45,580

2,694

97,780

15

(45,444)

107,590









Profit for the period

-

-

-

-

-

14,051

14,051

Foreign currency translation differences arising on consolidation of foreign operations

-

-

-

-

(654)

-

(654)

Total comprehensive income/(loss) for the period

-

-

-

-

(654)

14,051

13,397

Cost true up relating to FY 20 share issue

-

(28)

-

-

-

-

(28)

Share-based payment charge

-

-

-

-

-

451

451

Share-based payment transfer to reserves

-

-

-

-

-

(77)

(77)

At 3 July 2021

6,965

45,552

2,694

97,780

(639)

(31,019)

121,333









 

The notes form part of these condensed consolidated financial statements.

 

HSS Hire Group plc 

Unaudited condensed consolidated statement of cash flows

 


Note

26 weeks ended
2 July 2022

27 weeks

ended
3 July 2021



£000s

£000s

Profit after income tax

 

6,086

14,051

Adjustments for:




- Tax


449

37

- Profit on disposal of discontinued operations

17

-

(3,180)

- Amortisation

6

2,851

2,634

- Depreciation

6

17,749

19,398

- Accelerated depreciation relating to hire stock customer losses and hire stock write offs

6

1,666

1,766

- Profit on disposal of property, plant and equipment and right of use assets

6

(64)

(47)

- Lease disposals

14

-

(3,463)

- Capital element of net investment in sublease receipts


-

129

- Share-based payment charge


358

451

- Foreign exchange gains on operating activities


(40)

(378)

- Finance expense

7

3,674

11,388

Changes in working capital (excluding the effects of disposals and exchange differences on consolidation):




- Inventories


(423)

(389)

- Trade and other receivables

12

(1,775)

3,265

- Trade and other payables

13

1,954

10,217

- Provisions

16

(1,800)

(6,929)

Net cash flows from operating activities before changes in hire equipment

 

30,685

48,950

Purchase of hire equipment

10

(14,404)

(9,749)





Cash generated from operating activities

 

16,281

39,201





Net interest paid


(3,228)

(10,498)

Income tax (paid)/received


(1,238)

7

Net cash generated from operating activities

 

11,815

28,710





Cash flows from investing activities

 



Proceeds on disposal of business, net of cash disposed of

17

-

9,550

Proceeds on disposal of assets as part of business divestiture

17

-

526

Purchases of non-hire property, plant, equipment and software

10,11

(3,670)

(2,836)

Net cash generated (used in)/from investing activities

 

(3,670)

7,240





Cash flows from financing activities

 



Costs associated with capital raise


-

(1,556)

Repayment of borrowings


-

(38,432)

Capital element of lease liability payments

14

(11,725)

(12,279)





Net cash used in financing activities

 

(11,725)

(52,267)

 

 

Net decrease in cash

 

(3,580)

(16,317)





Cash at the start of the period


42,269

97,573

Cash at the end of the period - continuing operations


38,689

79,626

Cash at the end of the period - discontinued operations


-

1,630

Cash at the end of the period

 

38,689

81,256

 

 

 


 

The notes form part of these condensed consolidated financial statements.

 

HSS Hire Group plc 

Notes forming part of the unaudited condensed consolidated financial statements

 

1.         General information

 

The Company is a public limited company, is quoted on the AIM market of the London Stock Exchange and is incorporated and domiciled in the United Kingdom. The address of the registered office is Building 2, Think Park, Mosley Road, Manchester M17 1FQ. These condensed consolidated financial statements comprise the Company and its subsidiaries (the 'Group') and cover the 26 week period ended 2 July 2022.

 

The Group is primarily involved in providing tool and equipment hire and related services in the United Kingdom and the Republic of Ireland.

 

The condensed consolidated financial statements were approved for issue by the Board on 28 September 2022.

 

The condensed consolidated financial statements do not constitute the Statutory Accounts within the meaning of Section 434 of the Companies Act 2006 and have not been subject to audit by the Group's auditor. Statutory Accounts for the year ended 1 January 2022 were approved by the Board on 27 April 2022 and delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

 

2.         Basis of preparation and significant accounting policies

 

The condensed consolidated financial statements for the 26 weeks ended 2 July 2022 have been prepared in accordance with IAS 34 Interim Financial Reporting. The condensed consolidated financial statements should be read in conjunction with the Group's Annual Report and Accounts for the year ended 1 January 2022, which were prepared in accordance with IFRS as adopted by the UK (IFRS).

 

Accounting policies are consistent with those in the Statutory Accounts for the year ended 1 January 2022.

 

Going concern

 

At 2 July 2022, the Group's financing arrangements consisted of a drawn senior finance facility of £70.0m, undrawn overdraft facilities of £6.0m, undrawn revolving credit facilities of £17.2m and finance lease lines to fund hire fleet capital expenditure, of which £12.4m had not been utilised. Both the senior finance facility and revolving credit facility are subject to net debt leverage and interest rate cover financial covenant tests each quarter. At the reporting date the Group had significant headroom against these covenants. Cash at 2 July 2022 was £38.7m.

 

While encouraged by the resilience of the Group during a period of continued disruption, the Directors continue to model via a number of scenarios current macroeconomic factors such as increasing inflation and interest rates. At 28 September 2022 the Group had sufficient liquidity to operate within banking covenants for the next 12 months even under a 'reasonable worst case' scenario. The reasonable worst case scenario models lower than forecast market growth rates, increased inflationary pressures and an increase in debtor days.

After reviewing the above, considering current and future developments and principal risks and uncertainties, and making appropriate enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence over a period of at least twelve months from the date of approval of these financial statements.  Accordingly, they continue to adopt the going concern basis in preparing these unaudited condensed consolidated financial statements.

 

Prior period restatement

The group made two strategic divestitures during the year ended 1 January 2022 (see note 17). These met the IFRS 5 definition of discontinued operations and so the prior period figures included in the Consolidated Income Statement and the supporting notes have been re-presented to exclude amounts relating to discontinued operations.

 

Following a review of the Annual Report and Accounts for the year to 26 December 2020 by the FRC's Corporate Reporting Review Team, a change has been made to separately disclose the impairment loss on trade receivables of £1.3m on the face of the Consolidated Income Statement. Previously it was included within administrative expense. There is no impact on the profit for the period.

 

3.         Segmental reporting

 

The Group's operations are segmented into the following reportable segments:

-       Rental and related revenue; and

-       Services.

 

Rental and related revenue comprises the rental income earned from owned tools and equipment, including powered access, power generation and HVAC assets, together with directly related revenue such as resale (fuel and other consumables), transport and other ancillary revenues. Services comprise the Group's HSS OneCall rehire business and HSS Training. HSS OneCall provides customers with a single point of contact for the hire of products that are not held within HSS' fleet and are obtained from approved third party partners; HSS Training provides customers with specialist safety training across a wide range of products and sectors.

 

Contribution is defined as segment operating profit before branch and selling costs, central costs, depreciation, amortisation and exceptional items.

 

All segment revenue, operating profit, assets and liabilities are attributable to the principal activity of the Group being the provision of tool and equipment hire and related services in, and to customers in, the United Kingdom and the Republic of Ireland. No single customer represented more than 10% of Group Revenue in the 26 week period ending 2 July 2022 (27 weeks ending 3 July 2021: one customer was 10% or more of Group Revenue).

 


26 weeks ended 2 July 2022


Rental

(and related revenue)

Services

Central

Total


£000s

£000s

£000s

£000s


 

 

 

 

Total revenue from external customers from continuing operations

99,311

60,626

-

159,937


 

 

 

 

Contribution

64,872

9,129

-

74,001

 

 

 

 

 

Branch and selling costs

 

 

(26,740)

(26,740)

Central costs

 

 

(14,344)

(14,344)

 

 

 

 

 

Adjusted EBITDA

 

 

 

32,917

Less: Exceptional items (non-finance)

 

 

(488)

(488)

Less: Depreciation and amortisation

(12,295)

(224)

(9,701)

(22,220)

 

 

 

 

 

Operating profit

 

 

 

10,209

 

 

 

 

 

Net finance expenses

 

 

 

(3,674)


 

 

 


Profit before tax from continuing operations

 

 

 

6,535

 

 

 

 

 

 

 

As at 2 July 2022

 

Rental

(and related revenue)

Services

Central

Total

 

£000s

£000s

£000s

£000s

 

 

 

 

 

Additions to non-current assets

 

 

 

 

Property, plant and equipment

15,416

41

865

16,322

Right of use assets

3,700

144

1,307

5,151

Intangibles

1,037

39

1,688

2,764


 

 

 

 

Non-current assets net book value

 

 

 

 

Property, plant and equipment

53,177

150

13,532

66,859

Right of use assets

20,776

401

49,192

70,369

Intangibles

4,692

3,910

138,959

147,561

 

 

 

 

 

Unallocated corporate assets

 

 

 

 

Deferred tax assets

 

 

2,596

2,596

Current assets

 

 

122,552

122,552

Current liabilities

 

 

(102,764)

(102,764)

Non-current liabilities

 

 

(138,821)

(138,821)


 

 

 

 


 

 

 

168,352


 

 

 

 

 



As restated1

27 weeks ended 3 July 2021



Rental

(and related revenue)

Services

Central

Total



£000s

£000s

£000s

£000s







Total revenue from external customers from continuing operations


92,864

53,434

-

146,298







Contribution


64,756

7,745

-

72,501













Branch and selling costs




(24,863)

(24,863)

Central costs




(14,850)

(14,850)







Adjusted EBITDA





32,788

Add back: Exceptional credit




7,539

7,539

Less: Depreciation and amortisation


(13,590)

(297)

(8,363)

(22,250)







Operating loss





18,077







Net finance expenses





(11,322)







Profit before tax from continuing operations





6,755

 1. The notes supporting the income statement have been restated to disclose continuing operations (note 2).


 

 

As at 1 January 2022


Rental

(and related revenue)

Services

Central

Total


£000s

£000s

£000s

£000s






Additions to non-current assets





Property, plant and equipment

18,558

16

2,750

21,324

Right of use assets

8,558

56

6,826

15,440

Intangibles

2,928

39

1,361

4,328






Non-current assets net book value





Property, plant and equipment

44,332

129

15,476

59,937

Right of use assets

20,651

384

54,945

75,980

Intangibles

143,553

836

3,259

147,648






Unallocated corporate assets





Deferred tax asset



2,404

2,404

Current assets



123,631

123,631

Current liabilities



(103,020)

(103,020)

Non-current liabilities



(144,679)

(144,679)






Net assets




161,901


 

 

 

 

 

4.         Other operating income

 




26 weeks ended
2 July 2022

As restated1

27 weeks ended
3 July 2021




£000s

£000s






COVID-19 Government grant income: Job retention schemes


-

232

Insurance proceeds



-

1,203

Sublease rental and service charge income



315

119




315

1,554






During the period sub-let rental income of £0.3m (27 weeks ended 3 July 2021: £0.1m) was received on properties no longer used by the Group for trading purposes.

 

During the 27 weeks ended 3 July 2021 the Group recognised £0.2m of income received in 2020 as a result of earlier participation in the Republic of Ireland's COVID-19 Wage Subsidy Scheme. Recognition had been deferred pending confirmation of entitlement. During the 27 weeks ended 3 July 2021 the Group also received £1.2m from a COVID-19 business interruption insurance claim.

 

1. The notes supporting the income statement have been restated to disclose continuing operations (note 2).

 

5.         Exceptional items

 

Items of income or expense have been shown as exceptional because of their size and nature or because they are outside the normal course of business. As a result, during the 26 weeks ended 2 July 2022 the Group has recognised exceptional items as follows:

 




Included in administrative expenses

Included in other operating income

Included in finance expense

26 weeks ended
2 July 2022




£000s

£000s

£000s

£000s








Onerous property costs/(credits)



12

(258)

13

(233)

Costs relating to restructure

945

-

-

945

Onerous contract

(211)

-

53

(158)

Total



746

(258)

66

554

 

During the 27 weeks ended 3 July 2021, the Group recognised exceptional items analysed as follows:




 

Included in administrative expenses

Included in finance expense

27 weeks ended
3 July 2021




 

£000s

£000s

£000s




 




Release of onerous property (credits)/costs



 

(7,539)

120

(7,419)

Exceptional items - continuing operations

 

(7,539)

120

(7,419)

Business divesture - discontinued operations (note 17)

(3,180)

-

(3,180)

Total



 

(10,719)

120

(10,599)

 

 


 

 



Costs related to onerous properties: branch and office closures (incurred in 2022 and 2021)

In the 26 weeks ended 2 July 2022 an exceptional credit of £0.2m has been recognised, this mainly relates to sublease income on vacant stores. In the 27 weeks ended 3 July 2021 an exceptional credit of £7.4m was recognised. This related to the release of lease liabilities and onerous non-rental property cost and dilapidation provisions on surrender of properties closed as part of the Group's acceleration of strategy announced in October 2020.

Cost relating to restructuring (incurred in 2022 only)

Following the changes made to its operating network in Q4 2020 and the roll-out of HSS Pro in Q1 2021, the Group commenced an exercise to legally separate the HSS Operations and Pro Service divisions into distinct entities. Fees incurred relating to the restructure of £0.9m have been recognised as exceptional. The legal separation was completed on 3 July 2022 although further costs are expected in relation to increasing the technological capability and efficiency of the Group.

 

Business divesture (incurred in 2021 only)

To enable the Group to focus on its strategic priority to Transform the Tool Hire Business, the disposal of Laois Hire Service Limited, the Irish large plant hire business, to Briggs Equipment Ireland Limited ("Briggs") completed on 7 April 2021. Proceeds of the disposal, net of transaction costs, were £10.0m generating a profit on disposal of £3.2m. As part of the transaction, HSS entered into a commercial agreement with Briggs for the cross hire of equipment to ensure the broadest possible distribution of, and customer access to, each party's existing fleet.

 

6.         Depreciation and amortisation expense

 





 

26 weeks ended
2 July 2022

 

As restated1

27 weeks ended
3 July 2021

 





£000s

 

£000s

 








 

Amortisation




2,861

 

2,543

 

Depreciation




19,359

 

19,707

 








 

Amounts charged in respect of depreciation:

26 weeks ending 2 July 2022

27 weeks ending 3 July 2021


Property, plant and equipment

Right of use assets

Total

Property, plant and equipment

Right of use assets

Total


£000s

£000s

£000s

£000s

£000s

£000s








Depreciation (notes 10,11)

8,087

9,662

17,749

7,889

11,509

19,398

Accelerated depreciation relating to hire stock lost by customers or written off (notes 10,11)

1,404

262

1,666

6,488

133

6,621

Loss on disposal of other assets (notes 10,11)

56

-

56

625

304

929

Total depreciation per notes 10,11

9,547

9,924

19,471

15,002

11,946

26,948








Items not charged to income statement (continuing operations)



Dilapidations profit on surrender

(120)

-

(120)

-

-

-

Accelerated depreciation included in exceptionals

8

-

8

(243)

-

(243)

Disposal of discontinued operations hire stock assets

-

-

-

(4,612)

-

(4,612)

(Loss)/profit on disposals included in exceptional amounts

-

-

-

(94)

145

51

Disposal of discontinued operations other assets

-

-

-

(588)

(439)

(1,027)

Depreciation from discontinued operations

-

-

-

(1,172)

(238)

(1,410)

Total non-exceptional depreciation from continuing operations

9,435

9,924

19,359

8,293

11,414

19,707

 

1. The notes supporting the income statement have been restated to disclose continuing operations (note 2).

 

Amounts charged in respect of amortisation:

 






26 weeks ended
2 July 2022

27 weeks ended
3 July 2021






£000s

£000s

Intangible assets







Amortisation (note 9)





2,851

2,634

Loss on write off




10

-






2,861

2,634

Less amortisation from discontinued operations





-

(91)

Total non-exceptional amortisation





2,861

2,543








 

7.         Finance income and expense

 




26 weeks ended
2 July 2022

As restated1

27 weeks ended
3 July 2021




£000s

£000s






Senior finance facility



1,269

7,590

Amortisation of debt issue costs



254

1,085

Accelerated amortisation of debt issue costs



-

166

Lease liabilities



1,936

2,031

Interest unwind on discounted provisions



94

13

Revolving credit facility, including commitment fees



132

299

Other interest (received)/paid



(11)

138




3,674

11,322






1. The notes supporting the income statement have been restated to disclose continuing operations (note 2).

 

8.         Earnings per share

 

Basic earnings per share:

 


Profit after tax from total operations

Profit after tax from continuing operations

Weighted average number of shares

Earnings after tax from total operations per share

Earnings after tax from continuing operations per share

 

£000s

£000s

000s

pence

pence

26 weeks ended 2 July 2022

6,086

6,086

704,988

0.86

0.86

27 weeks ended 3 July 2021

14,051

6,701

696,478

2.02

0.96

 

Basic earnings per share is calculated by dividing the result attributable to equity holders by the weighted average number of ordinary shares in issue for that period.

 

Diluted earnings per share:

 


Profit after tax from total operations

Profit after

tax from continuing operations

Weighted average number of shares

Earnings after tax from total operations per share

Earnings after tax from continuing operations per share

 

£000s

£000s

000s

pence

pence

26 weeks ended 2 July 2022

6,086

6,086

722,559

0.84

0.84

27 weeks ended 3 July 2021

14,051

6,701

721,364

1.95

0.93

 

 

Diluted earnings per share is calculated using the result attributable to equity holders divided by the weighted average number of shares outstanding assuming the conversion of potentially dilutive equity derivatives outstanding, being market value options, nil-cost share options (LTIP shares), restricted stock grants, deferred bonus shares and warrants.

 

All of the Group's potentially dilutive equity derivative securities were dilutive for the purpose of diluted basic earnings per share for the period (27 weeks ending 3 July 2021: all equity derivative securities were dilutive except for the market value options and their related CSOP's which were anti-dilutive).

 

The following is a reconciliation between the basic earnings per share and the adjusted basic earnings per share:



26 weeks ended 2 July 2022

As restated1

27 weeks ended 3 July 2021



 Total operations

 Continuing operations

 Total operations

 Continuing operations



pence

pence

pence

pence

Basic earnings per share


0.86

0.86

2.02

0.96

Add back:






Exceptional items per share


0.08

0.08

(1.52)

(1.07)

Amortisation of customer relationships and brands per share


0.18

0.18

0.21

0.21

Tax per share


0.06

0.06

0.01

0.01

Charge:

 





Tax charge at prevailing rate


(0.22)

(0.22)

(0.14)

(0.02)

Adjusted basic earnings per share


0.96

0.96

0.58

0.09







 

The following is a reconciliation between the diluted earnings per share and the adjusted diluted earnings per share:



26 weeks ended 2 July 2022

 

As restated1

27 weeks ended 3 July 2021



 Total operations

 Continuing operations

 Total operations

 Continuing operations



pence

pence

pence

Pence

Diluted earnings per share


0.84

0.84

1.95

0.93

Add back:






Adjustment to basic loss per share for the impact of dilutive securities






Exceptional items per share


0.08

0.08

(1.47)

(1.03)

Amortisation of customer relationships and brands per share


0.18

0.18

0.20

0.20

Tax per share


0.06

0.06

0.01

0.01

Charge:

 





Tax charge at prevailing rate


(0.22)

(0.22)

(0.13)

(0.02)

Adjusted diluted earnings per share


0.94

0.94

0.56

0.09

 

1. The notes supporting the income statement have been restated to disclose continuing operations (note 2).

 

The weighted average number of shares for the purposes of calculating the diluted earnings per share are as follows:




 26 weeks ended
2 July 2022

 27 weeks ended
3 July 2021




Weighted average number of shares

Weighted average number of shares




000s

000s






Basic



704,988

696,478

Warrants



-

8,505

LTIP share options



4,687

8,368

Restricted stock grant



12,801

7,265

CSOP options



83

748

Diluted



722,559

721,364






 

9.     Intangible assets



Goodwill

Customer relationships

Brands

Software

Total

 


£000s

£000s

£000s

£000s

£000s

Cost

 






At 2 January 2022

 

115,855

25,400

22,590

31,856

195,701

Additions


-

-

-

2,764

2,764

At 2 July 2022

 

115,855

25,400

22,590

34,620

198,465

 







Amortisation

 






At 2 January 2022

 

-

23,301

298

24,454

48,053

Charge for the period


-

1,270

17

1,564

2,851

At 2 July 2022

 

-

24,571

315

26,018

50,904

Net book value

 






At 2 July 2022

 

115,855

829

22,275

8,602

147,561

 

 

 


Goodwill

 

Customer relationships

Brands

Software

Total

 



£000s

£000s

£000s

£000s

£000s

 

Cost







 

At 27 December 2020


124,877

26,744

23,222

27,580

202,423

 

Additions


-

-

-

1,751

1,751

 

Disposals


(1,695)

-

-

(138)

(1,833)

 

At 3 July 2021


123,182

26,744

23,222

29,193

202,341

 








 

Amortisation







 

At 27 December 2020


-

21,348

622

21,955

43,925

 

Charge for the period


-

1,377

51

1,206

2,634

 

Disposals


-

-

-

(138)

(138)

 

At 3 July 2021


-

22,725

673

23,023

46,421

 

Net book value







 

At 3 July 2021


123,182

4,019

22,549

6,170

155,920

 

 



Goodwill

Customer relationships

Brands

Software

Total



£000s

£000s

£000s

£000s

£000s

Cost







At 27 December 2020


124,877

26,744

23,222

27,580

202,423

Additions


-

-

-

4,328

4,328

Disposals


-

-

-

(52)

(52)

Business disposal


(9,018)

(1,344)

(632)

-

(10,994)

Foreign exchange differences


(4)

-

-

-

(4)

At 1 January 2022


115,855

25,400

22,590

31,856

195,701








Amortisation







At 27 December 2020


-

21,348

622

21,955

43,925

Charge for the period


-

2,675

84

2,551

5,310

Disposals


-

-

-

(52)

(52)

Business disposal


-

(722)

(408)

-

(1,130)

At 1 January 2022


-

23,301

298

24,454

48,053

Net book value







At 1 January 2022


115,855

2,099

22,292

7,402

147,648








The Group tests property, plant and equipment, goodwill and indefinite life brands for impairment annually and considers at each reporting date whether there are indicators that impairment may have occurred.

 

10.       Property, plant and equipment

 



Land & buildings

Plant & machinery

Materials & equipment held for hire

Total

 


£000s

£000s

£000s

£000s

Cost

 

 

 

 

 

At 2 January 2022

 

37,303

43,163

133,674

214,140

Transferred to right of use assets

 

-

-

(1,504)

(1,504)

Transferred from right of use assets

 

-

-

4,498

4,498

Additions

 

221

685

15,416

16,322

Disposals

 

(266)

(41)

(7,086)

(7,393)

Remeasurement

 

(790)

-

-

(790)

Foreign exchange differences

 

4

9

71

84

At 2 July 2022

 

36,472

43,816

145,069

225,357







Accumulated depreciation

 





At 2 January 2022

 

25,453

39,408

89,342

154,203

Transferred from right of use assets

 

-

-

2,140

2,140

Charge for the year

 

1,163

833

6,091

8,087

Disposals

 

(209)

(42)

(5,682)

(5,933)

Foreign exchange differences

 

-

-

1

1

At 2 July 2022

 

26,407

40,199

91,892

158,498







Net book value

 





At 2 July 2022

 

10,065

3,617

53,177

66,859

 

The transferred to right of use assets category represents assets that were purchased in the prior period and subsequently financed through hire purchase agreements.

 

The transferred from right of use assets category represents the acquisition of ROU assets at expiry of the lease in cases where the title is transferred to the Group.

 



Land & buildings

Plant & machinery

Materials & equipment held for hire

Total



£000s

£000s

£000s

£000s

Cost

 





At 27 December 2020


58,419

55,315

149,534

263,268

Transferred from right of use assets


-

-

5,967

5,967

Additions


673

412

9,749

10,834

Disposals


(618)

(1,235)

(17,669)

(19,522)

Foreign exchange differences


(31)

(31)

(581)

(643)

At 3 July 2021

 

58,443

54,461

147,000

259,904







Accumulated depreciation

 





At 27 December 2020


45,208

50,580

99,105

194,893

Transferred from right of use assets


-

-

3,336

3,336

Charge for the year


1,318

859

5,712

7,889

Disposals


(163)

(1,065)

(11,181)

(12,409)

Foreign exchange differences


(6)

(56)

(322)

(384)

At 3 July 2021

 

46,357

50,318

96,650

193,325







Net book value

 





At 3 July 2021

 

12,086

4,143

50,350

66,579

 




Land & buildings

Plant & machinery

Materials & equipment held for hire

Total




£000s

£000s

£000s

£000s

Cost

 

 





At 27 December 2020



58,419

55,315

149,534

263,268

Transferred from right of use assets



-

-

8,742

8,742

Additions



2,011

755

18,558

21,324

Disposals



(22,394)

(11,193)

(16,515)

(50,102)

Business disposal



(702)

(1,683)

(26,064)

(28,449)

Foreign exchange differences



(31)

(31)

(581)

(643)

At 1 January 2022

 

 

37,303

43,163

133,674

214,140








Accumulated depreciation

 

 





At 27 December 2020



45,208

50,580

99,105

194,893

Transferred to right of use assets



-

-

5,200

5,200

Charge for the year



2,543

1,710

12,482

16,735

Impairment



264

-

-

264

Disposals



(22,325)

(11,171)

(13,145)

(46,641)

Business disposal



(231)

(1,485)

(14,148)

(15,864)

Foreign exchange differences



(6)

(56)

(322)

(384)

Transfers



-

(170)

170

-

At 1 January 2022

 

 

25,453

39,408

89,342

154,203








Net book value

 

 





At 1 January 2022

 

 

11,850

3,755

44,332

59,937

 

11.       Right of use assets



Property

Vehicles

 

Equipment for internal use

Equipment for hire

Total



£000s

£000s

£000s

£000s

£000s

Cost

 






At 2 January 2022

 

56,847

26,283

520

25,339

108,989

Additions

-

1,451

-

3,700

5,151

Transferred from property, plant and equipment

-

-

-

1,504

1,504

Transferred to property, plant and equipment

-

-

-

(3,761)

(3,761)

Disposals

 

(71)

(334)

-

(489)

(894)

Foreign exchange differences

4

12

-

-

16

At 2 July 2022

 

56,780

27,412

520

26,293

111,005

 

 

 

 

 

 

 

Accumulated depreciation

 

 

 

 

 

At 1 January 2022

 

15,104

12,773

444

4,688

33,009

Transferred to property, plant and equipment

-

-

-

(1,403)

(1,403)

Charge for the period

3,878

3,296

29

2,459

9,662

Disposals

 

(71)

(334)

-

(227)

(632)

At 2 July 2022

 

18,911

15,735

473

5,517

40,636

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

At 2 July 2022

 

37,869

11,677

47

20,776

70,369

 

The transferred from property, plant and equipment category represents assets that were purchased in the prior period and subsequently financed through hire purchase agreements.

 

The transferred to property, plant and equipment category represents the acquisition of ROU assets at expiry of the lease in cases where the title is transferred to the Group.

 



Property

Vehicles

Equipment for internal use

Equipment for hire

Total



£000s

£000s

£000s

£000s

£000s

Cost

 






At 27 December 2020

61,253

23,681

562

21,998

107,494

Additions


519

651

-

3,590

4,760

Remeasurements


227

137

-

-

364

Transferred to property, plant and equipment

-

-

-

(5,967)

(5,967)

Disposals


(7,785)

(805)

-

(727)

(9,317)

Foreign exchange differences

(120)

(23)

-

-

(143)

At 3 July 2021

 

54,094

23,641

562

18,894

97,191








Accumulated depreciation

 





At 27 December 2020

15,403

6,854

327

1,422

24,006

Transferred to property, plant and equipment

-

-

-

(3,336)

(3,336)

Charge for the period


4,340

3,783

76

3,310

11,509

Disposals


(7,920)

(366)

-

(594)

(8,880)

At 3 July 2021

 

11,823

10,271

403

802

23,299








Net book value

 






At 3 July 2021

 

42,271

13,370

159

18,092

73,892

 



Property

Vehicles

Equipment for internal use

Equipment for hire

Total



£000s

£000s

£000s

£000s

£000s

Cost

 






At 27 December 2020

61,253

23,681

562

21,998

107,494

Additions


1,882

5,000

-

8,558

15,440

Remeasurements


3,407

128

(12)

-

3,523

Transferred to property, plant and equipment

-

-

-

(4,462)

(4,462)

Business disposal


(1,304)

(1,662)

(30)

-

(2,996)

Disposals


(8,755)

(859)

-

(755)

(10,369)

Amount re-recognised on disposal of sublease

544

-

-

-

544

Foreign exchange differences

(180)

(5)

-

-

(185)

At 1 January 2022

 

56,847

26,283

520

25,339

108,989








Accumulated depreciation

 





At 27 December 2020

15,403

6,854

327

1,422

24,006

Transfers to property, plant and equipment

-

-

-

(920)

(920)

Charge for the period


7,840

7,099

147

4,307

19,393

Impairments


233

-

-

-

233

Business disposal


(397)

(538)

(30)

-

(965)

Disposals


(7,975)

(642)

-

(121)

(8,738)

At 1 January 2022

 

15,104

12,773

444

4,688

33,009








Net book value

 






At 1 January 2022

 

41,743

13,510

76

20,651

75,980

 

Disclosures relating to lease liabilities are included in note 14.

 

12.       Trade and other receivables

26 week period ended 2 July 2022


Gross

Provision for impairment

Provision for credit notes

Net of provision


£000s

£000s

£000s

£000s






Trade receivables

71,815

(3,446)

(3,612)

64,757

Accrued income

7,254

(71)

-

7,183

Trade receivables and contract assets

79,069

(3,517)

(3,612)

71,940

Net investment in sublease

961

-

-

961

Other debtors

1,206

-

-

1,206

Prepayments

6,651

-

-

6,651

Total trade and other receivables

87,887

(3,517)

(3,612)

80,758



 

 

 

 


Year ended 1 January 2022


Gross

Provision for impairment

Provision for credit notes

Net of provision


£000s

£000s

£000s

£000s






Trade receivables

73,873

(3,884)

(3,225)

66,764

Accrued income

4,165

(47)

-

4,118

Trade receivables and contract assets

78,038

(3,931)

(3,225)

70,882

Net investment in sublease

961

-

-

961

Other debtors

1,282

-

-

1,282

Prepayments

5,555

-

-

5,555

Total trade and other receivables

85,836

(3,931)

(3,225)

78,680

 

The following table details the movements in the provisions for credit notes and impairment of trade receivables and contract assets:

 




26 week period ended

2 July 2022

Year ended

1 January 2022




Provision for impairment

Provision for credit notes

Provision for impairment

Provision for credit notes




£000s

£000s

£000s

£000s




 




Balance at the beginning of the period


(3,931)

(3,225)

(3,023)

(2,458)

Increase in provision



(1,204)

(1,446)

(1,835)

(3,746)

Utilisation



1,618

1,059

910

2,752

Business disposals



-

-

17

227

Balance at the end of the period

 

 

(3,517)

(3,612)

(3,931)

(3,225)








 

The bad debt provision based on expected credit losses and applied to trade receivables and contract assets, all of which are current assets, is as follows:

 

2 July 2022

Current

0-60 days past due

61-365 days past due

1-2 years past due

Total

Trade receivables and contract assets

61,234

7,829

8,287

1,719

79,069

Expected loss rate

0.9%

3.1%

20.6%

59.6%

4.4%

Provision for impairment charge

546

243

1,704

1,024

3,517

 


















1 January 2022

Current

0-60 days past due

61-365 days past due

1-2 years past due

Total

Trade receivables and contract assets

44,209

22,847

9,376

1,606

78,038

Expected loss rate

1.0%

2.4%

19.7%

68.7%

5.0%

Provision for impairment charge

435

544

1,848

1,104

3,931

 

Contract assets consist of accrued income.

 

The bad debt provision is estimated using the simplified approach to expected credit loss methodology and is based upon past default experience and the Directors' assessment of the current economic environment for each of the Group's ageing categories.

 

The Directors have given specific consideration to the level of uncertainty in the economy driven by the impact of COVID-19, the associated pressures on businesses facing staff and material shortages and, more latterly, increased inflation. At the reporting date, the Group has seen an increase in debt write-offs due to customer failure. This was anticipated following the withdrawal of COVID-19 related government support in the prior year and accordingly the Group had exercised judgement in the creation of a significant additional provision to cover this eventuality, some of which has now been released. The Group still considers that historical losses are not a reliable predictor of future failures and so has continued with its practice of increasing the expected loss rates across all categories of debt. In so doing the provision has been increased by around £0.6m (1 January 2022: £1.2m) from that which would have been required based on loss experience over the past two years. As in the prior year, historical loss rates have been increased where debtors have been identified as high risk with a reduction applied to customer debt covered by credit insurance. Unless the counterparty is in liquidation, these amounts are still subject to enforcement action.

 

In line with the requirements of IFRS 15, provisions are made for credit notes expected to be raised after the reporting date for income recognised during the period.

 

The combined provisions for bad debt and credit notes amount to 9.0% of trade receivables and contract assets at 2 July 2022 (1 January 2022: 9.2%).

 

13.       Trade and other payables

 




2 July

2022

1 January 2022




£000s

£000s

Current

 




Trade payables



42,776

43,062

Other taxes and social security costs



3,439

5,175

Other creditors



1,842

1,308

Accrued interest on borrowings



369

271

Accruals



31,233

28,494

Deferred income



627

394




80,286

78,704






 

14.  Lease liabilities

 

 

 

 

 

2 July

2022

1 January 2022





£000s

£000s

Current






Lease liabilities




17,946

19,310

Non-current






Lease liabilities




53,601

57,255





71,547

76,565

 

 






The interest rates on the Group's lease liabilities are as follows:





2 July

2022

1 January 2022







Equipment for hire

Floating

%age above the lenders base rate

2.4 to 3.3%

2.4 to 3.3%

Other

Fixed



3.5 to 6.0%

3.5 to 6.0%

 

 

The weighted average interest rates on the Group's lease liabilities are as follows:

 





2 July

2022

1 January 2022







Lease liabilities




5.4%

4.8%







 

The Group's leases have the following maturity profile:

 





2 July

2022

1 January 2022





£000s

£000s







Less than one year




21,411

23,015

Two to five years




46,336

48,755

More than five years




17,225

19,354





84,972

91,124







Less interest cash flows:




(13,425)

(14,559)

Total principal cash flows


 

 

71,547

76,565



 

 

 


 

The maturity profile, excluding interest cash flows of the Group's leases is as follows:

 

 





2 July

2022

1 January 2022

 





£000s

£000s

 







 

Less than one year




17,946

19,310

 

Two to five years




39,435

41,417

 

More than five years




14,166

15,838

 





71,547

76,565

 







The lease liability movements are detailed below:

Property

Vehicles

Equipment for hire and internal use

Total


£000s

£000s

£000s

£000s

At 2 January 2022

44,879

14,247

17,439

76,565

Additions

-

1,451

5,204

6,655

Discount unwind

1,364

225

190

1,779

Payments (including interest)

(5,056)

(3,181)

(5,267)

(13,504)

Foreign exchange differences

(3)

18

37

52

At 2 July 2022

41,184

12,760

17,603

71,547


 

 

 

 


Property

Vehicles

Equipment for hire and internal use

Total


£000s

£000s

£000s

£000s

At 27 December 2020

57,181

16,861

15,530

89,572

Additions

1,981

5,029

8,591

15,601

Remeasurements

3,407

128

(12)

3,523

Discount unwind

2,805

535

5

3,345

Payments (including interest)

(13,209)

(7,012)

(6,675)

(26,896)

Disposals

(6,006)

(216)

-

(6,222)

Business disposals

(1,063)

(1,048)

-

(2,111)

Foreign exchange differences

(217)

(30)

-

(247)

At 1 January 2022

44,879

14,247

17,439

76,565

 

15.       Borrowings

 











2 July

2022

1 January 2022





£000s

£000s

Non-current  




 


Senior finance facility




68,407

68,166







The senior finance facility is stated net of transaction fees of £1.6m (1 January 2022: £1.8m) which are being amortised over the loan period.

 

The nominal value of the Group's loans at each reporting date is as follows:

 





2 July

2022

1 January 2022





£000s

£000s







Senior finance facility




70,000

70,000







 

The interest rates on the Group's borrowings are as follows:

 





2 July

2022

1 January 2022







Revolving credit facility

Floating

%age above SONIA

3.0%

3.0%

Senior finance facility

Floating

%age above SONIA

3.0%

3.0%

 

The weighted average interest rates on the Group's borrowings is 3.0% (1 January 2022: 3.0%).

 

The Group's borrowings have the following maturity profile:

 





2 July

2022

1 January 2022





£000s

£000s







Less than one year




2,932

2,235

Two to five years




76,908

76,498





79,840

78,733

Less interest cash flows:






Senior finance facility




(9,840)

(8,733)

Total principal cash flows




70,000

70,000







 

The Group had undrawn committed borrowing facilities of £35.6m at 2 July 2022 (1 January 2022: £35.8m), including £12.4m of finance lines (1 January 2022: £12.6m) to fund hire fleet capital expenditure not yet utilised. Including net cash balances, the Group had access to £74.3m at 2 July 2022 (1 January 2022: £78.1m) of combined liquidity from available cash and undrawn committed borrowing facilities.

 

16.       Provisions

 



Onerous property costs

Dilapidations

Onerous contracts

Total

 


£000s

£000s

£000s

£000s

 






At 2 January 2022

 

186

10,174

13,463

23,823

Additions


-

148

-

148

Utilised during the period


(11)

(43)

(1,644)

(1,698)

Unwind of provision


-

41

53

94

Impact of change in discount rate


-

(729)

(211)

(940)

Releases


(3)

(236)

-

(239)

Foreign exchange


-

9

-

9

At 2 July 2022

 

172

9,364

11,661

21,197

 






Of which:

 





Current


69

1,355

3,108

4,532

Non-current


103

8,009

8,553

16,665

 


172

9,364

11,661

21,197

 






 



Onerous

property costs

Dilapidations

Onerous contracts

Total



£000s

£000s

£000s






At 27 December 2020


12,677

17,018

33,654

Additions


1,471

-

1,557

Utilised during the period


(2,538)

(3,290)

(6,040)

Unwind of provision


24

(8)

15

Impact of change in discount rate


(457)

(257)

(745)

Releases


(643)

-

(4,258)

Business disposals


(361)

-

(361)

Foreign exchange


1

-

1

At 1 January 2022


186

10,174

13,463

23,823






Of which:





Current


1,453

3,190

4,713

Non-current


8,721

10,273

19,110



186

10,174

13,463

23,823






Onerous property costs

The provision for onerous property costs represents the current value of contractual liabilities for future rates payments and other unavoidable costs (excluding lease costs) on leasehold properties the Group no longer uses. The releases are the result of early surrenders being agreed with landlords - the associated liabilities are generally limited to the date of surrender but were provided for to the date of the first exercisable break clause to align with the recognition of associated lease liabilities.

 

Onerous contract

The onerous contract represents amounts payable in respect of the agreement reached in 2017 between the Group and Unipart to terminate the contract to operate the NDEC.

 

17.       Business disposals - 27 weeks ended 3 July 2021 only

 

To enable the Group to strengthen its balance sheet and focus on its strategic priority to Transform the Tool Hire Business, the Group made two strategic divestments during the year ended 1 January 2022:

 

Laois Hire Services Limited

Laois Hire Services Limited, the Irish large plant hire business, was sold to Briggs Equipment Ireland Limited on 7 April 2021. Proceeds of the disposal, net of transaction costs were £10.0m generating a profit on disposal of £3.2m.

 

All Seasons Hire Limited

All Seasons Hire Limited, a cooling and heating provider, was sold to Cross Rental Services Limited with the transaction completing on 29 September 2021. Proceeds of the disposal, net of transaction costs were £54.3m generating a profit on disposal of £38.0m.

 

As part of these transactions, the Group entered into commercial agreements to cross-hire equipment to ensure the broadest possible distribution of, and customer access to, each party's existing fleet.

 

The table below shows the results of discontinued operations for the 27 weeks ended 3 July 2021:




£000s

Result of discontinued operations

 


Revenue



7,143

Expenses other than finance costs, amortisation and depreciation


(1,480)

Depreciation


(1,410)

Finance costs


(66)

Taxation



(17)

Loss from discontinued operations, net of tax

 

4,170

Profit on disposal of discontinued operations


3,180

Profit for the period


7,350









Basic earnings per share


1.06

Diluted earnings per share


1.02

 

The revenue relating to Laois Hire Services Limited is £3.0m with a loss after tax of £0.3m. The revenue relating to All Seasons Hire Limited is £4.1m with a profit after tax of £4.5m.

 

Included in the results for the 27 weeks ended 3 July 2021 are profits of £3.2m realised on the sale of Laois Hire Services Limited on 7 April 2021. The table below shows how this amount arose:






 

 

 

 

£000s

Description of assets and liabilities

 

 

 

Intangible assets (incl Goodwill)



1,695

Property, plant and equipment



5,200

Right of use assets



439

Current assets, excluding cash



2,509

Cash




504

Current liabilities (incl lease liabilities)



(3,241)

Foreign exchange reserve



(53)

Net assets disposed of



7,053






Proceeds of disposal less transaction costs



9,950

Profit on asset sale



283

Less net assets disposed of



(7,053)

Total profit from disposal of Laois Hire Limited



3,180

 

18.       Risks and uncertainties

The principal risks and uncertainties which could have a material impact upon the Group's performance over the remaining 26 weeks of the 2022 financial year have not changed significantly from those set out on pages 32 to 34 of the Group's 2021 Annual Report, which is available at https://www.hsshiregroup.com/investors-section-landing/.

 

These risks and uncertainties are:

1)    Macroeconomic conditions;

2)    Competitor challenge;

3)    Strategy execution;

4)    Customer service;

5)    Third party reliance;

6)    IT infrastructure;

7)    Financial risk;

8)    Inability to attract and retain personnel;

9)    Legal and regulatory requirements;

10)  Safety; and

11)  Environment, Social and Governance (ESG).

COVID-19 and the impact of the war in Ukraine have been considered in terms of their impact on relevant principal risks and uncertainties. The risk presented by COVID-19 is considered to have reduced significantly but been replaced by the macroeconomic impacts of the war in Ukraine - namely increasing inflation and interest rates. The main risk expected to affect the Group in the remaining 26 weeks of the 2022 financial year is therefore macroeconomic conditions, which includes the impact of high inflation on energy costs, colleagues, the supply chain and on demand from new and existing customers within the numerous and diverse market sectors which HSS serves.

 

19.       Alternative performance measures

 

Earnings before interest, tax, depreciation and amortisation (EBITDA) and Adjusted EBITDA, earnings before interest, tax and amortisation (EBITA) and Adjusted EBITA and Adjusted profit/(loss) before tax are alternative, non-IFRS and non-Generally Accepted Accounting Practice (GAAP), performance measures used by the Directors and management to assess the operating performance of the Group.

 

- EBITDA is defined as operating profit before depreciation and amortisation. For this purpose depreciation includes: depreciation charge for the year on property, plant and equipment and on right of use assets; the net book value of hire stock losses and write-offs; the net book value of other fixed asset disposals less the proceeds on those disposals; impairments of right of use assets; the net book value of right of use asset disposals, net of the associated lease liability disposed of; and the loss on disposal of sub-leases. Amortisation is calculated as the total of the amortisation charge for the year and the loss on disposal of intangible assets. Exceptional items are excluded from EBITDA to calculate Adjusted EBITDA.

 

- EBITA is defined by the Group as operating profit before amortisation. Exceptional items are excluded from EBITA to calculate Adjusted EBITA.

 

- Adjusted profit/(loss) before tax is defined by the Group as profit/(loss) before tax, amortisation of customer relationships and brands related intangibles as well as exceptional items. The way the Group calculates Adjusted profit/(loss) before tax has been modified from that included in the financial statements for the period ended 1 January 2022, to include amounts relating to amortisation of software. Comparative figures have been restated to reflect this change.

 

The Group discloses Adjusted EBITDA, Adjusted EBITA and Adjusted profit/(loss) before tax as supplemental non-IFRS financial performance measures because the Directors believe they are useful metrics by which to compare the performance of the business from period to period and such measures similar to Adjusted EBITDA, Adjusted EBITA and Adjusted profit/(loss) before tax are broadly used by analysts, rating agencies and investors in assessing the performance of the Group. Accordingly, the Directors believe that the presentation of Adjusted EBITDA, Adjusted EBITA and Adjusted profit/(loss) before tax provides useful information to users of the Financial Statements.

 

As these are non-IFRS measures, Adjusted EBITDA and adjusted operating profit measures used by other entities may not be calculated in the same way and are hence not directly comparable.

 

Adjusted EBITDA is calculated as follows:

 


26 weeks ended
2 July 2022

As restated1

27 weeks ended
3 July 2021


Continuing operations

Continuing operations


£000s

£000s


 


Operating profit

10,209

18,077

Add: Depreciation of property, plant and equipment and right of use assets

19,359

19,707

Add: Amortisation of intangible assets

2,861

2,543

EBITDA

32,429

40,327

Add: Exceptional items (non-finance)

488

(7,539)

Adjusted EBITDA

32,917

32,788

 

Adjusted EBITA is calculated as follows:

 


26 weeks ended
2 July 2022

As restated1

27 weeks ended
3 July 2021


Continuing operations

Continuing operations


£000s

£000s




Operating profit/(loss)

10,209

18,077

Add: Amortisation of intangible assets

2,861

2,543

EBITA

13,070

20,620

Add: Exceptional items (non-finance)

488

(7,539)

Adjusted EBITA

13,558

13,081

 

Adjusted profit before tax is calculated as follows:


26 weeks ended
2 July 2022

As restated1

27 weeks ended
3 July 2021


Continuing operations

Continuing operations


£000s

£000s




Profit before tax

6,535

6,755

Add: Amortisation of customer relationships and brands

1,287

1,428

Profit before tax and amortisation of customer relationships and brands

7,822

8,183

Add: Exceptional items (finance and non-finance)

554

(7,419)

Adjusted profit before tax

8,376

764

 

1. The notes supporting the income statement have been restated to disclose continuing operations (note 2).

 

20.       Post Balance Sheet Events

Given the excellent progress made on strategy which has resulted in increased profitability and cash generation as well as strengthening the balance sheet, the Board has decided to implement a progressive dividend policy. An interim dividend of 0.17p per share was approved by the Board on 28 September, will be paid in cash during November 2022 and has an ex-dividend date of 6 October 2022.

 

On 23 September 2022 the Government announced that from 1 April 2023 the corporate tax rate would remain at 19% (rather than increase to 25% as previously enacted). If this legislation had been enacted at the balance sheet date the deferred tax asset would be reduced by £623,000 to £1,973,000.

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