Equipment hire firm needs funds to strength its balance sheet and fund fleet investment
Companies: HSS Hire Group PLC
Tool and equipment hire firm HSS Hire Plc has told investors that it intends to raise £13m with existing institutional shareholders in order to strengthen its balance sheet and allow additional flexibility to fund investments in its fleet.
The placing of nearly 15.5m new shares at 83.875p is a slight discount to Wednesday's close of 84p, and should see the firm raise £13m before expenses.
In the firm's 24 November 9-month trading update, it was announced that revenue had increased 11% Yoy, with Adj EBITA up 6% (£14.6m). The firm told investors then that its outlook for the full-year was unchanged.
So why is HSS raising funds?
The primary reasons for HSS raising funds from existing institutional investors is to strength its balance sheet. Looking at its Interim Results back in late August, it has a Net Tangible Asset Value of c.£300m, 80% of which is funded by its £240m of net debt. Furthermore, its EBITDA on a trailing 12 months is £74m, putting the net debt to EBITDA multiple at a stretched 3.2x.
Management also wants to fund fleet investment as it continues the change programme:
The scale and complexity of the programme... together with the on-going investment to support revenue growth, has led the Board to conclude that an equity injection would strengthen the balance sheet of the Group and provide additional flexibility to fund fleet investment as it completes the change programme in early 2017."
HSS has undertaken an operational change programme that includes the introduction of its new National Distribution and Engineering Centre, which whilst transformational in its impact on operational practices, has impacted the Group's core rental business and related revenue growth:
"...the new National Distribution and Engineering Centre... will deliver both significantly enhanced customer service levels and greater operational efficiencies when complete.
HSS's share price opened flat on Thursday.
