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BRENDA
HSS Hire Group plc
Annual Report and
Financial Statements 2021
CONTENTS
Strategic Report
0
2
4
8
Highlights
Our Business at a Glance
Chairman’s Statement
Chief Executive Officer’s
Strategic Review
14 Our Business Model
16 Investment Case
18 Strategy at a Glance
20 Strategy in action – Case studies
26 Our Key Performance Indicators
30 Principal Risks and Uncertainties
35 Financial Review
38 Environmental, Social and Governance
42 Section 172 Statement
43 Our Stakeholders
Corporate Governance
46 Chairman’s Introduction
48 Board of Directors
50 Corporate Governance
55 Nomination Committee Report
56 Audit Committee Report
60 Directors’ Remuneration Report
and Policy
70 Directors’ Report and
Other Statutory Disclosures
73 Directors’ Responsibility Statement
Financial Statements
74 Independent Auditor’s Report
79 Consolidated Income Statement
80 Consolidated Statement
of Comprehensive Income
81 Consolidated Statement
of Financial Position
82 Consolidated Statement of Changes
in Equity
83 Consolidated Statement of Cash Flows
84 Notes to the Consolidated
Financial Statements
124 Company Statement of Financial
Position
125 Company Statement of Changes
in Equity
126 Notes to the Company
Financial Statements
Additional Information
129 Shareholder Information
130 Company Information
131 Definitions and Glossary
ABOUT US
HSS Hire Group is a market leader in equipment hire in the
UK and Ireland. It offers a one-stop shop for all equipment
hire through a combination of complementary Rental and
Services businesses, the latter being a capital-light, fast-
growing and increasingly technology-based business.
OUR PURPOSE
Our purpose is to provide our customers with the equipment,
training and services they need, employing technology to do
this quickly, efficiently and sustainably.
OUR VALUES
HIGHLIGHTS
FINANCIAL
Revenue
£303.3m
FY20: £250.1m
Adjusted EBITDA
£69.8m
FY20: £59.6m
Leverage1
1.5x
FY20: 2.8x
EPS
1.05p
FY20: (15.13)p
Operating Profit
£34.5m
FY20: loss of £(4.7)m
Adjusted EBITA
£31.7m
FY20: £13.4m
Return on capital employed
(ROCE)2
22.1%
FY20: 10.7%
Adjusted EPS
1.52p
FY20: (4.64)p
h Strategic Report
HSS Hire Group plc
Annual Report and Financial Statements 2021
1
MARKET‑LEADING
TECHNOLOGY PLATFORM
IN TOOL HIRE
Our technology platform, which we call Brenda,
was launched back in 2019. Initially focused on
our Services business, the technology was built
from the user’s perspective, with tailored
interfaces for different users. Our ambition was
to create the most powerful, yet easy-to-use
platform for hire and associated building service
products in our industry.
Find out more on page 3
Built from a user
perspective
Quick, intuitive and
easy-to-use
Modular design,
scalable
Available on
multiple devices
SUSTAINABILITY
RIDDORS
5
FY20: 2
Colleague engagement
76.1%
FY20: 75.0%
Reduction in Building Energy Carbon
Emissions
91%
versus FY20
OPERATIONAL HIGHLIGHTS
– Completed the strategic plan we first
outlined in 2017 and embarked on a new
chapter of exciting growth
Read more on pages 8 to 13
– Continued to invest in technology,
developing our digital capabilities to
improve the customer experience
Read more on page 3
– Restructured our organisation around
two divisions: HSS ProService and
HSS Operations
Read more on pages 14 to 15
– Further delevered and refinanced the
business, leaving us with a stronger
balance sheet and lower interest costs
Read more on pages 35 to 37
– Conducted a comprehensive review of our
sustainability strategy and developed a
roadmap of related activities for 2022
Read more on pages 38 to 41
UN SUSTAINABLE
DEVELOPMENT GOALS
The Group is focusing on these six
sustainable development goals
1 Leverage for FY20 is continuing and
discontinued operations; all other measures
are for continuing operations.
2 ROCE is for Continuing Operations at each
reporting date. The ROCE calculation is
defined on page 29.
The Group uses alternative
performance measures:
Read more in the Financial Review,
pages 35 to 37
h 2
HSS Hire Group plc
Annual Report and Financial Statements 2021
OUR BUSINESS AT A GLANCE
OUR VISION
HSS TODAY
Top 4
UK Rental provider
To become the market-leading, digitally-led
brand for equipment services.
Leading
Technical Training provider
TWO DIVISIONS
Largest
Unique
European Rehire provider
Builders Merchant network
HSS PROSERVICE
Sales acquisition business with low capital invested. Highly technology
driven. Extremely scalable. Uniquely differentiated.
National coverage
One-stop shop
£303m
Revenue
149
locations
600+
£70m
EBITDA
2,000
colleagues
23%
supply chain partners
digital penetration
Read more on next page
c.750
Sales and training
colleagues
600+
Supply chain
partners
BRENDA
Our technology
platform
Extensive training offering for customers
HSS OPERATIONS
Fulfilment business, focused on health and safety and quality, with
circular economy credentials, comprehensive national footprint and
high customer satisfaction.
Read more on next page
c.1,000
40
Operations
colleagues
Customer
Distribution
Centres
550+
Delivery fleet
Tools, site
equipment and
powered access
Specialist power
generation providers
HOW WE DO IT
OUR VALUES
Safety comes first. Always! It’s at
the heart of everything we do,
which means that if we can’t do it
safely, we don’t do it. We take our
work seriously, and we never leave
anything to chance. We do
things the right way – every
time. Think safe, work safe,
home safe.
We’re not just ambitious and hard
working; we’re also excited about
what’s next. We love to win, we’re
change-ready and we want to
make a difference. We’re focused
on making things better,
brighter and fit for the future.
We know that change can be hard,
and we need to be resilient to keep
making things better.
WE SUPPLY OUR
CUSTOMERS THROUGH
OUR HSS OPS
NETWORK AND 500+
SUPPLIER LOCATIONS
Key
Head office
Branch
Customer Distribution
Centre (CDC)
Builders merchants
Specialist
We’re passionate, can-do people
who deliver great results, safely.
We’re relentless. We own it, we roll
our sleeves up and get on with it.
We always find a way. No job is
too big or too small, we always
do what it takes to get things
done. We do our best for our
customers and our business.
We have blue and yellow blood
running through our veins. We’re
like a family and we’ve all got
each other’s backs. We pull
together, trust and respect
each other. We celebrate
success, work well as a team,
and have fun along the way.
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Annual Report and Financial Statements 2021
3
OUR
TECHNOLOGY
BRENDA IS OUR
UNDERLYING
TECHNOLOGY
– The ‘brain’ behind all other user interfaces and
the platform on which all transactions in the
ProService business are raised and managed
– Built from a user perspective
– Allows us to create tailored
interfaces to suit users’ individual needs
COLLEAGUE INTERFACE:
HSS PRO
– Easy and quick to use
– Access to full range of services,
enabling them to say ‘yes’ to
the customer
Vodafone storm
– Call optimisation for remote
HSS colleagues
– Enhances call answer rates and
customer response times
– Provides analytics to drive performance
ONLINE CUSTOMER INTERFACE:
hss.com (also available
on HSS customer app)
– Provides customers with access
to the whole supply market
– Easy-to-use, providing speed
and efficiency
– Pricing and order transparency
– Live availability
– LiveChat, LiveVideo
BRENDA
CUSTOMER
PROCUREMENT
PLATFORM:
ProService
– All of the above, but presented
as a procurement platform
– Built to address the needs of
large customers with dedicated
buying team
– Additional management tools,
such as authorisation processes
and reporting functionality
– Single invoice
SUPPLIER INTERFACE:
– Provides suppliers with access to our
customers, benefiting from our brand,
digital channels and marketing
– Easy-to-use, offers speed and
efficiency. Reduced administration
– Pricing and order transparency,
contract accuracy
– Ability to self-serve with functionality
including surge pricing, territory
selection and utilisation managements
– Customer assurance
– Single invoice
SUSTAINABILITY
Read more on pages 38 to 41
ENVIRONMENTAL
SOCIAL
GOVERNANCE
Ongoing reduction in building energy
carbon emissions
Accident frequency rate remains low
despite return to post-COVID-19 activity
Colleague engagement score
continuously improving
91% reduction v FY20
0.11 RIDDOR rate
76% engagement
In 2021 we continued to make progress across all areas of sustainability as outlined later in our Sustainability section on page 38 to 41. In the final
quarter of 2021 we engaged specialist sustainability advisers Sustainable Advantage to review our progress and help us accelerate our ESG strategy.
They carried out an independent review of our ESG position assessing us as ‘Excellent’ and giving us a roadmap for further improvements. We have
carried out a materiality assessment, seeking our stakeholders’ views on all matters ESG which has informed the development of our ESG strategy.
Sustainable Advantage has also calculated our carbon footprint, including scope 3 elements, allowing us to make a net zero commitment of 2040.
This, alongside many other ambitious targets, will be published in our first ESG Impact Report during Q2 2022.
Net Zero Carbon Target
2040
4
HSS Hire Group plc
Annual Report and Financial Statements 2021
CHAIRMAN’S STATEMENT
CLOSING OUT
OUR 2017
STRATEGY
ALAN PETERSON OBE
CHAIRMAN
Strategic Report
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Annual Report and Financial Statements 2021
5
The Group is unrecognisable from
the HSS of five years ago and we
have established ourselves as a
digital leader in the hire market.”
Dear shareholder,
2021 was a significant year for
HSS, marking the completion
of the strategy we first set
out in 2017: to Delever the
Group, Transform the Tool Hire
business and Strengthen our
commercial proposition.
Today, the Group is unrecognisable from the
HSS of five years ago and we have established
ourselves as a digital leader in the hire market.
The progress is testament to the resilience of
our colleagues who have provided customers
with exceptional service during an immensely
challenging period for both the business and
society at large. We begin 2022 with the
technology, organisational structure and
resources that will support us as we begin
a new chapter of exciting growth for HSS,
focused on delivering our vision: to be
the market-leading, digitally-led brand
for equipment services.
Summary
Following the significant acceleration of our
digital strategy in 2020, we entered 2021 with
strong momentum and performance quickly
returned to pre-COVID-19 levels, delivered
through our lower cost operating model.
We continued to invest in technology, rolling
out HSS Pro and on-boarding colleagues to
improve the customer journey while expanding
our builders merchant network to enhance our
reach with little capital investment.
The strategic divestitures of Laois Hire Services
and All Seasons Hire represented good value
for shareholders while our ongoing commercial
relationships with both companies, entered
into as part of these transactions, ensure
we continue to offer a one-stop shop for
our customers.
We used the cash generated to further reduce
the Group’s debt. With a strengthened balance
sheet and net debt leverage at approximately
0.8x (non-IFRS 16, 2020 2.6x), our refinancing
was successfully completed leading to a
significant reduction in ongoing interest
cost and increase in earnings per share.
In ‘Delevering the business’, we completed
the last stage of the strategy set out in 2017
and now occupy a differentiated position within
the market as a digitally-enabled, capital-light
business, supported by a strong balance sheet.
We are now well-positioned for the future as
we begin a new chapter of exciting growth
built around our unique business model.
Our vision
As we embark on our next stage of growth,
we have a clear vision underpinning our
strategy: to become the market-leading,
digitally-led brand for equipment services.
Through the investments and digital
developments we have made over the last four
years, combined with our new organisational
structure, we have the foundations in place on
which to realise this vision.
Our Board and management team
Our Board members act as custodians of the
HSS brand and we benefit from a stable and
experienced Board with no Director having
served for fewer than four years. This stability
has been a crucial asset, both during the
uncertainty of the pandemic and also in
steering the business through a significant
transformation. The Board has provided
essential support to senior management at
key moments where important strategic
decisions have been made as well as helping
shape the Company’s approach to risk
during this period of change.
The Board continues to engage with all
stakeholders to ensure HSS operates with
transparency, integrity and in the interests of
our colleagues and partners while leading the
Company into the next phase of growth as we
deliver on our vision.
OUR
VISION
To become the market-
leading, digitally-led
brand for equipment
services.
6
HSS Hire Group plc
Annual Report and Financial Statements 2021
CHAIRMAN’S STATEMENT continued
At HSS, we strive to operate in a
responsible and sustainable way.”
IN NUMBERS
Revenue
£303m
Adjusted EBITA
£31.7m
FY20: £13.4m
Leverage (non-IFRS 16)
0.8x
FY20: 2.6x
Our people
At the heart of HSS are our colleagues
and, against the backdrop of the COVID-19
pandemic, they have worked tirelessly to
support our stakeholders. Our success as a
business is wholly a product of this hard work
and, on behalf of the Board, I would like to
express my sincere thanks to all our colleagues
for their unfaltering commitment.
Thankfully the pandemic appears to be
receding, however it has had a significant
impact on society and ways of working.
Given this, it is more important than ever
to maintain regular communication with
colleagues to ensure we are aware of their
views and concerns and provide them with
a fulfilling and engaging place to work.
This communication was vital in our decision-
making process as we adapted our working
policies, moving to a new head office designed
for hybrid working and rolling out our HSS Pro
technology to support their day-to-day work.
Our colleagues are now able to adapt their
working patterns with greater flexibility while
continuing to provide a seamless service for
our customers.
2021 also saw us implement significant
strategic and structural change across the
business and it was vital that colleagues were
kept abreast of these developments, had
their questions answered, and their views
addressed. Accordingly, during the year,
we provided regular updates through
company-wide emails, FAQs and our annual
management roadshow, supplemented by
more informal company updates through
our CEO’s blog.
‘Make It Together’ is one of our four core values
as a business but we can only live up to this
value if we maintain our position as a diverse
and inclusive employer. Engaging with our
colleagues is central to this and feedback from
the Women’s Networking Group provided
management with new methods of attracting
women into a historically male-dominated
industry while our employee engagement
surveys helped us establish the topics for our
monthly wellbeing events. We are incredibly
pleased with the progress that has been
made over the year and have now laid the
groundwork for a large-scale refresh of our
diversity training and outreach programmes.
Environment, Social and Governance
At HSS, we strive to operate in a responsible and
sustainable way. We are cognisant, however,
that we can always do better and, accordingly,
in 2021 we began a comprehensive review of
our ESG strategy.
Throughout 2021 health and safety has
remained paramount to our business including
an increased focus on mental health and
wellbeing. To support our colleagues, we have
implemented a variety of measures, see pages
39 to 40 for more information, while continuing
to support our customers, our communities
and the environment in which we operate.
In Q4 we appointed an external consultant,
Sustainable Advantage, to conduct a
comprehensive analysis of our ESG credentials
and identify improvement opportunities.
They benchmarked us as “excellent” during
their review of 62 ESG-related categories.
They have also supported us with a materiality
assessment and net zero analysis, which has
led us to accelerate our ESG strategy with a
new set of objectives and commitments which
are outlined in our Sustainability section on
page 41.
Benchmarked as ‘excellent’ across 62 ESG-related
categories by Sustainable Advantage in 2021
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Annual Report and Financial Statements 2021
7
During 2021 we moved to a hybrid working
model supported by the technology in our
new Head Office at Think Park, Manchester
Our investors
Over the year, the Group has benefited from
continued support from our long-term
shareholders while engagement with new and
potential investors has ensured our vision and
operating model are well-understood.
Having made excellent progress in delivering
our 2017 strategy, we now want to build on this
success and accelerate growth through further
investment in our digital capabilities to create
longer-term shareholder value. Accordingly,
the Board believes that the interests of
shareholders are best served by not declaring
a dividend for 2021, a position that will be kept
under review as we progress through 2022.
Looking ahead
Following the changes made last year, I am
pleased to say that we are entering 2022 with
the technology, structure, resources and – most
importantly – the colleagues, to deliver on our
next phase of accelerated growth. I would like
to thank my fellow Board members for their
continual support and, reiterating my earlier
sentiment, express my immense gratitude to
our colleagues for all that they have done over
the last year in driving our transformation and
continued success as a business. We are
confident that 2022 will see HSS continue to
grow by leveraging our differentiated position
within the tool hire market.
Alan Peterson OBE
Chairman
8
HSS Hire Group plc
Annual Report and Financial Statements 2021
CHIEF EXECUTIVE OFFICER’S STRATEGIC REVIEW
LEVERAGING OUR
DIGITAL OFFERING
TO ACCELERATE
GROWTH
STEVE ASHMORE
CHIEF EXECUTIVE
OFFICER
Strategic Report
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Annual Report and Financial Statements 2021
9
We enter 2022 with a new
organisational structure, a strong
balance sheet, and a differentiated
business model that we believe
positions us as the most agile and
technologically advanced operator
in the equipment hire industry.”
I am very pleased with our
performance in 2021 and would
like to thank all my colleagues
for their exceptional efforts and
performance over the last year.
Despite the ongoing headwinds of the
pandemic, our agile, digitally-enabled,
lower-carbon network ensured we were able
to support our customers and deliver a strong
set of results during a challenging period for
the global economy. We ended 2021 with
underlying (adjusted to account for an extra
week in 2021) revenue up 20% against prior
year and back in line with pre-pandemic 2019
levels. EBITDA and EBITA both stepped forward
against 2020 by £10.2m and £18.3m
respectively with the improved revenue
performance fulfilled through our lower-cost
operating model.
2021 also marked the successful completion
of the strategy we set out in 2017: to Delever
the Group, Transform the Tool Hire business,
and Strengthen our commercial proposition.
We enter 2022 with a new organisational
structure, a strong balance sheet and
a differentiated business model that we
believe positions us as the most agile and
technologically advanced operator in the
equipment hire industry. Our market-leading
digital capabilities continue to develop at pace
and allow us to provide a comprehensive and
efficient service to our customers. With these
foundations firmly in place, we are entering a
new stage of growth, ready to capitalise on the
market opportunities present in the sector.
Our year in summary
Following the significant acceleration of our
strategy in 2020, we started 2021 well and
EBITDA and EBITA margins in the first quarter
were comfortably ahead of both 2019 and 2020
levels. This was despite the impact of a third
COVID-19 lockdown across all territories
starting in January, with our click-and-collect
service and digital capabilities ensuring
trading remained strong.
Early in the year, we moved our shares from the
Main Market to AIM to benefit from its greater
flexibility following the significant strategy
acceleration we made in 2020. This was widely
supported by existing shareholders and we
have since seen increased interest from
potential new investors.
By April, HSS Pro had been rolled out across
our entire salesforce, improving our efficiency
and decision-making processes. As a result,
OneCall enquiries grew, conversion rates
increased, and we saw a material improvement
in like-for-like Services revenue.
In April, we announced the decision to
sell Laois Hire Services Limited to Briggs
Equipment Ireland Limited for €11.2 million.
With Laois contributing 4% of the Group’s
revenue in 2019, €11.2m was an attractive
valuation and, with our new operating model
performing well, we determined that the capital
could be more effectively used in other parts
of the business. The proceeds of the sale were
used to increase investment in our core Tool
Hire business and reduce debt, supporting
two of our 2017 objectives: to Delever the
Group and Transform the Tool Hire business.
As part of the transaction, we entered into
a commercial agreement with Briggs for
the cross-hire of equipment, ensuring that
we continue to provide our Irish customers
with their large plant requirements.
By the half-year, revenue was back in line with
2019 levels. Profitability had stepped forward
with EBITDA up 3ppts and EBITA up 6ppts
versus FY19 and ROCE at a record 24%.
IN NUMBERS
Adjusted EBITA margin
10.4%
FY20: 5.4%
ROCE
22.1%
FY20: 10.7%
Proforma interest costs1
£3.0m
FY20: £16.3
1 On new £70m senior finance facility and
based on current SONIA rate.
10
HSS Hire Group plc
Annual Report and Financial Statements 2021
CHIEF EXECUTIVE OFFICER’S STRATEGIC REVIEW continued
HSS ProService and HSS Operations
work in unison to provide our
customers with what we believe
is the most comprehensive offering
in the sector.”
In September we announced the sale of our
heating, ventilation and air conditioning hire
provider – All Seasons Hire (ASH) – to Cross
Rental Services for £55m. As with Laois, this
was an attractive valuation and, by striking a
commercial agreement with the company,
we continue to provide our customers with
access to ASH’s equipment and services.
This transaction reduced our leverage to
around 0.8x – a significant decrease from the
2.6x leverage (both measures on a non-IFRS 16
basis) we started the year with, and the
proceeds were used to repay debt, marking the
completion of the strategy we began in 2017.
With our 2017 strategy delivered, in the latter
half of 2021 we launched a new business
model in preparation for our next stage of
growth, creating a more focused, more efficient
organisation consisting of two distinct divisions
– HSS ProService and HSS Operations – which
work together to provide our customers with
what we believe is the most comprehensive
offering in the sector.
Capitalising on our new structure, materially
stronger balance sheet, and growth potential, in
November we engaged with our lenders whose
confidence in our operating model and financial
position enabled us to successfully refinance the
business, significantly reducing our annual
interest costs (on our senior finance facility) from
£16.3m in 2020 to approximately £3.0m per
annum (based on our £70m facility), improving
earnings per share and free cash flow.
Towards the end of what was already a year
of significant change, we also started to review
our sustainability approach, appointing an
external agency, Sustainable Advantage, to
conduct a comprehensive review of our current
ESG credentials, identify areas of strength and
weakness, and help us establish a new set of
commitments and targets which are outlined
later in this report (page 41).
With a new business model, stronger balance
sheet, and one of the most advanced digital
offerings in the marketplace, we ended 2021
well. We have continued to build on this and
started 2022 strongly with first quarter revenue
growth of 13% compared to 2021 and we are
well-positioned to build on this as we continue
our exciting new phase of growth.
Our strategy
The hire market in the UK is significant –
estimated to be £5-6bn in size – but it is
fragmented, consisting of a small number
of large providers and over 1,000 smaller,
independent businesses, most of which
operate from single sites.
The market is also digitally immature, and many
companies are still in their technological infancy.
As a result of the work we have done over the
last four years, accelerated in 2020 through
increased investment in technology, we benefit
from a highly differentiated position within
the marketplace which we believe creates
an exciting prospect for investors as well
as our customers.
For customers, our differentiated offering
is focused on employing our technology to
provide a superior service to that of our peers,
building brand loyalty and increasing our market
share. Through our website, our customer app,
HSS Pro, our ProService platform and Brenda
– the technology on which our digital
capabilities are built – we offer our customers
a one-stop shop for a full range of building
services. We believe our technology provides
the quickest, most efficient, most reliable and
most comprehensive offering in the sector.
For suppliers, we offer volume and access
to the end user. In our ProService division, our
rehire suppliers can put their rental equipment
on hire with our broad portfolio of customers.
We consolidate that demand for them, lowering
their customer acquisition and administration
costs. Our technology provides them with the
insight they require to enhance their returns
on investment.
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Annual Report and Financial Statements 2021
11
IN NUMBERS
UK rental
market size
£5-6bn
HSS operating
model savings1
£15m
1 Annualised savings from Oct 2020.
Builders merchant locations
55
Online transactions
23%
our customers with one of the broadest
and deepest product offerings in the sector.
Similarly, our technology allows us to connect
our suppliers with an extensive customer
base, consolidating supply and demand
and capitalising on converging customer
and supplier requirements.
Our Brenda technology ecosystem has been
designed to provide tailored interfaces to meet
the needs of different users – large customers,
SMEs, suppliers and colleagues – but each
with a consistent goal: to be quick and
easy-to-use and to provide access to our
complete range of products and services.
Supported by the Brenda platform, HSS
ProService allows us to operate a market-
leading, technologically-enabled acquisition
model at low cost, positioning us as an
aggregator, differentiating us from our peers
and replacing a legacy manual process with an
advanced, automated digital system to improve
the accuracy and speed of conversion, driving
customer loyalty and enquiry volumes.
HSS Operations:
HSS Operations leverages our well established,
national distribution and engineering network to
deliver upon the relationships we build and the
enquiries we generate through our HSS
ProService team.
Focused on customer service, utilisation and
fulfilment rates, HSS Operations makes sure
our customers get the equipment they need
when and where they need it in the quickest,
most efficient, way possible. Operations acts
as the largest single fulfilment solution for
ProService requirements, choosing to fulfil
enquiries where it is well placed from both
a customer service and operational
efficiency perspective.
At the heart of HSS Operations is ‘Spanner’,
our asset management tool that automates
the entire fulfilment process, ensuring that all
products are safe and in good working order
for our customers. As a ‘circular economy’
business, HSS Operations is inherently
sustainable and Spanner is the foundation of
this, prolonging the life-cycle of our equipment
by ensuring that our fleet is managed efficiently.
In addition, when a piece of equipment is
returned, it is routinely tested and maintained
to ensure that its life-cycle is extended and our
ROCE is maximised. Finally, when equipment
does reach the end of its life-cycle, it is recycled
or disposed of in a manner that minimises
environmental impact. When buying new fleet,
our procurement process carefully considers
the sustainability credentials of products and
this is key to our decision-making process.
For investors, our differentiated operating
model benefits from an extremely flexible
cost base and strong margin and ROCE
performance. Our technology also means
we are highly scalable without the need for
large capital investment. By transitioning from
a capital-heavy operating model with a large
branch network to an agile, digitally-enabled,
capital-light model, we fulfil our customers’
requirements while delivering superior returns
for shareholders (see investment case on page
16 for more information).
This differentiation is key to our success and,
as we enter our new chapter of growth, our
strategy will focus on leveraging our technology
to build on this and position ourselves as the
most comprehensive, accessible and reliable
service provider in the equipment hire sector,
retaining existing client relationships while
building new ones to drive revenue growth.
Our new operating model
At the heart of our strategy is our operating
model which underwent significant change in
2020 and 2021, making us a far more efficient
and profitable business. Our two divisions
– HSS ProService and HSS Operations – work
together to provide customers and suppliers
with the equipment and services they need
to complete projects.
HSS ProService:
HSS ProService is our customer-facing
sales acquisition division, offering customers
a one-stop shop for Hire, Equipment Sales,
Accessories, Parts, Fuel, Waste Management,
Training, Materials and other building services.
Built on Brenda, the technology platform on
which all our digital applications will sit, HSS
ProService can source – either from our own
fleet or through our extensive supplier network
– the equipment our customers need the
moment a request is made. By acting as
a supply aggregator, we can optimise our
owned fleet investment decisions towards
higher returning products, while providing
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Annual Report and Financial Statements 2021
CHIEF EXECUTIVE OFFICER’S STRATEGIC REVIEW continued
FOCUS AREAS
Our technology roadmap:
Initial focus areas
With technology at the heart of our
strategy and business model and a key
enabler to our growth, we have a clear
technology roadmap that will ensure
we retain and build on our already
differentiated position, provide our
customers, suppliers and colleagues
with a seamless, efficient and easy-to
use service, and grow market share.
The initial focus areas for our investment
will be:
1
Continuing to develop the ProService
platform for larger customers,
improving its features such as
auto-approval and revised order
flow, customer push notifications and
purchase order validation capabilities.
2
Moving our hss.com website from
Spanner to the Brenda technology
platform to provide our small
customers with the same benefits
our large customers receive through
the ProService platform, giving
them a quicker, easier-to-use
system with increased visibility
of product availability.
3
Improving our supplier portal and the
on-boarding of suppliers to ensure
they capitalise on the full benefits of
the system. These include the ability
to quickly and easily respond to
enquiries, manage the equipment they
have out on hire and optimise their
own utilisation by adjusting their
catchment area and pricing. Not only
does this benefit our suppliers by
improving their efficiency but it also
benefits our customers, enhancing
availability and response times.
4
Continuing the roll-out of our Satalia
Delivery routing and scheduling
software to our CDCs to improve
efficiency and reduce the carbon
impact of deliveries and collections.
Alongside Spanner, we introduced Satalia
Delivery – a tried and tested third party routing
and scheduling system – to our CDCs in late
2021 to optimise the efficiency of our deliveries.
Using technology, and integrating seamlessly
with our customer and driver apps, Satalia
Delivery examines all our orders to determine
the most effective way they can be fulfilled,
outlining which drivers should deliver which
tools to each customer and by which route.
This improves our service by increasing the
number of orders we can fulfil in a day and
provides our customers with more accurate
timeframes as to when they can expect their
deliveries. Importantly, it also reduces the time
our vans spend on the road, lowering fuel
costs, reducing carbon emissions and
improving our sustainability as a business.
Working in unison, our Operations platforms
ensure our customers are provided with
a seamless service, our colleagues have
easy-to-use systems to support their day-to-
day work.
Our technology roadmap
Beyond the initial focus areas (see box, right)
we will continue to build our digital capabilities
by accelerating our investment in customer
and supplier acquisition, utilising the data we
collect from our digital applications to better
understand consumer behaviour and improve
fulfilment choices.
We will also leverage our technology to enter
new verticals in the building services sector,
expanding our customer offering and
capitalising on converging customer
and supplier needs.
Increasing automation underpins our growth
plan, with our digital platforms ensuring
transactions are seamless and accurate,
reducing manual intervention and improving
both customer and supplier adoption.
In short, by utilising our technology and
providing our customers with the easiest,
quickest and most accurate service in the
marketplace, we will continue to differentiate
our offering and become the ‘go to’ building
services provider, growing our business, our
customer base and our market share.
Acting responsibly and sustainably
Health and Safety is our priority and, via the
monthly Health and Safety forums which I chair,
I can see that our teams consistently strive to
keep themselves, their colleagues and our
customers safe at all times. We continue to
make progress reporting near misses and
safety observations, and our colleagues have
really embraced the first of our four values:
Make It Safe.
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Annual Report and Financial Statements 2021
13
Outlook
To summarise, the business is in great shape
and, with a high performing team, leading
technology, differentiated organisational
structure and strong balance sheet, we have
all the elements in place to begin a new chapter
of sustainable growth.
We have started this already and in the first
quarter of 2022 revenue is 13% ahead of
prior year.
We continue to benefit from a differentiated
position in an attractive marketplace and as
such, continuing historic performance trends,
we are targeting growth in our Services
business segment of 10ppts above the
market and our Rental business segment
in line with the market.
Steve Ashmore
Chief Executive Officer
While we strive to act as a sustainable business
(see page 38 for our sustainability report), our
appointment of Sustainable Advantage to
conduct a review of our policies was in
recognition of the fact that there is always
room for improvement.
At the end of the year, Sustainable Advantage
provided us with a comprehensive review and
suggestions for development of our ESG
credentials. We are currently in the process
of developing a new approach and set of
commitments and targets which are detailed
later in this report (page 41).
Our market
Following a period of uncertainty created by
COVID-19 and the associated reductions in
demand and supply-side challenges, we saw
our market recover well. While the Group has
no direct customer exposure, recent tragic
events in Ukraine have resulted in cost inflation
and supply chain disruptions. Our exposure
to supply chain disruption had already been
mitigated through early ordering of our current
year’s hire fleet requirements in the latter part
of 2021 as well our Services business supply
chain of 600+ partners ensuring that we can
continue to provide national availability. We are
offsetting cost pressure through targeted selling
price increases. We will continue to monitor the
situation closely.
The business is
in great shape
and, with a high
performing team,
leading technology,
differentiated
organisational
structure and
strong balance
sheet, we have
all the elements
in place to begin
a new chapter
of sustainable
growth.”
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Annual Report and Financial Statements 2021
OUR BUSINESS MODEL
RESOURCES AND
RELATIONSHIPS
WHAT WE DO AND HOW WE DO IT
ACQUISITION MODEL
HSS
PROSERVICE
Single platform offering a wide
range of solutions to the building
services market, addressing
converging customer and
supplier requirements.
Well-trained salesforce
ProService has c.750
colleagues, including
field-based, home-based,
branch-based and builders
merchant-based sales
colleagues, in addition to
our Training colleagues.
Powered by technology
Intelligent, scalable, easy-to-use
and accessible by customers
and colleagues on a range of
devices at home, in the office
or on site.
Extensive supply chain
With access to around half of
all equipment available for hire
in the UK, our 600+ fulfilment
partners provide impressive
availability and quick response.
Wide-ranging expertise
Experts not just in hire, but
also equipment sales, training,
builders merchant products,
waste management and many
other product verticals.
FULFILMENT MODEL
HSS
OPERATIONS
Longest established tool hirer in the
UK, fulfilling equipment requirements
of a broad range of customers and
end-user markets.
BUY VERSUS HIRE
ENVIRONMENTAL
IMPACT
Research by our ESG
advisers, Sustainable
Advantage, highlights
the significant
reduction in carbon
footprint that results
from customers
hiring equipment
rather than buying
TECHNOLOGY
– Satalia – third party
route optimisation
software. Used by
the transport teams
to route our vehicles
– Spanner – in-house
asset management
software. Used to
track the status of all
equipment, prompt
servicing and testing
and recording repairs
– PRISM – in-house
stock distribution
software. Sources
equipment for
new orders
and rebalanced
available stock
Health and safety systems
Robust operating systems
and strong health and safety
culture, driven by technology
and leadership focus.
Logistics expertise
Long established, process driven
transport teams, operating from
40 distribution centres, recently
enhanced by new route
optimisation software.
Procurement capability
Strong relationships with
equipment manufacturers and
technical product expertise.
Engineering skills
More than 200 well-trained
fitters and service technicians
based in our locations or in
mobile service vehicles.
Life-cycle management
capabilities optimising
product life-cycles, maximising
utilisation, enhancing returns
and minimising carbon footprint
across a fleet of c.£134m
(gross book value).
SME C
T O M ERS ALSO W
A
N
S
U
T
:
– Extremely quick
ordering process
– ‘On-the-go’ or ‘in-hand’
accessibility
CUSTOMER NEEDS
– Wide product offering
and extensive supply
chain all in one place
– Fast response time
– Enquiries
automatically routed
to most appropriate
available colleague
– Full visibility of
order status
– Real-time
delivery tracking
– Choice of
fulfilment slots
– Lowest prices
possible
…Our hss.com website
and customer app have
been designed to address
these additional
requirements
SME CUSTOMERS
LARGER CUSTOMERS
LAR G E R C U S TOMERS ALS
O
W
A
N
T
:
– Order approval processes
– PO validation
– Additional reporting
– Interface with their systems
…Our ProService platform
is designed to address all
these additional
requirements
LOW CAPITAL INVESTMENT.
HSS collect from customer
site using HSS operated
transport. Satalia
optimises routing
OR
Customer drops equipment
in to any one of our locations
at their convenience
Equipment is tested by
Service Technician using
Spanner-prompted checklist.
Equipment that passes is put
in to ‘available’ status, ready
to hire to the next customer.
Failed equipment is put in
to ‘maintenance’ status
which prevents them from
being hired
HIRE ENDS
TEST
HIRE STARTS
HIRE
REQUIREMENT
Delivered to customer site
using HSS operated transport.
Satalia optimises routing
OR
Customer uses click-and-collect,
visiting one of our locations to
collect their equipment
CIRCULAR ECONOMY BUSINESS, WITH LEADING
T O M ERS ALSO W
A
N
T
:
S
U
SME C
LAR G E R C U S TOMERS ALS
O
W
A
N
T
:
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Annual Report and Financial Statements 2021
15
E P R O S ERVICE TEA
M
T H
– c.130 HSS field-based sales
colleagues building relationships
– 44 HSS local sales branch teams
– 55 HSS builders merchant
counter-based teams
– c.250 desk-based sales colleagues
driving enquiries and conversion
– 17 builders merchant salesforces
promoting our offering
COLLEAGUE NEEDS
– Say yes to customers
– Raise orders to drive
performance
– Tech automatically
updates the
customer with
push notifications
on ETAs
– Minimal rework
BRENDA
PROSERVICE TEAM
SUPPLY PARTNERS
+ S U PPLY PARTN
E
R
S
0
6 0
– Generalist and specialist
equipment hirers
– Spare parts and components,
equipment sales and accessories
– National and local suppliers
– Builders merchants
– Training companies
SUPPLIER NEEDS
– Minimise
overheads
and admin costs
– Utilise excess
equipment
available
– Access to our
customer base
and the volumes
they bring
DRIVEN BY TECHNOLOGY. EXTREMELY SCALABLE. UNIQUE.
If economical, equipment
is repaired by a HSS fitter,
and is then put in to
‘available’ status
End of life
equipment is
recycled,
repurposed or sold
at auction to
secondary
owners
»
SPANNER
SATALIA
PRISM
MAINTENANCE
& REPAIR
STORAGE AND
TESTING
LIFE-CYCLE
MANAGEMENT
»
Equipment is stored in ‘available’ status, ready for
the next hire. Periodic inspections are required on
certain equipment all of which is Spanner-prompted.
Cooling equipment is ‘winterised’ at the end of the
summer and then refreshed in spring. Stock levels are
redistributed to ensure best availability and quickest
response times (prompted by PRISM)
Infleeting new
equipment.
Focus on
sustainable
products
CUSTOMER SATISFACTION AND RETURNS ON CAPITAL.
PERFORMANCE
FRAMEWORKS
VALUE CREATED
FOR STAKEHOLDERS
Enquiries
Conversion
rates
Revenue
growth
Gross
margins
Digital
penetration
Fulfilment
rates
Customer
service
Utilisation
Cost to
serve
Sustainability
One-stop shop
ProService aggregates products,
services and suppliers offering
customers a single marketplace
for all their requirements, reducing
procurement, administration and
invoicing costs.
Accessibility & availability
Customers can access our
services, quickly and easily whether
they are on site, in the office or at
home. Our extensive supply chain
means we are more likely to say
‘yes’, and fulfil quickly.
Value for money
We source from a wide range of
suppliers providing customers with
a solution that strives for the optimal
balance of hire rate, transport cost
and quality.
Information & accuracy
Our single technology platform
and tailored interfaces provide
customers, colleagues and
suppliers with information at
their fingertips.
Supplier access to customers
A combination of our brand,
customer base and technology
provides our supply chain partners
with the volumes to improve
utilisation and returns.
Colleague wellbeing
Going home to families safe
and well is our priority.
Accessibility & availability
Provides ProService and its
customers with a significant
proportion of their hire
requirements nationally.
Service quality
Our newly introduced Satalia
software will enable customers
to select time windows for
deliveries and collections
and improve reliability.
Equipment quality
The quality systems in place
around our Spanner technology
ensure equipment has been
thoroughly tested and inspected
before hiring to a customer.
Sustainability
Our lean operating model
combined with the recently
introduced Satalia route
optimisation software aim to
minimise customers’ carbon
footprints and the impact on
local communities.
16
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Annual Report and Financial Statements 2021
INVESTMENT CASE
A RESILIENT
PROPOSITION
Our differentiated customer proposition, facilitated
by market-leading technology, means we occupy a
unique space within the sector.
2
INNOVATIVE
TECHNOLOGY
– We believe our integrated technology
platform leads the industry, and our
technology roadmap for 2022 will further
differentiate us from our competitors.
– Following the roll-out of HSS Pro to all
colleagues, they have access to our entire
range of equipment and services, so can
offer the full one-stop shop to our customers.
The technology also connects our suppliers
and customers giving them new routes to
market for their products.
– The scalable nature of our technology allows
us to add non-hire building services to our
offering, as we have already demonstrated
with waste services, equipment sales
and training.
1ATTRACTIVE
MARKET
DYNAMICS
– The UK equipment hire industry is worth an
estimated to be between £5bn and 6bn and its
fragmented supply base provides an opportunity
to grow share.
– The industry is digitally immature with less than
3% of orders estimated to be made via digital
channels compared to 15%+ in other sectors.
HSS’s technology platform is well-placed to take
advantage of this growth opportunity.
– Customer and supplier requirements are
converging with both trying to access the whole
market, and demanding speed, accuracy and
transparency. Our one-stop shop proposition,
enhanced by our recent technology transformation,
addresses these requirements.
CUSTOMER NEEDS
Equipment availability
One-stop shop
Easily accessible
Value for money
Quick response
Accurate invoicing
Y
B
D
E
S
S
E
R
D
D
A
S
T
N
E
M
E
R
U
Q
E
R
G
N
G
R
E
V
N
O
C
I
I
Y
G
O
L
O
N
H
C
E
T
Y
B
D
E
C
N
A
H
N
E
,
I
E
C
V
R
E
S
O
R
P
Access to the whole market:
Suppliers to all customers,
customers to all suppliers
Speed and efficiency:
Reduced administration, minimising
cost to buy and cost to serve
Information and insight:
Transparency for customers,
informed decisions for suppliers
Access to customers
Administration reduction
Brand recognition
Customer assurance
Digital channels
and marketing
Opportunities for
occasional hires
SUPPLIER NEEDS
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Annual Report and Financial Statements 2021
17
MODEL
– Our fast-growing (18% CAGR over ten years)
capital-light services business can be scaled
without capex.
3 SCALABLE
– We have a flexible, low-cost model comprising
a hub-and-spoke distribution network providing
national delivery coverage from just 40 distribution
centres, a rehire supply chain of over 600 partners
covering a huge range of equipment and services
and a flexible low-cost builders merchant network
providing convenience for customers.
– Our technology platform enables us to
rapidly expand our supply chain and add
new product verticals.
Digital transactions less than
3% vs 15%+ in other sectors
52%
– Digital immaturity in equipment hire sector
provides significant growth driver for HSS.
32%
28%
22%
20%
17%
15%
Significant
Growth
Driver
4%
<3%
Consumer
Electronics
Clothing
Wholesale1
Furniture
Chemicals2
B2B
(2023
forecast)3
Cosmetics
&
Toiletries
Construction1
Equipment
Hire
Source:
(1) ONS – UK E-commerce sales as a percentage of total turnover in 2019;
(2) CheMondis – Proportion of the global market that is online in 2019;
(3) Forrester Research - Forecasted US B2B E-commerce sales as a proportion of total B2B sales in 2023.
5DRIVING
SUSTAINABILITY
– We have the circular economy at the
heart of our business model, ensuring
that equipment is used again and
again by multiple customers who
would otherwise have large amounts
of poorly utilised equipment.
– We have a proven track record
of reducing our building carbon
footprint by 97% since 2016.
– We have been working with a
third party specialist ESG adviser,
developing an ambitious set
of sustainability targets and
commitments (see Sustainability
section on page 38).
4STRONG, WELL-
RECOGNISED AND
TRUSTED BRAND
– We have market-leading brand recognition.
– Our reputation and track record underpinned
by technology and systems provide
assurance to customers.
– We are highly attractive to supply partners,
whether rehire partners or builders
merchants, providing them with access
to customers and technology.
6STRONG BALANCE
SHEET AND
ATTRACTIVE
RETURNS
– Leverage (non-IFRS16) at 0.8x, well-
positioned to invest for future growth.
Electric vibrating
plate reduces
carbon emissions
– ROCE above 22%, leveraging insight tools
to focus investment on high demand, high
return hire fleet.
– Industry-leading EBITA margins.
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Annual Report and Financial Statements 2021
STRATEGY AT A GLANCE
2017 STRATEGY
DELIVERED
FOCUSED PROJECTS…
…DELIVERING ON OUR STRATEGIC GOALS
»
2018
Network reconfiguration £11m annual savings
Central efficiencies £4m annual savings
Customer segmentation study
Data insight investment
Introduction of new vision
2019
Divestment of UKP
Launch of customer and driver Apps
Launch of Brenda
Started builders merchant trial
Cross-dock removed
2020
Organisational restructure £15m
annual savings
Builders merchant roll-out
Launch of HSS Pro and Vodafone Storm
Capital raise £53m
2021
Roll-out of HSS Pro
Ongoing technology investment
Divestment of Laois
Divestment of ASH
Refinancing completed
Key
Delever
Strengthen
Transform
DELEVER
THE GROUP
1
TRANSFORM
THE TOOL HIRE
BUSINESS
2
STRENGTHEN
COMMERCIAL
POSITION
3
Leverage (non-IFRS 16) reduced
from 4.8x in 2017 to 0.8x...
– Significant reduction in net debt
(non-IFRS 16) from £235m+ (2018) to
£45m (2022)
– Refinancing in November 2021
significantly reduced the cost of capital
– Interest charges reduced from c.£16m
in 2021 to c.£3m in 2022
– Foundation established to invest in
next exciting phase of growth
Leverage 1 January 2022
0.8x
Transformed and
now performing well...
– Core tool hire business returned
to profitability
– Builders merchant model provides
low-cost access to new customers
– Launch of HSS App, website
improvements and click-and-collect
service have all improved customer
experience
– New organisational structure operating
well with revenues ahead of pre-
COVID-19 levels
Builders merchant sites
55
New technology platform
established...
– Development of new technology
platform, Brenda, and associated
interfaces, makes our proposition
uniquely positioned to scale rapidly
– Capitalises on converging requirements
of customers and suppliers
Digital channel penetration
23%
Strategic Report
HSS Hire Group plc
Annual Report and Financial Statements 2021
19
ENTERING AN EXCITING
NEW PHASE OF GROWTH
»
CAPITALISING ON
CONVERGING CUSTOMER
AND SUPPLIER
REQUIREMENTS
Access to the whole market
Customers want access to more
suppliers, increasing availability,
improving response times, and
minimising cost and carbon footprint.
Suppliers want access to more
customers to drive efficiencies,
improving utilisation and return
on capital.
Speed and efficiency
Customers and suppliers want reduced
administration, minimising the cost to
buy and to serve respectively. They want
to focus on their core activities and
not be distracted by administration
and rework.
Information and insight
Customers want transparent pricing
and confidence that they are getting
value for money. Suppliers want to be
able to make informed decisions to
maximise utilisation. Both want access
to real-time information to improve
their efficiency.
TAKING ADVANTAGE OF
MARKET CONDITIONS
CONTINUING TO
DIFFERENTIATE OUR
OFFERING
Highly fragmented
There are approximately 1,000
hire companies in the UK with many
small, good quality local and regional
independents and specialists. There is
an opportunity to provide our customers
with a one-stop shop access to this
supply chain.
Differentiation
Suppliers have historically struggled to
differentiate their offering, as customers
perceive the products offered as similar
in nature. National providers cannot
guarantee availability without unsustainable
levels of capex and inferior returns.
The opportunity remains to enhance
availability through a marketplace model.
Technologically immature
Our sector has historically focused on
products and asset utilisation rather
than customer journey and technology.
The opportunity exists to take market
share as customers shift to digital
channels and take advantage of our
technology proposition.
Investing in our technology
We have a development roadmap in
place for 2022 that will further enhance
our technology platforms, in particular:
launching an enhanced platform for
larger customers; providing full access
to our services for small customers
via our website; and expanding our
product verticals.
Expanding our offering via a
scalable platform, growing our
share of customers’ wallets
Strengthening our supply chain
and launching new products and
services such as building materials
and consumables.
Using data insight to deliver
value for all stakeholders
Our technology platform allows
intelligent decision-making across
our entire operating model, from
improving responsiveness and reducing
costs for customers, making colleagues
more efficient and improving their
performance, reducing carbon footprint
and enhancing shareholder returns.
Read more in our Investment case (page 16)
2022 PRIORITIES
Continue to prioritise health and safety for customers and colleagues
Risks
Delivering our technology development roadmap
Investing in our sales acquisition teams to drive enquiries and
conversion rates
Delivering a scheduling system so that we can offer customers a
choice of time slots
Achieving our ESG objectives, as outlined in our ESG Impact report,
improving outcomes for our stakeholders and the planet
– Ongoing COVID-19 impacts, such as supply chain and
labour supply
– Cyber security and business continuity
– Macroeconomic conditions
Read more on pages 30 to 34
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Annual Report and Financial Statements 2021
CASE STUDY
MAKING IT
EASIER FOR
CUSTOMERS
CUSTOMER BENEFITS
– Our website is quicker and easier to use than ever
– Customers have access to more user content,
helping them to choose the right equipment for
their job
– Our new chatbot service provides customers with
a rapidly accessible channel for support and advice
23%
online ordering FY21
16%
improvement in average
website page load speed
4.5
App Store rating Q4 2021
Strategic Report
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Annual Report and Financial Statements 2021
21
THE OPPORTUNITY
We know that customers want the ordering
process to be quick and easy, and we learnt
during the pandemic that customers are
prepared to go online (22% of orders
were taken online by the end of 2020).
Entering 2021, we set ourselves the
challenge of enhancing the online customer
journey so that customers continued to use
this channel as they returned to work after
lockdown and reverted to pre-pandemic
norms in other areas.
WHAT WE DID
We made significant improvements to
page speed and website performance, and
introduced new intelligent search functionality
giving customers quicker and more relevant
results. We introduced a ‘mini basket’ on
our website, allowing customers to view
a summary of their order anywhere on the
site. We migrated our blog from a standalone
domain to hss.com, driving more traffic to
the website, improving SEO performance and
allowing customers to view blogs then quickly
return to their hire journey. We introduced
an AI-enabled chatbot service and enhanced
our user content with post-checkout emails
providing video user guides and blog posts.
THE RESULTS
Average page load speed improved 16%
and server connection time improved 43%
(Q4 21 versus 20). In 2021, our chatbot
resolved 77% of all requests, and our
post-checkout emails achieved an 82%
open rate. The number of unique visits to our
website increased by 9% to 4.3m (143% more
traffic than the nearest national competitor)
and the average online order value was up
7%. Our digital penetration was 23%, above
the level seen at the end of 2020 despite the
industry returning to relatively normal ways
of working for most of 2021, following the end
of COVID-19 restrictions.
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Annual Report and Financial Statements 2021
CASE STUDY
EQUIPPING
OUR
COLLEAGUES
COLLEAGUE BENEFITS
– Our new hybrid working practices provide
colleagues with choice and flexibility
– Our HSS Pro technology makes it easier for
colleagues to serve their customers
– New recruits can get up to speed quicker with HSS
Pro making them feel part of the team early in their
career with HSS
76%
engagement score
80%
response rate
22%
increase in rehire revenue
FY21 versus FY20
Strategic Report
HSS Hire Group plc
Annual Report and Financial Statements 2021
23
THE OPPORTUNITY
During the COVID-19 pandemic we
adapted our working practices significantly,
with many colleagues working from home,
taking enquiries over the phone, via email
or online. Our digital mix also changed
significantly, from c.8% to over 20%, with
customers and colleagues embracing our
ongoing investment in technology and
adapting to new ways of working.
Throughout this period we sought feedback
from colleagues to understand how we could
optimise our ways of working. 2021 was an
opportunity to embrace this feedback, learn
from our new experiences and further
leverage our technology-based model.
WHAT WE DID
We made two major changes in 2021. First,
in Q1 we rolled out HSS Pro to our entire
salesforce. HSS Pro is the user interface to
our underlying technology platform, Brenda.
HSS Pro, designed specifically for colleagues,
is easy and intuitive to use, is accessible via
various devices and allows sales colleagues
to fulfil customer requirements immediately,
across our entire range of services. Second,
in Q4 we relocated our head office to a
smaller, better, technology-enhanced site
located at Think Park in Manchester and
adopted hybrid working practices.
THE RESULTS
The HSS Pro roll-out has significantly
increased our cross-selling activity, with
more colleagues promoting and selling
the full range of our products and services.
This has led to very strong growth in our
Services division with rehire revenue up 22%
on FY20. The shift to hybrid working has given
colleagues the flexibility to choose the optimal
balance between working from home and the
office. Working from home led to improved
productivity and better work-life balance,
but colleagues missed out on the social
interactions and benefits of working in an
office. Our new hybrid model provides the
best of both worlds for colleagues. It’s early
days at Think Park, but our recent colleague
engagement survey suggests colleagues are
enjoying the new hybrid way of working.
24
HSS Hire Group plc
Annual Report and Financial Statements 2021
CASE STUDY
CREATING A
MORE AGILE
BUSINESS
MODEL
CUSTOMER BENEFITS
– Our hire counters in builders merchant locations provide a
convenient way for customers to collect their hire equipment
along with building materials
– Saves customers time and money, and reduces their carbon footprint
– Full integration with our click-and-collect offering
55
builders merchant locations
70k
contracts in 2021
£15m
lower fixed cost base
compared to 2019
Strategic Report
HSS Hire Group plc
Annual Report and Financial Statements 2021
25
THE OPPORTUNITY
OPPORTUNITY
Our unique hub and spoke distribution
network provides national delivery and
collection capability from 40 distribution
centres. This allowed us to pioneer a
low-cost and flexible model for sales
counters, as an alternative to the
traditional hire branch. We entered 2021
with a new, lean operating network and a
builders merchant model that we were
keen to expand on.
WHAT WE DID
In 2021, we expanded our builders
merchant model from 24 to 55 locations,
with new partners in the North and
Midlands adding to the established
relationships we had forged in the South.
The model targets the customers of
successful regional builders merchants,
offering them the convenience of hire
when they collect their building materials.
Our sales counters are usually an
extension of the builders merchant
counter and our colleagues work as part
of the wider builders merchant team,
benefiting from their customer
relationships and experience.
THE RESULTS
Our builders merchant locations raised
over 70,000 contracts in 2021,
generating £16m of sales, and as these
locations mature during 2022 we expect
them to grow further. The fixed cost of
our branch network in 2021 was £15m
lower than in 2019, and we believe we
have the most agile model in our industry.
This leaves us well placed to respond
to changing customer requirements in
the future.
26
HSS Hire Group plc
Annual Report and Financial Statements 2021
OUR KEY PERFORMANCE INDICATORS
MEASURING OUR
PROGRESS
Key
Delever
Transform
Strengthen
STRATEGIC FRAMEWORK
Key performance indicator (KPI) FY21 performance
GROUP
REVENUE
Continuing operations
£303.3m
FY20: £250.1m
RENTAL AND
RELATED
REVENUES
Continuing operations
£191.2m
FY20: £89.4m
SERVICES
REVENUE
Continuing operations
£112.1m
FY20: £89.4m
ADJUSTED
EBITDA AND
MARGIN
Continuing operations
£69.8m
23.0% margin
ADJUSTED EBITA
AND MARGIN
Continuing operations
£31.7m
10.4% margin
Importance of KPI
Definition
Performance
Remuneration linkage
Track record
Simplest measure of the ongoing growth of the Group’s
sales from which profits can be generated and shareholder
value created.
Link to Strategy:
Delever the Group
Transform the Tool Hire business
Strengthen the Group’s commercial proposition
See Financial Review page 35
Simplest measure of the ongoing growth of the core hire
business’ sales from which profits can be generated and
shareholder value created.
Link to Strategy:
Delever the Group
Transform the Tool Hire business
See Financial Review page 35
Simplest measure of the ongoing growth of the Services
business representing the strategic goal of focusing on a
capital-light structure.
Link to Strategy:
Delever the Group
Strengthen the Group’s commercial proposition
See Financial Review page 35
Widely recognised measure of profitability. Metric also used in
leverage and covenant calculations.
Link to Strategy:
Delever the Group
Transform the Tool Hire business
Strengthen the Group’s commercial proposition
See Financial Review page 35
Measure of profitability before amortisation, impacts of capital
structure (interest and tax) and exceptional costs.
Operating profit before amortisation
137% increase in EBITA
Indirectly, as numerator in
and exceptional items.
and margin increased
ROCE calculation.
Link to Strategy:
Delever the Group
Transform the Tool Hire business
Strengthen the Group’s commercial proposition
See Financial Review page 35
LEVERAGE
Total operations
Measure of financial liquidity.
1.5x
FY20: 2.8x
Link to Strategy:
Delever the Group
Transform the Tool Hire business
Strengthen the Group’s commercial proposition
See Financial Review page 35
Net debt is borrowings, including
Large reduction from FY20
Component of leadership
finance leases, less cash expressed
following the capital raise,
incentive plan.
as a multiple of Adjusted EBITDA.
strong trading and sale of
FY21
1.5x
Improvement
Laois and ASH.
Revenue from contracts with
third party customers derived
Increase of 21.3%, with
Driver of colleague
recovery from COVID-19
incentive plans.
from continuing operations after
and results back in line with
deducting VAT, rebates and credit
pre-pandemic levels.
note provision movements.
Revenue including kit and equipment
Growth of 19.0% driven by
Driver of colleague incentive
sales derived from the direct contact
strong performance as
plans and component of
with our customers.
business recovered from
leadership incentive plan.
impact of COVID-19.
Revenue including kit and equipment
Growth of 25.4% driven by
Driver of colleague
sales derived from our OneCall and
strong performance as
incentive plans.
Training businesses.
business recovered from
impact of COVID-19.
Operating profit before depreciation,
A strong performance in a
Driver of colleague incentive
amortisation and exceptional items.
year of significant progress.
plans and component of
The Group adopted IFRS 16 in FY20
Margins have improved
leadership incentive plan
and so depreciation and interest
slightly in both segments
(including as a threshold
related to right of use assets is
with overall margin slightly
element).
deducted as well as the net book
reduced due to mix.
value of hire stock losses and
write-offs, and the profit on disposal
of other fixed assets.
to 10.5%.
FY21
FY20
FY19
FY18
FY21
FY20
FY19
FY18
FY21
FY20
FY19
FY18
FY21
FY20
FY19
FY18
FY21
FY19
FY18
Growth/(decline)
£303.3m
21.3%
£250.1m
-18.6%
£307.3m
1.2%
£303.8m
1.2%
Growth/(decline)
£191.2m
19.0%
£160.6m
-21.9%
£205.7m
0.3%
£205.1m
2.1%
Growth/(decline)
£112.1m
25.4%
£89.4m
-12.0%
£101.6m
£98.7m
2.9%
-0.4%
£69.8m
23.0%
£59.6m
£56.1m
£53.4m
Margin
23.8%
18.3%
17.6%
Margin
5.3%
7.4%
6.3%
1.3x
0.0x
0.5x
1.5x
£31.7m
10.4%
FY20
£13.4m
£22.9m
£19.1m
FY20
2.8x
FY19
2.8x
FY18
3.3x
Strategic Report
HSS Hire Group plc
Annual Report and Financial Statements 2021
27
KPIs and strategy
IFRS 16 and KPIs
Key
The Group will publish its new strategy during
2022 and will therefore be reviewing and
selecting the KPIs that best reflect the
performance of the business and progress
against strategy. For FY21 the strategy
referenced is the 2017 strategy that was
completed with the refinancing of the business
in November 2021.
The Group adopted IFRS 16 during FY20.
Under the adoption method chosen, prior
years are not restated. The standard has a
significant impact on several financial measures
and, as a result, certain KPIs. The Group now
reports its KPIs on an IFRS 16 basis which
means that periods prior to FY20 are not
directly comparable.
IFRS 16 adoption means FY19 and earlier
not directly comparable
Key performance indicator (KPI) FY21 performance
Importance of KPI
Definition
Performance
Remuneration linkage
Track record
Revenue from contracts with
third party customers derived
from continuing operations after
deducting VAT, rebates and credit
note provision movements.
Increase of 21.3%, with
recovery from COVID-19
and results back in line with
pre-pandemic levels.
Driver of colleague
incentive plans.
Revenue including kit and equipment
sales derived from the direct contact
with our customers.
Growth of 19.0% driven by
strong performance as
business recovered from
impact of COVID-19.
Driver of colleague incentive
plans and component of
leadership incentive plan.
Revenue including kit and equipment
sales derived from our OneCall and
Training businesses.
Growth of 25.4% driven by
strong performance as
business recovered from
impact of COVID-19.
Driver of colleague
incentive plans.
Operating profit before depreciation,
amortisation and exceptional items.
The Group adopted IFRS 16 in FY20
and so depreciation and interest
related to right of use assets is
deducted as well as the net book
value of hire stock losses and
write-offs, and the profit on disposal
of other fixed assets.
Operating profit before amortisation
and exceptional items.
A strong performance in a
year of significant progress.
Margins have improved
slightly in both segments
with overall margin slightly
reduced due to mix.
Driver of colleague incentive
plans and component of
leadership incentive plan
(including as a threshold
element).
137% increase in EBITA
and margin increased
to 10.5%.
Indirectly, as numerator in
ROCE calculation.
LEVERAGE
Total operations
Measure of financial liquidity.
1.5x
FY20: 2.8x
Net debt is borrowings, including
finance leases, less cash expressed
as a multiple of Adjusted EBITDA.
Large reduction from FY20
following the capital raise,
strong trading and sale of
Laois and ASH.
Component of leadership
incentive plan.
FY21
FY20
FY19
FY18
FY21
FY20
FY19
FY18
FY21
FY20
FY19
FY18
FY21
FY20
FY19
FY18
Growth/(decline)
£303.3m
21.3%
£250.1m
-18.6%
£307.3m
1.2%
£303.8m
1.2%
Growth/(decline)
£191.2m
19.0%
£160.6m
-21.9%
£205.7m
0.3%
£205.1m
2.1%
Growth/(decline)
£112.1m
25.4%
£89.4m
-12.0%
£101.6m
£98.7m
2.9%
-0.4%
Margin
£69.8m
23.0%
£59.6m
£56.1m
£53.4m
23.8%
18.3%
17.6%
Margin
FY21
£31.7m
10.4%
FY20
£13.4m
FY19
FY18
£22.9m
£19.1m
5.3%
7.4%
6.3%
Improvement
FY21
1.5x
FY20
2.8x
FY19
2.8x
FY18
3.3x
1.3x
0.0x
0.5x
1.5x
STRATEGIC FRAMEWORK
GROUP
REVENUE
Continuing operations
£303.3m
FY20: £250.1m
RENTAL AND
RELATED
REVENUES
Continuing operations
£191.2m
FY20: £89.4m
SERVICES
REVENUE
Continuing operations
£112.1m
FY20: £89.4m
ADJUSTED
EBITDA AND
MARGIN
£69.8m
23.0% margin
Continuing operations
Widely recognised measure of profitability. Metric also used in
ADJUSTED EBITA
AND MARGIN
£31.7m
10.4% margin
Continuing operations
Measure of profitability before amortisation, impacts of capital
structure (interest and tax) and exceptional costs.
Simplest measure of the ongoing growth of the Group’s
sales from which profits can be generated and shareholder
value created.
Link to Strategy:
Delever the Group
Transform the Tool Hire business
Strengthen the Group’s commercial proposition
See Financial Review page 35
Simplest measure of the ongoing growth of the core hire
business’ sales from which profits can be generated and
shareholder value created.
Link to Strategy:
Delever the Group
Transform the Tool Hire business
See Financial Review page 35
Simplest measure of the ongoing growth of the Services
business representing the strategic goal of focusing on a
capital-light structure.
Link to Strategy:
Delever the Group
Strengthen the Group’s commercial proposition
See Financial Review page 35
leverage and covenant calculations.
Link to Strategy:
Delever the Group
Transform the Tool Hire business
Strengthen the Group’s commercial proposition
See Financial Review page 35
Link to Strategy:
Delever the Group
Transform the Tool Hire business
Strengthen the Group’s commercial proposition
See Financial Review page 35
Link to Strategy:
Delever the Group
Transform the Tool Hire business
Strengthen the Group’s commercial proposition
See Financial Review page 35
28
HSS Hire Group plc
Annual Report and Financial Statements 2021
OUR KEY PERFORMANCE INDICATORS continued
LONG-TERM MEASURES
Key performance indicator (KPI) FY21 performance
Key
Delever
Transform
Strengthen
Importance of KPI
Definition
Performance
Remuneration linkage
Track record
RETURN ON
CAPITAL
EMPLOYED
(ROCE)
Continuing operations at
reporting date
Measure of the return-generating ability of the business over the
longer term and key measure for leadership incentives.
Adjusted EBITA divided by the
Increased, through
Component of 2019 LTIP.
average of capital employed at the
strong growth in EBITA.
22.1%
FY20: 10.7%
Link to Strategy:
Delever the Group
Transform the Tool Hire business
See Financial Review page 35
ADJUSTED
EARNINGS PER
SHARE
(DILUTED) (EPS)
Profit of
1.49p per
share
FY20: Loss of (4.64)p per share
Measure of adjusted profitability per share. Widely recognised
measure of shareholder value (profit) being generated by a business
excluding non-recurring or exceptional items and amortisation and
after charging the prevailing rate of corporation tax.
Link to Strategy:
Delever the Group
Transform the Tool Hire business
See Financial Review page 35
beginning and end of the year.
Capital employed is total assets
except intangible assets, derivatives
and cash less current liabilities except
current debt items.
items and amortisation and then
charging the prevailing rate of tax.
Earnings are then divided by the
number of shares in issue assuming
the conversion of any potentially
dilutive equity derivatives outstanding.
Earnings are defined as profit before
Increase of 6.14p driven by
Adjusted EPS is a component
tax after adding back exceptional
the increase in EBITA.
of 2019 LTIP.
Growth/(decline)
£191.2m
19.0%
£160.6m
-21.9%
£205.7m
0.3%
£205.1m
2.1%
FY20 -4.64p
-5.53p
Change
1.49p
6.13p
0.89p
0.72p
0.16p
9.29p
STAKEHOLDERS
Key performance indicator (KPI) FY21 performance
HEALTH AND
SAFETY
(RIDDORS)
Continuing operations
0.11
FY20: 0.04
COLLEAGUE
ENGAGEMENT
Continuing operations
76.1%
FY20: 75.0%
NET PROMOTER
SCORE (NPS)
Total operations
38
FY20: 44
GREENHOUSE
GAS EMISSIONS
Total operations
32.9
TCO2e/£m Rev
FY20: 44.3
Importance of KPI
Definition
Performance
Remuneration linkage
Track record
Widely recognised measure of safety in the workplace. Safety is at
the heart of how HSS operates.
Link to Strategy:
Transform the Tool Hire business
See ESG page 38
Number of events that are reportable
Increase in rate and 5
Component of leadership
under the Reporting of Injuries,
Diseases and Dangerous
Occurrences Regulations
RIDDORs for the year
despite the significant
increase in activity versus
2013 multiplied by 100,000 and
last year; evidence of
divided by the hours worked.
continued focus.
incentive plan.
FY21
0.11
FY20
0.04
0.20
Change
0.07
-0.16
-0.14
0.34
-0.05
A measure of the level of engagement across the entire population
of colleagues.
Link to Strategy:
Transform the Tool Hire business
Strengthen the Group’s commercial proposition
See ESG page 38
A measure of how likely our customers are to recommend HSS
and used to benchmark against the industry.
Link to Strategy:
Transform the Tool Hire business
Strengthen the Group’s commercial proposition
See CEO’s Strategic Review page 8
A key measure of the impact we have on the environment relative
to our scale and which allows progress to be tracked.
Link to Strategy:
Transform the Tool Hire business
Strengthen the Group’s commercial proposition
See ESG page 38
Proportion of responses from
colleague engagement survey
Improved score and
consistently high
(carried out by Anthem Engagement)
completion rate of 84%
that either Strongly Agree or Agree to
despite challenging
positively phrased questions.
working conditions through
N/A
the pandemic.
The percentage of promoters less the
Continues to be
N/A
percentage of detractors based on
significantly ahead of the
survey and as measured by Kantar.
industry benchmark.
The total UK and ROI (for FY21, UK
Significant reduction.
N/A
only for earlier years) greenhouse gas
The increase in trading has
emissions produced by the Group
been more than offset by
during the period in tonnes, divided
the reduction in network
by Total Group Revenue in £m.
and ongoing efforts to
reduce emissions.
FY21
FY20
FY19
FY18
FY21
FY19
FY18
FY19
FY18
FY21
FY20
FY19
FY18
FY21
FY20
FY19
FY18
FY21
FY20
FY19
FY18
Change
76.1%
1.1 pp
75.0%
2.6 pp
72.4%
0.8 pp
71.6%
38
44
45
44
32.9
44.3
Change
25.8%
9.7%
49.1
11.7%
55.6
39.3%
Key performance indicator (KPI) FY21 performance
Importance of KPI
Definition
Performance
Remuneration linkage
Track record
Strategic Report
HSS Hire Group plc
Annual Report and Financial Statements 2021
29
Increased, through
strong growth in EBITA.
Component of 2019 LTIP.
Increase of 6.14p driven by
the increase in EBITA.
Adjusted EPS is a component
of 2019 LTIP.
Adjusted EBITA divided by the
average of capital employed at the
beginning and end of the year.
Capital employed is total assets
except intangible assets, derivatives
and cash less current liabilities except
current debt items.
Earnings are defined as profit before
tax after adding back exceptional
items and amortisation and then
charging the prevailing rate of tax.
Earnings are then divided by the
number of shares in issue assuming
the conversion of any potentially
dilutive equity derivatives outstanding.
FY21
FY20
FY19
FY18
Growth/(decline)
£191.2m
19.0%
£160.6m
-21.9%
£205.7m
0.3%
£205.1m
2.1%
Change
FY21
1.49p
6.13p
FY20 -4.64p
-5.53p
FY19
FY18
0.89p
0.72p
0.16p
9.29p
Key performance indicator (KPI) FY21 performance
Importance of KPI
Definition
Performance
Remuneration linkage
Track record
Continuing operations
Widely recognised measure of safety in the workplace. Safety is at
Number of events that are reportable
under the Reporting of Injuries,
Diseases and Dangerous
Occurrences Regulations
2013 multiplied by 100,000 and
divided by the hours worked.
Increase in rate and 5
RIDDORs for the year
despite the significant
increase in activity versus
last year; evidence of
continued focus.
Component of leadership
incentive plan.
FY21
0.11
FY20
0.04
LONG-TERM MEASURES
RETURN ON
CAPITAL
EMPLOYED
(ROCE)
reporting date
22.1%
FY20: 10.7%
Continuing operations at
Measure of the return-generating ability of the business over the
longer term and key measure for leadership incentives.
Link to Strategy:
Delever the Group
Transform the Tool Hire business
See Financial Review page 35
ADJUSTED
EARNINGS PER
SHARE
(DILUTED) (EPS)
Profit of
1.49p per
share
FY20: Loss of (4.64)p per share
Measure of adjusted profitability per share. Widely recognised
measure of shareholder value (profit) being generated by a business
excluding non-recurring or exceptional items and amortisation and
after charging the prevailing rate of corporation tax.
Link to Strategy:
Delever the Group
Transform the Tool Hire business
See Financial Review page 35
STAKEHOLDERS
HEALTH AND
SAFETY
(RIDDORS)
0.11
FY20: 0.04
COLLEAGUE
ENGAGEMENT
76.1%
FY20: 75.0%
NET PROMOTER
SCORE (NPS)
38
FY20: 44
Continuing operations
A measure of the level of engagement across the entire population
Total operations
A measure of how likely our customers are to recommend HSS
the heart of how HSS operates.
Link to Strategy:
Transform the Tool Hire business
See ESG page 38
of colleagues.
Link to Strategy:
Transform the Tool Hire business
Strengthen the Group’s commercial proposition
See ESG page 38
and used to benchmark against the industry.
Link to Strategy:
Transform the Tool Hire business
Strengthen the Group’s commercial proposition
See CEO’s Strategic Review page 8
Proportion of responses from
colleague engagement survey
(carried out by Anthem Engagement)
that either Strongly Agree or Agree to
positively phrased questions.
N/A
Improved score and
consistently high
completion rate of 84%
despite challenging
working conditions through
the pandemic.
The percentage of promoters less the
percentage of detractors based on
survey and as measured by Kantar.
Continues to be
significantly ahead of the
industry benchmark.
N/A
GREENHOUSE
GAS EMISSIONS
Total operations
32.9
TCO2e/£m Rev
FY20: 44.3
A key measure of the impact we have on the environment relative
to our scale and which allows progress to be tracked.
Link to Strategy:
Transform the Tool Hire business
Strengthen the Group’s commercial proposition
See ESG page 38
The total UK and ROI (for FY21, UK
only for earlier years) greenhouse gas
emissions produced by the Group
during the period in tonnes, divided
by Total Group Revenue in £m.
N/A
Significant reduction.
The increase in trading has
been more than offset by
the reduction in network
and ongoing efforts to
reduce emissions.
Change
0.07
-0.16
-0.14
0.34
-0.05
0.20
Change
76.1%
1.1 pp
75.0%
2.6 pp
72.4%
0.8 pp
71.6%
38
44
45
44
32.9
44.3
Change
25.8%
9.7%
49.1
11.7%
55.6
39.3%
FY19
FY18
FY21
FY20
FY19
FY18
FY21
FY20
FY19
FY18
FY21
FY20
FY19
FY18
30
HSS Hire Group plc
Annual Report and Financial Statements 2021
PRINCIPAL RISKS AND UNCERTAINTIES
MANAGING RISK
AND UNCERTAINTY
Effective risk management
underpins everything we do
at HSS and is embedded within
our culture as a business.
We employ a comprehensive
risk management process to
identify, assess and mitigate
risks to ensure we deliver on
our strategic objectives.
Ownership
The Board has overall responsibility for the
business strategy and managing the risk
associated with its delivery, setting the risk
appetite, tolerance and culture to achieve goals.
The Audit Committee plays a key supporting
role through monitoring the effectiveness of
risk management and the control environment,
reviewing and requesting deep dives on
emerging risk areas and through directing
and reviewing independent assurance.
The Group’s Executive Management Team
(EMT) has overall responsibility for day-to-day
risk management. Mark Shirley, HSS’s Risk
and Assurance Director, maintains the Group’s
Risk Register which is reviewed in detail by the
EMT on a quarterly basis with changes to the
risk landscape, assessment and mitigating
actions agreed.
Identification and assessment
Risks are identified through a variety of
sources, both internal and external, to ensure
that developing risk themes are considered.
This process is focused on those risks which,
if they occurred, would have a material financial
or reputational impact on the Group.
Management identifies the controls in place
for each risk and assesses the impact and
likelihood of the risk occurring, taking into
account the effect of these controls, with the
result being the residual risk. This assessment
is compared with the Group’s risk appetite to
determine whether further mitigating actions
are required.
All risks have an overall EMT owner responsible
for the day-to-day management. Health and
safety is a key area in our industry and as such
it requires collective ownership to continually
improve. There is an established Health and
Safety Forum which is made up of the EMT,
Operational MDs and the Risk and Assurance
Director, that meets bi-monthly (and more
frequently if required, e.g. during COVID-19) to
review trends, incidents and issues such
as COVID-19.
Monitoring
The Risk and Assurance Director reports to
the EMT and the senior management team
on a monthly basis to review the findings of
risk-based assurance activity. Risk-based
assurance work is then reported to the Audit
Committee on a quarterly basis for review.
How we manage risk
We adopt a ‘Three Line of Defence’ model for
managing risk, providing the Board and the
EMT with assurance that risk is appropriately
managed. This is achieved by dividing
responsibilities as follows:
– The first line of defence – functions that own
and manage risk.
– The second line of defence – functions that
oversee or specialise in risk management,
compliance such as Health, Safety
Environment and Quality (HSEQ).
– The third line of defence – functions that
provide independent assurance, in the HSS
case primarily Internal Audit (IA).
Culture and values
The Board is cognisant that risk management
processes alone are not enough to mitigate
risk, and behaviour is a critical element in risk
management. The wellbeing of our colleagues,
the drive and skill set they bring and the training
and environment we provide are key to our
success. These are underpinned in the HSS
values which are vital in us achieving our
strategy as well as mitigating the risks
associated with it:
COVID-19
In 2021 the Group effectively implemented
strategy and delivered strong performance,
all against the continued backdrop of the
COVID-19 pandemic. Keeping our colleagues
and customers safe remained paramount
throughout the year with measures taken in
2020 maintained including flexible working for
colleagues, COVID-19 safety procedures (which
were subject to regular audit) above and
beyond government guidelines and click-and-
collect capability. We continue to monitor
emerging variants and adapt policies and
procedures to ensure supply is not disrupted
and all stakeholders remain safe.
New risks in 2021
In 2021 we expanded our key risks from 9 to 11.
We added ‘Environment, Social and
Governance’ (ESG) recognising the importance
of working with all our stakeholders to drive a
sustainable end-to-end business with defined
targets underpinned with clear deliverable plans.
‘Safety’ and ‘Legal and Regulatory
Requirements’ were previously combined as one
risk. We have now separated out Safety as a
standalone risk, reflecting its importance to us
and the effort and innovation that has gone into
improving our performance, for example
introducing incident reporting on mobile devices
and increasing safety observations, with
colleagues challenging each other to keep
everyone safe.
Ukraine conflict
The conflict is increasing macroeconomic risk
in 2022 and will be closely monitored for its
effect on inflation, interest rates and demand.
Measures will be put in place to minimise
exposure as risk evolves.
COVID-19 has continued
to impact the Group’s risk
profile in 2021. Policies and
procedures developed and
a close working relationship
across the Group have
continued to keep colleagues
and customers safe and
informed as we navigated
the pandemic.”
Mark Shirley
Risk and Assurance Director
Strategic Report
HSS Hire Group plc
Annual Report and Financial Statements 2021
31
RISK MANAGEMENT FRAMEWORK
BOARD
AUDIT COMMITTEE
GROUP EXECUTIVE TEAM
1st line of defence
Owns and manages risk
and implements/operates
business controls
Who is responsible:
– Operational management/
colleagues
Activity/Controls:
– Policies and procedures
– Internal controls
E
X
T
E
R
N
A
L
A
U
D
I
T
I
N
D
U
S
T
R
Y
(
H
A
E
)
A
N
D
I
S
O
A
C
C
R
E
D
I
T
A
T
I
O
N
S
2nd line of defence
Oversight of risks and control
compliance
3rd line of defence
Independent assurance
Who is responsible:
– Compliance/oversight functions
Who is responsible:
– Internal Audit
Activity/Controls:
– SHQ Team with Audit
programme in place
Activity/Controls:
– Approved Internal Audit plan
– Internal Audit has reporting line to
– Environmental/legal/regulatory
Audit Committee
– Planning, budgeting, forecasting
processes
compliance
– Risk management
– Regular Internal Audit updates at
Audit Committee
– Delegated authorities
– Controls compliance monitoring
– Business workflows/IT system
– Management/Board reporting
controls
– Personal objectives and
incentives
and review of KPIs and financial
performance
– Corporate policies and central
function oversight
2021 RISK MANAGEMENT DEVELOPMENTS
The Group has continued to improve its approach to
the management of risk and assurance throughout 2021,
with significant emphasis on the new operational model, the
impact of continued investment in technology platforms and
improvement in the automation of reporting, findings and trends
to better focus ongoing assurance activities.
– Improved the ease of accident, near miss and safety
observations reporting by enabling reporting through
mobile devices. Our Incident Report Management System
(IRMS) roll-out increased safety observations threefold to over
22,000, helping to keep colleagues safe.
– Implemented new assurance software with improved
functionality enabling enhanced controls tracking and insight.
– Launched an improved Customer Distribution Centre (CDC)
audit with the addition of virtual branch and builders
merchant audits to assurance programmes.
– Enhanced quality of accident investigations through
introduction of a new senior HSEQ role; introducing
subject matter expertise and improving investigations,
reporting and insight.
– Increased early Internal Audit involvement supporting strategy
implementation, helping shape controls for new processes
and systems and minimise issues post change.
– Engaged third party companies to provide specialist
knowledge on areas such as cyber security and Environment
and Social Governance (ESG). This has helped with the
implementation of an IT Risk assessment tool providing
a more detailed view of risk across the estate.
2022 PLANNED IMPROVEMENTS TO
RISK MANAGEMENT PROCESS
Significant progress has been made in the last year. The focus
in 2022 is on enhancing and leveraging our reporting tools,
supporting the Group’s strategic technology roadmap delivery
and working more collaboratively with outside specialists to
better understand and manage risk.
– Work with specialist ESG partners to establish targets, the
implementation plan to deliver and governance process to
monitor progress.
– Increase the amount of guidance and training material
accessible to colleagues through mobile technology.
– Increase risk management awareness across the
organisation enabling more colleagues to have a better
understanding of controls, why they are important and why
we concentrate assurance on these areas.
– Implement actions required to secure ISO 270001
Information Security Management accreditation.
– Increase internal audit engagement in assessing and shaping
controls for new processes and systems being implemented
as part of the strategy execution.
– Develop and implement succession plans for risk and
assurance specialist colleagues.
32
HSS Hire Group plc
Annual Report and Financial Statements 2021
PRINCIPAL RISKS AND UNCERTAINTIES continued
PRINCIPAL RISKS REVIEW
Key Risk
Description and Impact How we mitigate
What we have done in 2021
The Group’s sales and
profits, either volume or
price, are adversely
impacted by any decline
in the macroeconomic
environment.
COVID-19 and the
Ukraine conflict could
have a material impact
on inflation, effecting
demand and therefore
financial performance.
A highly competitive and
fragmented industry, with
the chance of increased
competition could result in
excess capacity therefore
creating pricing pressure
and adverse impacts on
planned growth.
Failure to successfully
implement the Group’s
strategic plans could lead
to lower than forecast
financial performance
both in terms of revenue
growth and cost savings.
1. Macro-
economic
conditions
Movement
Owner:
Steve Ashmore
(Chief Executive
Officer)
2. Competitor
challenge
Movement
Owner:
Steve Gaskell
(Group Strategy
Director)
3. Strategy
execution
Movement
Owner:
Steve Gaskell
(Group Strategy
Director)
4. Customer
service
Movement
Owner:
Tom Shorten
(Chief Commercial
Officer)
The provision of the
Group’s expected service
levels depends on its
ability to efficiently
transport the hire fleet
across the network to
ensure it is in the right
place, at the right time and
of the appropriate quality.
Any disruption in supply
can reduce revenue and
drive additional costs into
the business.
The Group focuses on the ‘fit-out,
maintain and operate’ markets, which are
less cyclical, less discretionary and have
a large proportion of recurring spend.
Embedded our new lower and flexible cost
operating model, which mitigates against any
downturn in future demand. Trading via this
model was in line with 2019.
Ongoing monitoring and modelling
of performance, which is reviewed
regularly by the EMT.
Differentiated technology platforms
including fully integrated Customer App.
National presence through Customer
Distribution Centres (CDCs), branches
and builders merchants.
Through the Services business,
the Group provides customers with
access to a huge range of products
and complementary services such as
training courses.
Strengthened the balance sheet by completing
the strategic divestures of Laois Hire and All
Seasons Hire, and successfully refinancing the
Group’s debt.
Continued to consider via a reverse stress test
model the impact of COVID-19 should there be
further lockdowns, each time demonstrating
significant liquidity and covenant headroom.
Further investment and development in the
Group’s technology capability including
re-platforming the business onto the HSS
Pro system.
Expansion of the builders merchant network
to 55 branches, increasing local presence in
key markets.
Targeted investment in hire fleet based on
demand and returns, utilising insight capability.
A clearly defined and communicated
strategic plan is in place.
The 2017 strategic plan was completed following
the Group’s refinancing in November 2021.
Delever the Group: leverage reduced from a high
of 4.8x to 0.8x (non-IFRS 16) following the
completion of strategic divestures.
Transform the Tool Hire Business: the new
digitally-led, lower-cost operating model has been
implemented with performance back to
pre-COVID-19 levels.
Strengthen the Commercial Proposition:
continued investment in technology platforms
and fast delivery of improvements through agile
development. This includes the re-platforming of
the business onto HSS Pro, making it easier for
colleagues and customers.
A new strategic plan and targets are in
development, and will be published during 2022.
Ongoing engagement with colleagues and
customers, monitoring and acting on feedback as
the technology develops, improving the customer
experience at pace.
Introduction of new routing and scheduling
software for CDCs, improving operational
efficiency and providing more accurate delivery
windows for customers.
Introduction of new engineering processes,
including storing digital images to improve quality,
and continual colleague development.
Clear governance structure,
with defined accountabilities.
Each strategic initiative is sponsored
by an EMT member.
Implementation of projects is
monitored by the EMT including
resource allocation.
Regular updates, including initiative-
specific deep dives, provided to
the Board.
National reach and presence through
CDCs, branches, builders merchants
and online.
Diverse range of rehire suppliers
provides ongoing flexibility to ensure
continuity of supply for customers.
Clear business continuity plans to
ensure continuity of supply.
Extensive and continued training to
ensure testing and repair quality
standards are maintained.
Audits and reporting covering quality,
contracts and complaints.
Business accreditations are
maintained, including ISO 9001
providing customers with confidence in
the quality of the services provided.
Strategic Report
HSS Hire Group plc
Annual Report and Financial Statements 2021
33
Key Risk
Description and Impact How we mitigate
What we have done in 2021
5. Third party
reliance
Movement
Owner:
Tom Shorten
(Chief Commercial
Officer)
6. IT
infrastructure
Movement
Owner:
Paul Quested
(Chief Financial
Officer)
7. Financial
Movement
Owner:
Paul Quested
(Chief Financial
Officer)
Third party rehire suppliers are subject
to rigorous on-boarding processes.
Each supplier is subject to
demanding service level agreements
with performance monitored on an
ongoing basis.
The wide and diverse range of rehire
suppliers provides flexibility to select
those who meet required service levels.
Extensive commercial and risk
assessment process undertaken
before and after entering into a
relationship with a builders merchant
or opening a new location.
Third party specialists are used to
assess the appropriateness of IT
controls, including the risk of malicious
or inadvertent security attacks.
Firewalls, antivirus software, endpoint
detection and clean up tools to protect
against malicious attempts to penetrate
the business IT environment and
remove malware or similar agents.
Procedures to update supplier
security patches.
Regular disaster recovery tests
conducted and appropriate back-up
servers to manage the risk of primary
server failure.
Cross-departmental Data Governance
Team to ensure that business processes
are, and continue to be, adequate.
Working capital management with cash
collection targets (which roll up into our
net debt KPI).
Extensive credit checking for account
customers with strict credit control over
a diversified customer base.
Credit insurance in place to minimise
exposure to larger customer default risk.
Investigation team focused on minimising
Group’s exposure to fraud.
Clearly defined authorisation matrix
governing payments and amendments.
A significant amount of
Group revenue is derived
from the Services
business which is
dependent on the
performance of third
party service providers.
Other third parties, such
as builders merchants,
are an increasingly
important part of the
operational model.
If any third parties become
unable or refuse to fulfil
their obligations, or violate
laws or regulations, there
could be a negative
impact on the Group’s
operations leading to
an adverse impact on
profitability and reputation.
The Group requires
an IT system that is
appropriately resourced
to support the business.
An IT system malfunction
may affect the ability to
manage operations and
distribute hire equipment
and service to customers,
affecting revenue
and reputation.
An internal or external
security attack could lead
to a potential loss of
confidential information
and disruption to
transactions with
customers and suppliers.
To deliver its strategic
goals the Group must
have access to funding
at a reasonable cost.
Some customers may be
unwilling or unable to fulfil
the terms of their rental
agreements. Bad debts
and credit losses can
arise due to service
issues or fraud.
Unauthorised, incorrect or
fraudulent payments may
lead to financial loss or
delays which could affect
relationships with
suppliers and lead to
a disruption in supply.
Further expansion of the rehire supplier base
in 2021, ensuring availability of equipment for
customers and mitigating against risks caused
by COVID-19 or broader supply chain issues.
Strengthened relationships with builders
merchant partners. There are currently 55
branches open through 17 partners.
Detailed third party review commissioned to
review cyber security and develop Group’s
ongoing server upgrade strategy.
Cyber security improvements implemented
including the introduction of new software to
reduce spear-phishing risk, refreshed testing
protocols and colleague awareness and
training programmes.
Enhanced IT Risk assessment tool introduced.
Ongoing resilience and penetration testing with
prioritisation of any resultant actions through the
Group’s governance process.
Strategic divestures of Laois Hire and All Seasons
Hire materially reduced the Group’s net debt and
leverage. This improved balance sheet position
enabled the Group to refinance at a materially
lower interest cost of c.£3.0m (FY20: £16.3m).
Technology enhancements to the Group’s
dispute management modules improved the
efficiency in ensuring invoices are paid when
they fall due.
The vast majority of dark store leases were
surrendered during 2021. There are currently
eight onerous locations with a liability over the
next five years of £0.8m.
34
HSS Hire Group plc
Annual Report and Financial Statements 2021
PRINCIPAL RISKS AND UNCERTAINTIES continued
Key Risk
Description and Impact How we mitigate
What we have done in 2021
8. Inability to
attract, train and
retain personnel
Movement
The Group needs to
ensure the appropriate
human resources are
in place to support the
existing and future growth
of the business.
Failure to attract and
retain the necessary
high-performing
colleagues could
adversely impact
financial performance.
Failure to comply with laws
or regulation, leading to
material misstatement and
potential legal, financial
and reputational liabilities
for non-compliance.
The Group operates in
industries where safety is
paramount for colleagues,
customers and the
general public.
Failure to maintain high
safety standards could
lead to the risk of serious
injury or death.
Owner:
Max Morgan
(Group HR
Director)
9. Legal and
regulatory
requirements
Movement
Owner:
Daniel Joll
(General Counsel)
10. Safety
New
Owner:
(Previously
included within
Safety, legal and
regulatory
requirements)
Owner:
Steve Ashmore
(Chief Executive)
Market rates are regularly
benchmarked to ensure competitive
pay and benefits packages.
Colleague wellbeing and mental health activity
has been prioritised, especially with the backdrop
of the pandemic and increased homeworking.
Training for colleagues is provided at all
levels to build capability and improve
compliance. Training is role-related and
behaviour focused, via blended learning.
Colleague engagement surveys are
conducted, with actions taken as a
result of feedback.
A number of initiatives have been established to
attract and retain certain critical skills, for example
Earn as you Learn schemes.
Recruitment programmes reintroduced working
with the Prison Service and social enterprises
(e.g. ex-military personnel).
Robust governance is maintained
within the Group including a strong
financial structure, assurance provision
from internal and external audit, and
employment of internal specialist
expertise supported by suitably
qualified and experienced
external practitioners.
Training and awareness programmes,
focusing on anti-bribery, anti-modern
slavery, anti-facilitation of tax evasion
and data protection legislation.
Whistleblowing process in place
providing colleagues with the ability
to raise non-compliance issues.
Clear Health and Safety policy
with ongoing risk management and
monitoring of accidents and incidents.
Health and Safety leadership forum
chaired by the CEO and comprising
senior managers with responsibility
for setting direction and
monitoring progress.
Fully skilled HSEQ team and an internal
Group investigation team providing
assurance and support.
Mandatory training programmes for
higher risk for activities.
The Group is ISO 45001 Health and
Safety accredited.
Ongoing review of relevant compliance
requirements including development of anti-
competition e-learning training programmes
and its roll-out to all sales colleagues.
Refresher training completed by colleagues
on anti-bribery, modern slavery, tax evasion
and data protection.
A range of COVID-19 measures were in
operation throughout 2021. These were
continually risk-reviewed and flexed in line with
changes to the business and government advice,
including in response to the Omicron variant.
Risk assessments were undertaken for all
colleagues with an element of home working,
to check on physical and mental wellbeing.
A new mobile technology enabled Incident
Reporting Portal has been established to improve
on the already high level of safety observations –
these have a key role in reducing accidents.
Creation of a Senior HSEQ role to enhance
accident investigation and resulting insight.
Increased focus on awareness communication
across the Group.
Energy carbon emissions reduced 91%
compared to 2020 and are now 97% lower
than 2016.
While the Group has continually improved
performance year on year, we recognise the need
to set scientifically based environmental targets to
become net zero.
External consultants were engaged from the start
of Q4 FY21 to support the Group set targets and
develop milestones within a coherent delivery
plan. This will be governed by a senior ESG
Forum led by the CEO.
11.
Environmental,
Social and
Governance
(ESG)
New
Owner:
Steve Gaskell
(Group Strategy
Director)
If the Group fails to set
and meet appropriate
ESG goals, there may be
an adverse reputational
impact with stakeholders
and limit ability to trade
with customers.
This could result in
revenue reduction,
deterring people from
joining the business
and limit attractiveness
to investors.
The Group has a comprehensive set
of procedures in place to minimise
adverse environmental impact including
procurement of electricity from
renewable sources, third party
monitoring of utility consumption
and waste management.
Procedures are in place to manage
Social and Governance risks, many
of which are covered in key risks 8, 9
and 10.
The Group is ISO 140001 Environmental
Management accredited.
Strategic Report
HSS Hire Group plc
Annual Report and Financial Statements 2021
35
FINANCIAL REVIEW
STRONGER BALANCE SHEET,
WELL-POSITIONED FOR GROWTH
2021 has been a milestone year for
the Group, successfully completing
the 2017 strategy and delivering
improved performance through our
technology-led, scalable, low-cost
operating model. Combined with a
strong balance sheet, the business
is well-positioned for the next
phase of growth.”
Financial highlights1
Revenue
Contribution2
Adjusted EBITDA3
Adjusted EBITA3
Operating Profit/(Loss)3
£m
Rental
Services
Group
Rental
Services
Group
2021
191.2
112.1
303.3
132.6
16.2
148.8
69.8
31.7
34.5
2020
2021 vs 2020
160.6
89.4
250.1
116.8
10.7
127.5
59.6
13.4
(4.7)
19.0%
25.4%
21.3%
13.5%
51.5%
16.7%
17.2%
18.3
39.2
1 Results are for Continuing operations.
2 Contribution is defined as revenue less cost of sales (excluding depreciation and exceptional items),
distribution costs and directly attributable costs (for each segment).
3 These measures are not reported on a segmental basis because branch and selling costs, central costs and
exceptional items (non-finance) are allocated centrally rather than to each reportable segment.
Overview
FY21 has been an excellent year for the Group,
delivering improved performance across all key
financial measures and successfully completing
the strategy set out in 2017. This is testament to
the hard work and commitment demonstrated
every day by each and every colleague,
especially given it was delivered against the
backdrop of the pandemic.
Our revenue, which is back to pre-pandemic
levels, was underpinned by continued
technology development, including the
re-platforming of the business onto our HSS
Pro system, and efficient hire fleet investment,
leveraging insight from our various tools.
This performance was also positive affirmation
of the operational changes made at the end of
2020 where we moved to a lower variable cost
and scalable model with our regional builders
merchant partners. These changes have
delivered improved EBITA margin.
Paul Quested
Chief Financial Officer
Financial highlights –
Continuing operations
Revenue
£303.3m
2020: £250.1m
Adjusted EBITDA
£69.8m
2020: £59.6m
Adjusted EBITA
£31.7m
2020: £13.4m
Operating profit
£34.5m
2020: loss of £4.7m
Leverage
1.5x
2020: 2.8x
ROCE
22.1%
2020: 10.7%
36
HSS Hire Group plc
Annual Report and Financial Statements 2021
FINANCIAL REVIEW continued
Our Rental
revenues
recovered
throughout
2021 as we
rolled out HSS
Pro, expanded
the builders
merchant
network to 55
locations and
increased hire
fleet investment
where customer
demand and
returns were
strong.”
Pleasingly, the balance sheet was materially
strengthened with the proceeds from the
strategic business sales of Laois and All
Seasons Hire used to repay the Group’s debt
and enable an early refinancing at materially
lower interest costs. An important part of these
divestitures was the ongoing commercial
agreement through our technology-led,
capital-light business, offering our customers
continued access to the broadest range
of products. We are delighted with the
performance to date under these
agreements. To ensure comparability all
commentary in this report is on a continuing
operations basis.
The combination of these actions resulted in the
Group delivering a significant increase in both
adjusted EBITDA and EBITA alongside
a material reduction in net debt leverage
to 1.5x (2020: 2.8x); the lowest level in the
Group’s history.
With our technology platforms in place and
supported by a flexible, low-cost, scalable
operating model and strong balance sheet,
we are well-positioned for the next phase
of growth.
Revenue
Group revenue grew by 21.3% to £303.3m
(FY20: £250.1m) and recovered back to
pre-pandemic levels through effective strategy
execution. This is against a backdrop of
COVID-19, including the impact of stricter
lockdowns in some territories in the early
part of 2021.
Group revenue growth is one of our KPIs as,
combined with estimates of market size and
growth rates, it provides us with a measure
of our market share.
Segmental performance
Rental and related revenues
Our Rental revenues recovered throughout
2021 as we rolled out HSS Pro, expanded the
builders merchant network to 55, increased hire
fleet investment where customer demand and
returns were strong and COVID-19 restrictions
were gradually eased. Revenues grew 19.0% to
£191.2m (FY20: £160.6m) and accounted for
63% of Revenue (FY20: 64.2%). Rental and
related revenues is one of our KPIs.
Contribution, defined as revenue less cost of
sales (excluding depreciation and exceptional
items), distribution costs and directly
attributable costs, of £132.6m (FY20: £116.8m)
was up 13.5%. Prior year benefited from £2.0m
of COVID-19 support.
Services
Services revenues increased by 25.4% to
£112.1m (FY20: £89.4m), accounting for 37%
(FY20: 35.7%) of Group revenues.
Customers continue to value the one-stop-
shop that our Services division provides and
our technology platforms, supported by a large
network of supply chain partners, are making
every transaction even easier and therefore
enabled exceptional growth in the financial year.
Contribution from Services increased 51.5%
to £16.2m (FY20: £10.7m) as our scalable
operating model more efficiently connected
customers and suppliers through technology.
Costs
Our cost analysis set out below is on a reported
basis and therefore includes exceptional costs,
the most significant of which are associated
with the successful surrender of branches
closed in October 2020 (see note 7 to the
Financial Statements).
Our cost of sales increased by 17.1% to
£146.3m (2020: £124.9m) reflecting increased
sales through our Services division.
Distribution costs reduced to £21.9m
(2020: £25.3m) with reduced operating costs
following the Group’s operating network
changes in the latter part of 2020.
Administrative expenses were reduced by
£12.2m, of which £7.9m relates to the release of
provisions and lease liability held following the
successful surrender of the branches closed in
October 2020 – refer to the exceptional items
section of this review for more detail.
Adjusted EBITDA and Adjusted EBITA
Our Adjusted EBITDA for 2021 was 17% higher
at £69.8m (2020: £59.6m) driven by improved
revenue through our lower-cost operating
model. Adjusted EBITDA margin reduced 0.8pp
to 23.0% (2020: 23.8%) with the mix of the
business moving more towards our Services
segment. Adjusted EBITDA and EBITDA margin
are included in our KPIs.
Our Adjusted EBITA increased £18.3m to
£31.7m (2020: £13.4m), a combination of
improved EBITDA and reduced depreciation on
property (Right of Use assets, dilapidations and
leasehold enhancements) following the Group’s
network changes in 2020. This also reflects the
impact of careful fleet management to match
demand at the height of the pandemic.
Adjusted EBITA margin increased 5.1pp to
10.4% (2020: 5.3%). Adjusted EBITA and EBITA
margin are included in our KPIs.
Other operating income
Total other operating income was £1.7m,
principally due to insurance proceeds following
a successful claim under our business
interruption policy. This compares to £11.2m in
2020; mainly the result of Government grant
income via participation in the UK and Irish
Governments’ furlough programmes (£9.2m),
rate relief grants (£0.6m) and insurance
proceeds (£1.2m).
Operating profit
Our operating profit increased by £39.2m
to £34.5m (2020: operating loss £4.7m).
Exceptional items
Exceptional costs, excluding profit on disposal
of discontinued operations, totalled £1.9m.
Strategic Report
HSS Hire Group plc
Annual Report and Financial Statements 2021
37
Following the successful surrender of
properties post the network restructure in
October 2020, lease liabilities, onerous property
costs and dilapidation provisions related to
these locations have been released resulting
in an exceptional credit of £7.9m.
Return on capital employed
Our ROCE for 2021 was 22.1%, an increase
of 11.4pp over 2020. The strong EBITA growth,
including from our capital-light Services
business, underpinned this performance.
ROCE is one of our KPIs.
This has been offset by costs expensed
refinancing the Group (£9.7m) comprising
accelerated amortisation of original debt issue
costs, and prepayment penalties incurred
on the early settlement of the previous senior
finance facility.
Restructuring costs of £0.6m were incurred as
the Group legally restructures to reflect the two
core divisions of ProService (sales acquisition)
and HSS Operations (fulfilment) that were
introduced at the time of our H1 2021 results.
This project will complete later in 2022.
Profit on disposal of
discontinued operations
We completed two strategic divestitures in
2021 realising a profit on disposal of £41.2m.
Laois Hire Services was sold in April 2021
(profit: £3.2m) and All Seasons Hire in
September 2021 (profit; £38.0m). The cash
generated was used to further reduce the
Group’s debt.
Finance costs
Net finance expense increased to £28.5m
(2020: £25.0m). The charge for the year included
£9.7m of exceptional costs associated with the
early repayment of the Group’s senior finance
facility as part of the successful refinancing
completed in November 2021. The new debt
facility is lower in quantum and at significantly
reduced interest rates. As such ongoing finance
expenses will be materially reduced.
Taxation
The Group had a tax credit for the year of
£1.2m (2020: tax charge £42k), with a deferred
tax credit offsetting tax paid in the year.
Reported and adjusted earnings
per share
Our basic and diluted earnings per share, both
on a reported and adjusted basis, stepped
forward in 2021 from the loss per share in 2020,
driven by the improved performance of the
business. The successful refinancing of the
Group will result in a materially reduced ongoing
annual interest charge which will enhance EPS
in the future.
Capital expenditure
Additions to Intangible assets, Property, plant
and equipment and Right of Use hire
equipment in the year were £34.2m
(2020: £24.6m). Investment in technology
to support the strategic growth of the
business totalled £4.3m, up 30% on 2020.
Investment in hire fleet to support our Rental
business was £27.1m (2020: £19.0m) with
decisions informed from our insight tools
to maximise returns.
Trade and other receivables
Gross trade debtors increased 11% over 2020
as revenue recovered throughout the financial
year. A strong focus on cash collections is core
to the business and forms part of colleagues’
objectives. Despite this focus on collections,
macroeconomic uncertainty remains and as
such we continue to provide at levels above the
historic loss rate. The situation will be kept
under review moving forward.
Provisions
Provisions reduced £9.8m to £23.8m
(2020: £33.7m). The vast majority of this
reduction relates to the release of onerous
property cost and dilapidations provisions
associated with properties surrendered during
the year. The balance relates to the ongoing
annual utilisation of the onerous contract
provision associated with Unipart, created
in 2017.
Cash generated from operations
Cash generated from operating activities was
£71.6m for FY21, an increase of £15.6m
compared to FY20. Materially increased
profitability supported by continued focus on
working capital management contributed to this
improved performance.
Leverage and net debt
Net debt non-IFRS 16 (stated gross of issue
costs) decreased by £75.0m to £45.4m
(2020: £120.4m) reflecting the strategic
divestitures during the year and continued
trading performance. On a reported basis net
debt is £104.6m (2020: £194.6m). As at
1 January 2022 the Group had access to
£78.1m (2020: £118.3m) of combined liquidity
from available cash and undrawn borrowing
facilities. With the significantly improved
Adjusted EBITDA and lower net debt, leverage
reduced to 1.5x (2020: 2.8x). Leverage or Net
Debt Ratio is one of our KPIs.
Use of alternative performance
measures to assess and
monitor performance
In addition to the statutory figures reported in
accordance with IFRS, we use alternative
performance measures (APMs) to assess the
Group’s ongoing performance. The main APMs
we use are adjusted EBITDA, adjusted EBITA,
adjusted profit before tax, adjusted earnings per
share, leverage (or Net Debt Ratio) and ROCE,
which, with the exception of adjusted profit
before tax, are included in our KPIs as set out
on pages 26 to 29.
We believe that Adjusted EBITDA, a widely
used and reported metric amongst listed and
private companies, presents a ‘cleaner’ view of
the Group’s operating profitability in each year
by excluding exceptional costs, finance costs,
tax charges and non-cash accounting elements
such as depreciation and amortisation.
This metric was used in 2021 to calculate
annual bonuses payable to Executive Directors.
Additionally, analysts and investors assess our
operating profitability using the adjusted EBITA
metric, which treats depreciation charges as an
operating cost to reflect the capital-intensive
nature of the sector in which we operate.
Analysts and investors also assess our earnings
per share using an adjusted earnings per share
measure, calculated by dividing an adjusted
profit after tax by the weighted average number
of shares in issue over the period.
This approach aims to show the implied
underlying earnings of the Group. The adjusted
profit before tax figure comprises the reported
loss before tax of the business with
amortisation and exceptional costs added
back. This amount is then reduced by an
illustrative tax charge at the prevailing rate of
corporation tax (currently 19%) to give an
adjusted profit after tax. Adjusted earnings per
share is used as a performance metric for the
2019 LTIP awards.
The calculation of Adjusted EBITDA and
Adjusted EBITA can vary between companies,
and a reconciliation of Adjusted EBITDA and
Adjusted EBITA to operating profit/(loss) and
adjusted profit before tax to loss before tax is
provided on the face of the Group’s income
statement. A reconciliation of reported loss per
share to adjusted earnings per share is provided
in note 33 to the Financial Statements.
In accordance with broader market practice
we comment on the amount of net debt in the
business by reference to leverage (or Net Debt
Ratio), which is the multiple of our Adjusted
EBITDA that the net debt represents.
This metric was also used in the calculation
of annual bonuses payable to Executive
Directors in 2021.
We use ROCE to assess the return (the
Adjusted EBITA) that we generate on the
average tangible fixed assets and average
working capital employed in each year.
We exclude all elements of net debt from this
calculation. This metric is also used as a
performance metric for the vesting of 2019
LTIP awards.
Paul Quested
Chief Financial Officer
38
HSS Hire Group plc
Annual Report and Financial Statements 2021
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
ACCELERATING OUR
SUSTAINABILITY STRATEGY
Our people
The guiding principles of how our colleagues operate are set by our corporate values, all of which
are underpinned by an ethos of sustainability.
LIVING OUR VALUES
Safety comes first, always!
We’re excited about what’s next.
Think safe, work safe, home safe.
We’re focused on making things better,
brighter and fit for our future.
No job is too big or too small,
we do what it takes to get things done.
We’re like a family and we’ve all got each
other’s backs.
We do our best for our customers and
our business.
We celebrate success, work well as a team,
and have fun along the way.
In 2021 we continued our commitment to
supporting, engaging and protecting our
colleagues, and made advances in many areas
including health and safety, wellbeing, personal
development and colleague engagement.
COVID-19
Throughout 2021, our priority was to “Make
It Safe” for our colleagues during the ongoing
COVID-19 pandemic. We continued to operate
the COVID-19 protocols introduced in 2020
which are outlined in our HSS COVID-19
colleague handbook.
We made our new hybrid-working model
permanent in 2021, giving colleagues flexibility
to work from home. This also enabled us to
relocate our head office in Manchester to a
smaller site with improved facilities for
colleagues. Our new head office facilitates
collaboration between colleagues whether at
home or in the office, via a combination of
physical meeting spaces and technology that
connects colleagues in different locations.
In Q1 2021 we rolled out our HSS Pro
technology platform to our sales colleagues,
giving them the flexibility to work remotely
whilst also improving our efficiency in serving
our customers.
To support our colleagues working from home,
remote working packages were provided
containing practical advice and support.
We also carry out regular workplace
assessments to ensure our colleagues
are properly supported.
Against the backdrop of the pandemic,
communication was also key in ensuring
our colleagues across the business remained
up to date with changes to our policies as
government guidelines around self-isolation
continued to develop. Regular communication
through bulletins, emails, WhatsApp groups,
our annual colleague roadshow, working from
home welfare calls, and our CEO blog helped
support this while also ensuring our colleagues
felt part of one cohesive business and not
isolated. It was important, however, that
conversation was two-way, with management
engaging with colleagues to ask them their
opinions and ensure that the Board remained
cognisant of colleague concerns so they could
be addressed.
CEO INTRODUCTION
At HSS we have a strong desire
to operate responsibly and
sustainably, and with the best
interests of our stakeholders
and the planet in mind.
In recent years we have continued
to make significant progress with ESG
across several areas, including colleague
engagement and welfare, health and safety
and year on year reductions in energy
carbon emissions. In 2021 we decided to
take stock of our progress, engaging with a
specialist sustainability consultant to review
our ESG credentials and help us create an
ESG strategy for our business.
In Q4 2021 we appointed Sustainable
Advantage to carry out a comprehensive
assessment of our ESG activity and
provide recommendations of where
we could improve. As part of this work
Sustainable Advantage have recently
conducted a materiality assessment on
our behalf to understand our stakeholders’
requirements. They have also completed a
thorough analysis of our carbon footprint,
including scope 3, and have advised us
on how to reduce gross emissions further.
The conclusion of this work is an ESG
strategy, incorporating new objectives
including a net zero target.
As we embark on an exciting new phase of
growth, I am also looking forward to seeing
the positive impact our new ESG strategy
will have on all our stakeholders and
ultimately the contribution we make to
the global challenge of climate change.
Steve Ashmore
CEO
Strategic Report
HSS Hire Group plc
Annual Report and Financial Statements 2021
39
The introduction of electric
vehicles combined with our
our switch to renewable
electricity sources is
helping reduce our carbon
footprint as well as that of
our customers.
Health and safety
As well as protecting our colleagues from
COVID-19, keeping our colleagues safe
and well in their day-to-day work remains
fundamental to our success as a business.
It is why ‘Make It Safe’ is the first of our values.
We have seen continued low levels of RIDDOR
accidents with just 5 in 2021. While this is a
significant improvement on pre-COVID-19
levels, we regard any accident as one too many.
Accordingly, we implemented additional health
and safety initiatives in 2021 including an
increased focus on safety observations and
new training materials such as safety videos
and safety flipbooks for our drivers.
We also held a dedicated ‘Health and Safety
Month’ in December which focused on
a different health and safety topic each week.
We continued to hold CEO-led health and safety
forums to maintain a collaborative approach and
ensure colleagues from all levels of the business
give suggestions on how to improve our
company-wide health and safety procedures.
To complement our internal initiatives, we
launched a number of external health and safety
projects including undertaking an International
Powered Access Federation (IPAF) review, the
result of which saw us receive an IPAF Rental+
silver safety award for the first time.
Responsibility for our colleagues extends
beyond accidents, with employee wellbeing
equally important to our “Make It Safe” value.
Our wellbeing agenda is based around three
core pillars – financial wellbeing, physical
wellbeing and mental health – and each
month, an expert in their field hosts a webinar
to provide colleagues with useful information
to support their wellbeing. For example, in
January, we had an expert nutritionist host a
bespoke session for our colleagues focused
on nutrition and healthy living. The topics for
discussion are informed by our monthly
Employee Assistance Programme (EAP)
reports, our forums and our other engagement
activities. For example, following feedback
from the Women’s Networking Group, in 2022
we will be increasing focus on menopause and
fertility, providing additional support in these
areas as well as re-thinking our family-
friendly policies.
Our health and safety initiatives are supported
by our learning and development programme
(see ‘colleague development’ section, below)
with qualified first-aider and responder mental
health training delivered in collaboration with St
John’s Ambulance.
Colleague development
To support our ‘Make It Happen’ and ‘Make
It Better’ values, colleague development is
a central element of our activity. It ensures
our colleagues can provide customers with
unrivalled service and provides our colleagues
with an engaging and fulfilling place to work.
Our Learning and Development (L&D) team
utilises a variety of tools to support this.
Along with specific training modules for certain
subjects such as health and safety and
diversity, we offer a range of structured training
programmes to foster talent, engage colleagues
and build careers. We have also adapted many
training courses taking on a blended in-person
and virtual approach.
Our apprenticeship programme gives
current and future colleagues the opportunity
to take the next step in their career, whether
that be through our early career development
partnership with Reaseheath College, or our
advanced in-role schemes which offer technical
and managerial development in a range of
areas, from customer services to IT to
coaching. In addition, we provide ongoing
Continued Development Programmes to
address the changing world of business, such
as more effective management in the age of
permanent hybrid working. We are also
currently trialling an ‘Earn As You Learn’
scheme with our drivers to encourage upskilling
and hope to roll the scheme out in our
engineering community with a view to
expanding further beyond that.
At the heart of our Learning & Development
programmes is our e-learning platform,
LearningLab, and our dedicated HSS L&D
intranet page, which offer colleagues a wealth
of resources and information to support their
development, allowing them to learn remotely
at a time that is suitable for them.
The success of our learning and development
programme is dependent on colleague
engagement – therefore, we always collect
anonymous feedback following each session
and conduct pulse surveys at the conclusion
of each course.
Our annual engagement survey acts
as a consistent signpost to inform our policies.
Last year we saw the opportunity to improve
‘My Manager’ scores and following a series of
development initiatives for managers in 2021,
we have been pleased to see a significant
improvement in scores in this area in our
latest engagement survey.
40
HSS Hire Group plc
Annual Report and Financial Statements 2021
ENVIRONMENTAL, SOCIAL AND GOVERNANCE continued
Colleague engagement
A key indicator of colleague wellbeing in the
workplace is our annual engagement survey.
Our latest survey carried out in February 2022
showed further improvement in colleague
engagement, which has now risen four times in
a row since our first survey in FY16. Our latest
score of 76.1% is up on 75.0% from the prior
year and is significantly higher than the national
average of 61%. The score is a good reflection
of our workforce with over 80% of colleagues
answering the survey once again.
One area that saw a significant increase,
up 4ppts, was ‘My Manager’, which is very
pleasing to see following the focus we put on
training and developing our managers in 2021.
Diversity and inclusion
Our approach to diversity and inclusion is
led by our commitment to open dialogue
with our colleagues. We believe that there is
always progress to be made in this area and
we therefore encourage engagement at all
levels of the business to make HSS a more
inclusive company.
This engagement has involved a number of
initiatives that are pushing the Company forward
and enhancing the colleague experience.
For example the Women’s Networking Group,
which brings together women at all levels of
seniority to discuss their experiences and how
they believe HSS can improve its approach to
diversity and attracting women to a traditionally
male dominated industry. We maintain a
constant thread of diversity and inclusion
throughout all training programmes, from
induction to apprenticeships. Our 2021 median
pay gap was -6.9% (2020 -1.01%).
Our colleague engagement has laid the
groundwork for the future, helping us update
our Diversity, Equity and Inclusion (DE&I)
learning programmes.
Our communities
In line with our values, we are committed to
giving back to the communities we work in.
We are a corporate partner of the Lighthouse
Club (an organisation which provides mental,
financial, and medical support for construction
industry workers and their families) and in 2021
we raised funds through several charity events
and initiatives.
Our relationship with the charities we support
is reciprocal and extends beyond simply
raising money. We regularly engage with the
Lighthouse Club and men’s mental health
charity, Andy’s Man Club, both of which have
hosted webinars to support our colleagues
as part of our wellbeing agenda.
At a local level, we’re proud to say our
colleagues regularly support local community
initiatives in their area: for example, our Onsite
team collaborated with Sir Robert McAlpine
to support a local food bank, with the wider
Building Energy Carbon Emissions kg CO2e pa
7,531
7,659
7,978
7,654
6,716
4,108
3,477
2,217
204
2012/13
2013/14
2014/15
2015/16
2016/17
2017/18
2018/19
2020
2021
Source: Maloney Associates
business supporting the cause through
raising donations.
The environment
Approach
As a circular economy business, tool hire is
inherently sustainable, ensuring that a single
piece of equipment is reused multiple times
by multiple clients during its life-cycle. We help
our customers reduce their carbon footprint
through hire, but we are very conscious that
there is much more we can do, not just with
our customers but with our suppliers too. It was
with this in mind that we engaged Sustainable
Advantage to work with us towards the end of
2021 to help us accelerate our ESG strategy,
and this project has led to a new set of
objectives which are outlined later on page 41.
Progress has been made in 2021 across
several key areas:
Responsible waste management
We have made good progress in disposing of
our waste in a responsible manner, thanks to
our continuous relationship with Biffa. In 2021,
Biffa disposed of 985.3 tonnes of waste for us
(2020 – 937.5 tonnes), diverting 88% from
landfill. Our hazardous waste disposal partner,
Slicker, ensured that items like waste oils are
recovered, reused or converted into electricity
in accordance with their zero landfill policy.
Across HSS, 27,900 litres of waste oil was
collected. We have also achieved 57% Waste to
Energy, 1% Reuse, 2% Processed Fuel Oil and
30% Recycling.
Energy and emissions
Through our partnership with Maloney
Associates, we maintain a robust approach
to monitoring our energy and emissions and,
in 2021, building energy carbon emissions
reduced 91% compared to 2020 and are now
97% lower than in 2016. We have moved to
100% sourced renewable electricity at all our
sites in England, Wales and Scotland and
are targeting to do the same in Ireland this
coming year.
As part of the Streamlined Energy and Carbon
Reporting (SECR) framework, the total UK
energy use for HSS totals 48,325,397 kWh for
the period 1 January to 31 December 2021
(2020 – 49,167,771 kWh). This includes our built
environment, transport, and process fuel
energy. Total emissions expressed as a
percentage of revenue is a Group KPI (see page
28). We utilise the Greenhouse Gas Protocol
Corporate Accounting and Reporting Standard
to fulfil the reporting requirements around
energy and emissions. This includes DEFRA
conversion factors to calculate Greenhouse
Gas (GHG) emission disclosures. The extent of
the GHG reporting boundary comprises of all
building, transport and process emissions
within the three reporting scopes.
We continue to reduce the carbon footprint of
our company car fleet with 24% of our fleet now
electrified in some way, and that number set to
increase significantly as we replace older
models next year. All our commercial vehicles
are now a minimum of Euro 6 standard and we
have reduced idling through a driver education
program and the adoption of anti-idling
technology in new vehicles. All commercial
vehicles are also fitted with telematics which
were updated in 2021 to provide additional
information on driver behaviours and fuel
consumption. Looking forward, we have
recently launched a trial of Hydrotreated
Vegetable Oil (HVO) as a fuel for a small number
of vehicles and we are exploring a range
of larger electric delivery vehicles, including
trucks. Our Electric Vehicle (EV) loan scheme,
by which colleagues can try out an EV for a
limited period before deciding on their
permanent company vehicle, has proven
popular and we expect to see greater take-up
next year as many drivers near the end of their
Strategic Report
HSS Hire Group plc
Annual Report and Financial Statements 2021
41
current leases. To support this, we have
introduced charging points at our head
office and will increase the number of these
this year across our CDCs.
Our new route optimisation system, Satalia,
which we rolled out at the end of 2021, is
expected to reduce our mileage per job and we
look forward to seeing the associated reduction
in carbon as this technology embeds in 2022.
Our future plans
Our future plans for sustainability have been
informed by the ongoing project carried out
in partnership with Sustainable Advantage
which has involved five stages:
1. ESG Benchmarking Review
2. Materiality Assessment
3. Net Zero Analysis
4. Objective Setting
5. ESG Impact Report
Benchmarking Review
Sustainable Advantage carried out a
comprehensive benchmarking review in Q4
2021 involving 62 areas that cover Environment,
Social, Governance and ESG Integration.
Our overall score put us in their top category
of ‘Excellent’ which accounts for the top 10%
of companies they have benchmarked.
Following their review they made a series of
recommendations in many areas, which we
have since made commitments against.
In January 2022 we set up an ESG committee
to ensure that we meet these commitments
and improve our scores across all areas.
Materiality Assessment
Stage 2 of this ESG project has been to carry
out a materiality assessment to gauge the ESG
requirements of our colleagues, customers,
suppliers, our Board and our biggest
shareholders. This materiality assessment was
concluded in March 2022 and has informed
our new set of ESG objectives. The results of
these surveys will continue to inform our ESG
priorities and activity throughout 2022.
Net Zero Analysis
We decided to carry out a comprehensive
independent analysis of our Scope 1, 2 and 3
carbon emissions across the HSS Group.
Following the conclusion of this work, we have
clear and realistic goals for reducing our gross
emissions over the coming years which has
culminated in the net zero pledge outlined in
our ESG Objectives.
ESG Impact Report
Following the comprehensive work in stages
1-3 we will publish our first ever ESG Impact
Report in Q2 2022. This will showcase the
progress we have made and set out our plan
going forward. The report will also confirm our
objectives for 2025 and beyond.
LOOKING
FORWARD
ESG OBJECTIVES
The culmination of these five areas of activity now means
we have a very clear ESG plan and well defined objectives.
In addition, we have various ESG activities in
2022, including the creation of an ESG
policy, a community investment policy, a gap
analysis against the Government’s Social
Value model, creation of a CEO-led ESG
forum (akin to our successful H&S forum),
new carbon reporting for customers,
enhanced ESG integration with suppliers
and improved DE&I reporting.
In summary, we have a clear ESG plan, a
defined set of objectives and a management
framework that ensures we will accelerate
the progress we have made in all areas
of sustainability.
We’ll be publishing our 2022 ESG Impact
Report during Q2 2022.
Net Zero Carbon Target
2040
Adoption of the following UN Sustainable
Development Goals by the end of 2022
Our key objectives include:
1. Net Zero pledge by 2040
2. Submit science-based targets in 2022
3. 40% of company cars and vans electric
by 2025
4. 10% of commercial fleet (HGVs) electric
or other low-carbon technology by 2025
5. 16% of fuel through ABird and Apex
generators is HVO (or other low-carbon
fuel) by 2025
6. 6% of orders for large generators
are fulfilled by low-carbon products
(e.g. hybrid machines) by 2025
7. 100% of electricity is sourced from
renewable providers
8. Achieve 95% zero waste to landfill by
2025
9. Achieve ISO 50001: 2018 accreditation
for Energy Management
10. All products in our fleet to have ‘Eco’
classification and credentials, and 20%
of capex is spent on ‘Eco’ products
by 2025
11. Targeting a zero RIDDOR
environment by 2025
12. Adoption of the following UN Sustainable
Development Goals by the end of 2022:
- SDG3: Good Health and Wellbeing
- SDG7: Affordable and Clean Energy
- SDG8: Decent Work & Economic
Growth
- SDG9: Industry, Innovation and
Infrastructure
- SDG12: Responsible Consumption &
Production
- SDG13: Climate Action
13. Adoption of the TCFD reporting
framework by Q1 2023
42
HSS Hire Group plc
Annual Report and Financial Statements 2021
SECTION 172 STATEMENT
A proactive approach is taken to
stakeholder engagement to create
mutually positive opportunities
and outcomes.
The Board’s approach:
– The Board recognises the importance of
maintaining strong relationships with our
stakeholders in order to create sustainable
long-term value and encourages active
dialogue and transparency with all of its
stakeholder groups.
– We take time to engage with, and listen to,
the views of our stakeholders in order to
shape our decision-making and to continue
improving the way we do things. The Board
exercises skill and judgement, having regard
to the likely consequences of their decisions,
to promote actions that lead to the long-term
success of the Group.
– When developing strategy, the Board has
regard to financial considerations as well as
the need to engage, and the potential impact
on, the Company’s stakeholder groups.
The Board strives to balance appropriately the
effects of decision-making on key stakeholder
groups whilst always ensuring the need to
promote the success of the Group for the
benefit of its members as a whole.
Further information on how S172 has been applied by the Directors can be found
throughout the Annual Report:
S172 duties
Read more
Pages
Consequences of
decisions in the
long-term
Interests of employees
Our Business Model
Our Strategic Framework
Principal Risks and Uncertainties
Going Concern
Board Activities
Non-Financial Information Statement
Our People
Employee Engagement
Diversity and Inclusion
Culture and Values
Fostering business
relationships with
suppliers, customers
and others
CEO Strategic Review
Case studies
Impact of operations on
the community and the
environment
Sustainability Performance
Energy and emissions
ESG objectives
Maintaining high
standards of business
conduct
Non-Financial Information Statement
Culture and Values
Whistleblowing
Anti-fraud, Bribery and Corruption
Modern Slavery
Acting fairly
between members
Shareholder engagement
Voting Rights
14
18
30
53
53
70
39
40
47
2
8
20
38
40
41
70
0
53
47
53
54
71
HOW THE BOARD FULFIL
THEIR S172 DUTIES
BOARD TRAINING
Each of the Directors is aware of their duties and has received training on S172
BOARD INFORMATION
All Board papers for principal Board decisions
contain a section on S172 and stakeholder interests
Our Board directly and indirectly engages with our
stakeholders. Read more on pages 50 to 53
BOARD STRATEGIC DISCUSSION
S172 factors are considered in the
Board’s discussions on strategy,
including how they underpin the
Company’s long-term success
The Company’s open and honest
culture helps ensure there is proper
consideration of the impact of Board
decisions on our stakeholders
The Board considers the quality of
information it has received and seeks
assurance where appropriate
BOARD DECISION
Outcomes of Board decisions are assessed and further
engagement with stakeholders is undertaken where appropriate
As a result of the Board’s engagement, the necessary
actions are taken
Strategic Report
HSS Hire Group plc
Annual Report and Financial Statements 2021
43
OUR STAKEHOLDERS
SHAREHOLDERS AND INVESTORS
Stakeholder
Our shareholders monitor the performance
and governance of HSS and regular dialogue
is crucial in ensuring the Board is aware of
their expectations.
How we engaged
– The Chairman, CEO and CFO had regular,
transparent communication with major
shareholders through calls, emails and
one-to-one meetings
Interests
– HSS’s strategy and objectives
– Group performance and growth potential
– Ongoing impact of COVID-19
– HSS’s digital tools, their progress, and how
they differentiate HSS from peers
– Quality and effectiveness of the Group’s
governance
– HSS’s ESG approach and strategy
development
– Capital allocation
– The AGM and its subsequent Q&A session
provided the opportunity for all shareholders
to engage with the Chairman, CEO and CFO
directly and have their questions answered.
A recording was subsequently made
available on HSS’s website
– The Chair of Remuneration Committee
engaged with major shareholders on any
significant remuneration decisions
– The ESG review conducted at the end of
the year will lead to the publication of HSS’s
ESG Impact Report in Q2 2022, which will
be made available on the HSS website
Outcomes
– Strong support for the next stage of our
strategy and comprehension of our
investment case
– Shareholders’ ongoing confidence in the
Group’s ability to deliver shareholder value,
evidenced by existing shareholders
increasing investment and new investors
buying shares in the Company
– The Board is aware of investors’
expectations on governance and ESG
COLLEAGUES
Stakeholder
Our talented team of 2,000 colleagues is our
primary asset and regular engagement helps
ensure we understand what is important to
them to make HSS a fulfilling place to work.
Engagement also ensures HSS’s purpose and
values are understood across the business as
we work together to deliver on our strategy.
Interests
– HSS’s strategy and objectives during a
period of significant change
– Impact of the COVID-19 pandemic and
resulting changes to our working policies
– Diversity, equity and inclusion and our
approach to operating responsibly
– Employee benefits and remuneration
– Development opportunities and career
progression
– Engagement with senior management
How we engaged
– Regular updates during the year through
the CEO blog, calls, company WhatsApp
groups, emails and the annual executive
roadshow, delivered via ‘HSS TV’, all helped
keep colleagues abreast of developments
– The annual colleague engagement survey
was used to provide management with a
strong understanding of colleagues’ needs
and concerns, allowing us to adapt our
working practices based on their feedback
feel safe and comfortable in their
working environments
– Our bi-monthly Executive Health and Safety
Forum and subsequent pulse surveys after
health, safety and wellbeing events helped
identify areas where more support was
needed
– Senior Managers have attended
Board meetings this year to present on
developments in their areas of the business,
including their team structures, and discuss
key matters with the Board. Senior Managers
also attended a dinner with the Board in
November which facilitated engagement
in an informal setting
– The Board visited the Company’s new
offices in Manchester in November, with
Board members taking a tour of the new
offices and liaising with colleagues
– Colleagues took part in our ESG materiality
assessment to understand the relative
importance they place on various
ESG subjects
Outcomes
– Colleagues have a strong understanding
of company performance, strategy and
our updated business model
– Colleagues remain abreast of COVID-19
policies and management remain abreast
of employee concerns, implementing
new working policies to ensure colleagues
– The Learning and Development team is
continuing to update training programmes
based on employee feedback to upskill
colleagues and support career progression
– Feedback from the annual colleague
survey led to even more focus on
supporting colleagues’ health and
wellbeing – including physical, mental and
financial – along with widening our training
and development opportunities and
improving our benefits offer
– Findings from colleague engagement
initiatives and interaction with the Women’s
Networking Group will feed into a review of
our diversity approach including improving
our recruitment and diversity, equity and
inclusion e-learning programmes
– We updated our colleague intranet which
went live in December 2021 following
their suggestions
– Stronger links have been built between
the Board and Senior Managers
– The Board has greater visibility and have
seen the benefits to colleagues of
improved, collaborative working spaces
as well as the benefits these provide from
a wellbeing perspective
44
HSS Hire Group plc
Annual Report and Financial Statements 2021
OUR STAKEHOLDERS continued
CUSTOMERS
Stakeholder
We supply our customers with the essential
tools and equipment they need to complete
their projects. We engage with them to ensure
our offering adapts to meet their evolving
requirements and so that we remain their
supplier of choice.
Interests
– High-quality products
How we engaged
– Feedback on our service provision through
direct engagement with our sales teams,
either face-to-face, phone calls, email,
and through social media
Outcomes
– Based on customer feedback about
collections we have rebalanced the
prioritisation of transport activity using
our new Satalia technology
– Indirect feedback on our service provision
through Trust Pilot and other review services
– Annual NPS survey carried out by a third
– Reviews and direct feedback allowed us
to continue to improve our digital offering
to best suit customer needs
party, Kantar TNS
– Access to a broad range of equipment
and services, all in one place
– Reviews of our customer app on Apple’s
and Android’s respective app stores
– High quality, reliable and competitively
priced service with a quick and easy
journey from order to delivery
– Acknowledgement of, and responses to,
customer feedback
– Responsible and sustainable business
practices, and wider ESG interests
– COVID-safe branch and delivery policies
– Regular social media updates on our blog
and social media channels
– Customers took part in our ESG
materiality assessment to understand
the relative importance they place on
various ESG subjects
– Our NPS score this year, at 38 remains well
ahead of the industry benchmark
– Following the ESG materiality assessment
carried out recently we have a better
understanding of customers’ preferences
here, which is informing our ESG strategy
and objectives, due to be published in our
ESG Impact Report in Q2
SUPPLIERS
Stakeholder
Our suppliers, both equipment manufacturers
and rehire providers, allow us to serve our
customers and are central to our business
model. Frequent engagement with our
suppliers builds strong working relationships
and improves customer service. It also helps
us identify risks in our supply chain and
ensures HSS’s values and approach to
responsible business are shared.
Interests
– Access to customers
– Transparency of orders and data insight,
via an easy-to-use supplier portal
– Impact of COVID-19
– Responsible and sustainable
business practices
How we engaged
– We engaged with new suppliers during
the year to expand our supplier network
– Rehire suppliers have been individually
introduced to our supplier portal
– 12 key suppliers were consulted during our
sustainability review to better understand
their own ESG procurement practices
– 21 manufacturing suppliers and 22 rehire
suppliers took part in our ESG materiality
assessment
Outcomes
– Communication has ensured that our
suppliers retain a strong relationship with
the Company, have open communication
with us and readily provide feedback
– Following the ESG materiality assessment
carried out recently we have a better
understanding of suppliers’ preferences
here, which is informing our ESG strategy
and objectives, due to be published in our
ESG Impact Report in Q2
– Increased supplier network by c. 20%
– Improved understanding and use of the
supplier portal by rehire suppliers
Strategic Report
HSS Hire Group plc
Annual Report and Financial Statements 2021
45
LENDERS
Stakeholder
Our lenders provide HSS with the funding
we need to deliver on our strategy and
support our customers. In 2021, following
engagement with our lenders, we successfully
refinanced the business, significantly reducing
our interest costs.
Interests
– Our reputation as a responsible business
– Confidence in our strategy and ongoing
ability to repay and service our debt
How we engaged
– Met with lenders on a quarterly basis
to update on business performance
Outcomes
– Continued support from actively engaged
lenders throughout the year
– In-depth discussions were held regarding
refinancing the business following
significant delevering and strengthening
of balance sheet
– Successfully refinanced the business,
reducing annual interest costs on main
facility from £16.3m to c.£3.0m (based on
current SONIA rate)
LOCAL COMMUNITIES AND THE ENVIRONMENT
Stakeholder
We strive to be a responsible and sustainable
business and a good corporate citizen and
engagement with the communities in which
we operate is central to this.
How we engaged
– Participate with local charitable initiatives.
Partnering with NSPCC, supporting
Childline services in Wales, Lighthouse
Club, a charity offering support for
construction workers, and men’s mental
health charity Andy’s Man Club
Interests
– Climate change and initiatives to limit the
Company’s environmental impact
– Supporting local communities
– Onsite team collaborated with Sir Robert
McAlpine to support a local foodbank, with
the wider business supporting the cause
through donation raising
– During the ESG review carried out recently
our advisers provided new insight in to the
interests of our local communities and how
we can help the planet address the
environmental challenges it faces
Outcomes
– Contribution towards the local economy
via direct investment and community
involvement
– New Net Zero Carbon Target of 2040
– New ambitious set of ESG commitments
for 2025
– Active discussions with local
community groups
– Raised money for charities through
various events
The strategic report on pages 1 to 45 was approved by the Board of Directors on 27 April 2022 and is signed on its behalf by:
Steve Ashmore
Director
46
HSS Hire Group plc
Annual Report and Financial Statements 2021
CHAIRMAN’S INTRODUCTION TO CORPORATE GOVERNANCE
GOVERNANCE GUIDES US THROUGH
THESE CHALLENGING TIMES
ALAN PETERSON OBE
CHAIRMAN
On behalf of the Board, I
am pleased to present the
corporate governance report
for 2021. Our governance
structures have continued
to guide us through the
challenges of COVID-19
and key projects for
the business.”
Overview of the year
Governance, controls and
careful stewardship of the
business have continued to
be vital in another year of
significant achievement,
allowing us to complete
several major projects, despite
the ongoing challenges caused
by the COVID-19 pandemic.
The Board, committees, senior managers
and colleagues across the business have
again risen to the challenges with new ways of
working and driving the delivery of our strategy,
while also remaining focused on the safety of
each other and our customers.
Key projects, such as the strategic disposal of
two wholly-owned subsidiaries, the refinancing
of the Group and the move to trading on AIM
have been some of the areas of focus for the
Board, requiring additional Board meetings
as we analysed the impact on all stakeholders.
Our Health and Safety Forums have continued
to be of great importance, as we maintained
our COVID-19 compliant working practices,
click-and-collect offering for our customers and
safe sites for our colleagues and customers.
It has been another busy year for the
committees of the Board, summarised in their
respective reports and included in the following
pages. The Market Disclosure Committee has
not been required to carry out any specific
business during the year which has not
otherwise been covered by the Board,
and so no report is included.
Board evaluation and colleague
engagement
I am pleased to report that the findings of our
2021 internal Board and committee evaluation
show that our Board continues to be impressed
with the management and direction of the
business. Board members consider that
they are well-informed on the activities of
the business and able to contribute their
considerable skills and experience through
the Board and committee meeting setting.
I expressed my disappointment in my report
last year that the Board had not been able to
enjoy more direct engagement with colleagues
from across the business at Board meetings,
on site visits and through informal meetings.
FY21 has been better in this regard and we
have enjoyed welcoming senior managers and
other stakeholders to our Board meetings, as
well as a Board visit to the new head offices in
Manchester. In FY22 we are hoping to visit our
colleagues in Ireland and Scotland. The Board
remains of the view that this is an important
aspect for engagement and also for colleague
development and succession planning.
Governance
HSS Hire Group plc
Annual Report and Financial Statements 2021
47
Further details are provided in the report on
page 55.
The Nomination Committee is recommending
that all Board Directors are re-elected at our
Annual General Meeting (AGM).
As a Board, we look carefully at the findings
of our annual colleague engagement survey;
as well as monitoring morale and wellbeing
in the business, this helps us to monitor
the development of our culture and also
how colleagues feel about development
opportunities within HSS. We had record
numbers of colleagues completing the survey in
FY21, with some encouraging results and some
areas to focus on; more details on this are on
page 40.
Senior management
We have had good continuity amongst
senior management during 2021, with
the team showing excellent resilience,
fresh thinking and innovation to counter a
challenging environment, while completing our
many special projects and day-to-day activities.
Legislative/regulatory matters and
related training for colleagues
The Directors and senior management
are informed of notable legal and regulatory
changes via a combination of internal legal
and audit professionals and also via external
advisers. In January 2021, the Company was
admitted to trading on AIM and the Directors
were briefed regarding director responsibilities
and key differences between a Main Market
listing and an AIM listing. The Directors were
also briefed on the QCA Corporate Governance
Code, under which the business now reports.
The Group’s Data Governance Team monitors
day-to-day data protection issues as the UK
continues to apply the principles of the GDPR
as enacted by amendment of the Data
Protection Act 2018.
The Group continues to promote, to both
customers and suppliers, the importance
of doing business in an ethical way. An
anti-slavery and human trafficking statement
for FY20 was published during 2021, with
the FY21 statement to follow in 2022.
Our gender pay gap is -6.9% and I am pleased
to note the continued balance there. We remain
committed to paying all our colleagues fairly.
The Company’s Code of Ethics (available
at www.hsshiregroup.com) outlines our
commitment to operating in an ethical and
responsible manner, with honesty, integrity,
openness and respect for human rights.
Our support for these fundamental principles
is reflected in our policies and actions towards
our colleagues, customers, suppliers and
the communities we operate in. The Code
specifically sets out the Company’s position
on modern slavery and anti-bribery, areas on
which we continue to train our colleagues and
reinforce important messages. The Code and
the policies underpinning it are regularly reviewed
by senior management in light of changing
business and regulatory requirements.
Governance Code
As indicated in our FY20 Report, 2021 is our
first year of reporting under the QCA Corporate
Governance Code.
Equality and diversity policy
As reported last year, at HSS we promote
equal opportunities and diversity with a view
to securing sustainable success. Our gender
diversity on the Board is unchanged from 2020.
AGM
It is our intention, once again, to hold our AGM
at the Hilton Garden Inn, Hatton Cross, at
11.00am on 21 June 2022. We are pleased to
be able to invite shareholders to attend in
person once again. Should matters change
and/or should any additional precautions
around COVID-19 be required, such
arrangements will be advised via our
corporate website (www.hsshiregroup.com).
Alan Peterson OBE
Chairman
27 April 2022
The Group
continues to
promote, to both
customers and
suppliers, the
importance of
doing business in
an ethical way. An
anti-slavery and
human trafficking
statement for FY20
was published
during 2021, with
the FY21 statement
to follow in 2022.”
48
HSS Hire Group plc
Annual Report and Financial Statements 2021
BOARD OF DIRECTORS
ALAN PETERSON OBE
CHAIRMAN
STEVE ASHMORE
CHIEF EXECUTIVE
OFFICER
PAUL QUESTED
CHIEF FINANCIAL
OFFICER
Committee membership
N Nomination Committee
Tenure on Board
7 years and 3 months
Tenure on Board
4 years and 9 months
Tenure on Board
5 years and 7 months
A Audit Committee
R Remuneration
Committee
M Market Disclosure
Committee
Committee Chair
Independent
No
Independent
No
Independent
No
Committee memberships
Committee memberships
Committee memberships
N
External roles
– Honorary Colonel
Army Cadets, Wales
M
External roles
– None
External roles
– None
Past roles (include)
– Chairman, BBI Diagnostics
Past roles
– Managing Director, Brammer
Group
– Non-Executive Chair, Veezu
Group
UK
– Managing Director, Wolseley UK
– Various senior management
Past roles
– Global Strategy Director,
Electrocomponents plc
– General Manager, RS
Components UK
– Executive Chairman, Enterprise
positions, Exel
– Planning & Performance
Management Director,
European Supply Chain, InBev
– Trained with Coopers & Lybrand
Group Holdings
– Chairman, NSPCC Wales
Appeal Board
– Non-Executive Chairman,
Pattonair Holdings Limited
– Non-Executive Chairman,
Azelis Holdings SA
– Chairman Supervisory Board,
Refresco BV
– Managing Director, Rockware
Group
– Chief Executive Officer, Meyer
International plc
– 3i’s first Industrialist in
Residence, 2001 to 2005
Skills and experience
– M&A
– Digital
– Strategy
– International
– Construction services
– Supply chain & logistics
– Manufacturing
– Sales and marketing
– Housing
– Infrastructure
– Chair/Chief Executive Officer
– Retail
– Healthcare
Skills and experience
– M&A
– Digital
– Strategy
– International
– Construction services
– Supply chain & logistics
– Manufacturing
– Sales and marketing
– Housing
– Infrastructure
Skills and experience
– M&A
– Digital
– Strategy
– International
– Supply chain & logistics
– Manufacturing
– Sales and marketing
Governance
HSS Hire Group plc
Annual Report and Financial Statements 2021
49
AMANDA BURTON
SENIOR NON-
EXECUTIVE DIRECTOR
DOUG ROBERTSON
NON-EXECUTIVE
DIRECTOR
Tenure on Board
7 years and 3 months
Independent
Yes, since appointment
in January 2015
Tenure on Board
7 years and 3 months
Independent
Yes, since appointment
in January 2015
THOMAS SWEET-
ESCOTT
NON-EXECUTIVE
DIRECTOR
DANIEL JOLL
GROUP GENERAL
COUNSEL & COMPANY
SECRETARY
Tenure on Board
7 years and 3 months
Tenure on Board
5 years and 3 months
Independent
No
Independent
No
Committee memberships
Committee memberships
Committee memberships
R M A N
A R N
External roles
– Non-Executive Director and
Chair of Remuneration
Committee, Countryside
Partnerships plc
– Senior Independent Director,
Elevate Services Inc.
External roles
– Non-Executive Director and
Chair of Audit Committee,
Mpac Group plc
– Non-Executive Director and
Chair of Audit Committee,
Zotefoams plc
External roles
– Partner, Exponent Private
Equity LLP
– Serves on the Boards
of Photobox Group and
Meadow Foods
Committee memberships
Secretary for all Committees
External roles
– None
Past roles
– Chief Operating Officer, Clifford
Chance LLP
– Director, Meyer International plc
– Senior Independent Non-
Past roles
– Finance Director, SIG plc
– Finance Director, Umeco plc
– Finance Director, Seton House
Group Limited
Executive Director, Galliford Try
plc, Monitise plc
– Managing Director, Tesa Group
– Various senior financial and
– Non-Executive Director, Fresca
Group Limited, Skipton Building
Society and Connells Limited
– Chair, Battersea Dogs’
& Cats’ Home
business positions, Williams plc
Past roles
– Co-founded Exponent Private
Equity, 2004
Past roles
– Senior Legal Adviser, Sky plc
– Senior Corporate Lawyer,
– Various senior management
Watson, Farley & Williams LLP
positions, 3i Group plc
– Served on the Boards
of Trainline plc, V. Group
and Lowell
Skills and experience
– M&A
– Strategy
– International
– Legal
– Chief Operating Officer
– Governance
– Construction services
– Housing
Skills and experience
– M&A
– Strategy
– International
– Chief Financial Officer
– Construction services
– Supply chain & logistics
– Manufacturing
Skills and experience
– M&A
– Digital
– Strategy
– International
Skills and experience
– Corporate Law
– Commercial Law
– M&A
– Public Companies
and Capital Markets
– Governance
– International
– Dispute Resolution
– Insurance
50
HSS Hire Group plc
Annual Report and Financial Statements 2021
CORPORATE GOVERNANCE
CORPORATE
GOVERNANCE
COMPLIANCE WITH THE
QCA CORPORATE
GOVERNANCE CODE
As noted in our FY20 Report, the
Board adopted the QCA Code
following the Company’s move to
AIM in January 2021. FY21 is the
Company’s first year of reporting
under the QCA Code.
The Board is committed to high standards
of corporate governance and as such has
complied with the QCA Code during the
FY21 reporting year.
Details of how the Company has applied the
ten principles of the QCA Code are included
Leadership
Key roles and responsibilities
on its corporate website, which has been
updated for the 2021 year:
an appropriate balance between executive and
non-executive representation.
www.hsshiregroup.com/investor-relations/
corporate-governance/
There are six Directors on the Board.
Excluding the chair and the two Executive
Directors, there are three Non-Executive
Directors. Thomas Sweet-Escott, a Non-
Executive Director, is not considered to be
independent as he represents Exponent Private
Equity (Exponent) and related investors (the
Exponent Shareholders), who currently control
33.43% of the Company’s issued shares.
Amanda Burton and Douglas Robertson are
both considered independent. On that basis,
the Code provision is met. Independence on
the Board was reviewed for FY21 by the Board
and, in the Board’s judgement, there remains
On 14 January 2021, the Company, Exponent
and the Exponent Shareholders entered into
a new Relationship Agreement which regulates
the ongoing relationship between them.
Whilst there is no specific requirement for
the Company to have a Relationship
Agreement in place, the Board considered
it good governance to do so. In summary,
Exponent and the Exponent shareholders give
undertakings in the Relationship Agreement to
conduct all transactions and arrangements with
the Company and its Group on an arm’s length
basis and on normal commercial terms and
shall not take any actions which may prevent
or hinder the Company from complying with
the AIM Rules.
Chairman
Alan Peterson OBE
Responsible for:
– ensuring that the conduct of the Group is in accordance with high standards of integrity and probity;
– the leadership and overall effectiveness in directing the Company, including demonstrating objective judgement
and promoting a culture of openness and debate;
– ensuring a clear structure for the operation of the Board and its committees;
– setting the Board agenda in conjunction with the Company Secretary, Chief Executive Officer and Chief
Financial Officer;
– ensuring that the Board receives accurate, relevant and timely information about the Group’s affairs; and
– ensuring regular engagement with major shareholders and other stakeholders.
Chief Executive Officer
Steve Ashmore
Senior Independent
Non-Executive Director
Amanda Burton
Responsible for:
– developing the Group’s strategy for consideration and approval by the Board;
– implementing the agreed strategy;
– day-to-day management of the Group’s operations; and
– being accountable to, and reporting to, the Board on the performance of the business.
Responsible for:
– being an alternative contact for shareholders at Board level other than the Chairman;
– acting as a sounding board for the Chairman;
– if required, being an intermediary for Non-Executive Directors’ concerns; and
– reviewing the Chairman’s performance.
The Senior Independent Non-Executive Director carries out the duties of a Senior Independent Director for the
purposes of compliance with the QCA Code.
Board and committee
structure
The Board focuses on:
– leadership;
– risk assessment and management;
– strategy;
– performance; and
– monitoring safety, values and standards.
In addition, there is a formal schedule of matters reserved for the Board.
The committees each have full terms of reference which can be found on the Company’s website at
www.hsshiregroup.com/investor-relations/corporate-governance.
Non-Executive Directors
The number of Non-Executive Directors and their range of skills and experience is kept under review and was
formally reviewed as part of the Board evaluation (see page 55).
Governance
HSS Hire Group plc
Annual Report and Financial Statements 2021
51
GOVERNANCE FRAMEWORK
Alan Peterson OBE
Chairman
Responsible for:
– ensuring that the conduct of the Group is in accordance with high standards of integrity and probity;
– the leadership and overall effectiveness in directing the Company, including demonstrating objective judgement and promoting a culture of
openness and debate;
– ensuring a clear structure for the operation of the Board and its committees;
– setting the Board agenda in conjunction with the Company Secretary, Chief Executive Officer and Chief Financial Officer;
– ensuring that the Board receives accurate, relevant and timely information about the Group’s affairs; and
– ensuring regular engagement with major shareholders and other stakeholders.
Executive management
Chief Executive Officer, Chief Financial
Officer, Chief Commercial Officer, Group
HR Director, Managing Director of England
and Wales, Managing Director of Ireland,
Group Strategy Director, Group General
Counsel & Company Secretary.
Role:
– Define and implement Group strategy.
– Operational management of the Group.
Company Secretary
Daniel Joll
Role:
– Support and advise the Board and
Committees (in a dual legal and
company secretarial function).
The Board
Comprises six Directors, of whom four are
Non-Executive, two of whom, Amanda
Burton and Doug Robertson, are
considered independent. The Board is
supported by the Company Secretary.
Role:
– Lead the Group.
– Promote the long-term sustainable
success of the Company, generating
value for shareholders and contributing
to wider society.
– Oversee risk management and internal
controls.
– Oversee strategy.
– Oversee the executive management.
– Monitor performance.
– Set values and standards aligned with
culture and encourage engagement.
Audit & Risk Committee
Comprises Independent
Non-Executive Directors,
chaired by Doug Robertson,
supported by the Company
Secretary.
Role:
– Monitor financial reporting
– Monitor audit
– Monitor effectiveness of
risk management and
internal controls
Find out more in the
Audit Committee Report
on page 56
Remuneration
Committee
Comprises Independent
Non-Executive Directors,
chaired by Amanda Burton,
supported by the Company
Secretary.
Nomination Committee
Comprises Non-Executive
Directors, including two
Independent Non-Executive
Directors, chaired by Alan
Peterson OBE, supported
by the Company Secretary.
Role:
Role:
– Determine and review
appropriate Board and
senior executive
remuneration policies and
structures.
– Determine appropriate
remuneration packages
for Board and senior
executives.
– Review workforce
remuneration and related
policies, and the alignment
of incentives and rewards
with culture.
Find out more in the
Directors’ Remuneration
Report on page 66
– Advise the Board on
composition, membership
and succession planning.
– Advise the Board on
Board and senior
appointments (taking into
account skills, knowledge,
experience, independence
and diversity).
– Oversee Board evaluation,
including determining and
monitoring actions.
– People – promote the right
culture and engagement,
colleague development
and wellbeing.
Find out more in the
Nomination Committee
Report on page 55
Market Disclosure
Committee
Chaired by Amanda Burton,
plus the Chief Executive
Officer, supported by
the Company Secretary.
Role:
– Ensure compliance with
applicable disclosure
requirements of the
Financial Conduct
Authority’s Disclosure
Rules and Transparency
Rules.
– Review any
announcement proposed
to be made by the
Company, other than any
announcement of a
routine nature or to be
considered by the Board.
– Ensure that procedures
are in place for employees
with access to inside
information.
52
HSS Hire Group plc
Annual Report and Financial Statements 2021
CORPORATE GOVERNANCE continued
Attendance at Board and committee meetings of which each Director is a member held during FY21.
Director
Executive Directors
Steve Ashmore
Paul Quested
Non-Executive Directors
Alan Peterson OBE
Amanda Burton
Doug Robertson
Thomas Sweet-Escott
Board
(of 10)
Audit
Committee
(of 6)
Remuneration
Committee
(of 4)
Nomination
Committee
(of 2)
10
10
10
10
10
9
–
–
–
6
6
–
–
–
–
4
4
–
–
–
–
2
2
2
–
All the individuals who were Directors as at 1 January 2022 offer themselves for re-election at the next AGM of HSS Hire Group plc to be held at 11.00am on
21 June 2022.
The biographical details of each of the Directors, including details of their other directorships and relevant skills and experience, are on pages 48 and 49 of this Annual
Report and are also set out in the Notice of AGM.
The Board recommends that shareholders approve the resolutions to be proposed at the AGM relating to the re-election of all of the Directors.
Terms and conditions and time
commitments
The Chairman and Non-Executive Directors
are all appointed pursuant to formal letters
of appointment which outline, amongst
other details, the remuneration and terms
of appointment for each Director.
The Chairman and the Non-Executive Directors
devote such time to the affairs of the Company
as required, including attendance at meetings
as reflected in the above table.
In order to facilitate proper debate and
consideration, all Directors are expected to
attend Board meetings and such Committee
meetings to which they are invited in person.
The Executive Directors of the Company
may attend certain meetings of the committees
at the invitation of the Chair of the respective
committee. These attendances are not
recorded in the table set out above.
Conflicts of interest
Exponent and the Exponent Shareholders
currently control 33.43% of the Company’s
issued shares.
Thomas Sweet-Escott is a partner at Exponent
and Alan Peterson OBE has a long-standing
business relationship with Exponent.
The Group trades on an arm’s length basis
with certain Exponent portfolio companies.
In the event that HSS’s relationship with any
customers or other companies where any of
the Directors are also appointed as directors
becomes material by virtue of their trade with
the Group or another business reason, the
relevant Director would be expected to declare
their connection to the customer/company and
the Board would assess whether a conflict of
interest arises and the appropriate action to be
taken. There are no current or potential conflicts
of interest between any duties owed by the
Directors or senior management to the
Company and their private interests or
other duties.
Any Director’s conflicts of interest are declared
to the Board and recorded by the Company
Secretary.
Effectiveness
Board composition
The Board and committees are considered to
have an appropriate range of experience, skills
and knowledge to fulfil their duties. Profiles of
each of the members of the Board are provided
on pages 48 and 49.
The four Non-Executive Directors, Alan
Peterson OBE, Amanda Burton, Doug
Robertson and Thomas Sweet-Escott,
represent a majority of Board members and
provide a broad range of skills and experience.
The two Executive Directors, Steve Ashmore
and Paul Quested, bring a variety of sector
experience to the Board. Amanda Burton
and Doug Robertson are considered
independent. They are members of the Audit,
Remuneration and Nomination Committees
of the Board. The Market Disclosure and
Remuneration Committees are chaired by
an Independent Non-Executive Director,
Amanda Burton. The Audit Committee is
chaired by an Independent Non-Executive
Director, Doug Robertson.
Appointments to the Board
The Nomination Committee, which is
composed entirely of Non-Executive Directors,
is responsible for any future appointments to
the Board. The Nomination Committee is
chaired by the Chairman of the Board, Alan
Peterson OBE. By virtue of the fact that the
majority of its members are Independent
Non-Executive Directors, the Nomination
Committee is considered independent.
Board evaluation
Internal evaluation of the Board and of our
sub-committees was carried out as detailed on
page 55.
Board training
As part of induction, any new Directors receive
training from the Company’s sponsors/brokers
in relation to their responsibilities as a Director
of a listed company. The Board also receives
regular updates on legal and regulatory
developments through the course of a financial
year as reflected in the Chairman’s Introduction
on page 46.
Access to information and support
The Board is provided with an agenda,
supporting papers and documentation ahead
of each Board and/or Committee meeting to
allow them time to read, review and consider
the information and analysis presented.
The Board also receives ad hoc updates on
matters if required outside of the formal Board
meeting timetable. The Board has access to
the Company Secretary and can request
independent advice at the Company’s expense
where it believes it is appropriate and valuable
to do so. Senior management is frequently
invited to present at Board meetings as
deemed appropriate, and the Board can
access such colleagues at any time.
Governance
HSS Hire Group plc
Annual Report and Financial Statements 2021
53
Overview of Board’s work during 2021
The Board met ten times during 2021,
being a combination of scheduled
meetings and ad hoc meetings to discuss
the Group’s special projects undertaken
through the year.
Regular agenda items for the Board
included, and will include in 2022:
– health and safety;
– operational and financial performance;
– risk management and the risk register;
– reviewing, setting and approving
strategy;
– colleague/stakeholder/shareholder
engagement, values and culture;
– finance and banking arrangements;
– major capital expenditure;
– governance around special projects; and
– evaluation of acquisition/disposal
opportunities (as applicable).
The Board delegates authority to the
following Committees and receives updates
on their activities at each Board meeting:
– Audit Committee;
– Remuneration Committee;
– Nomination Committee; and
– Market Disclosure Committee.
Accountability
Financial and business reporting
The Directors are responsible for preparing
the Annual Report and the Financial Statements
in accordance with applicable law and
regulations. As set out in the Directors’
Responsibility Statement (see page 73), the
Board considers that the Annual Report and
Accounts, taken as a whole, is fair, balanced
and understandable and provides the
information necessary for shareholders to
assess HSS’s position and performance,
business model and strategy.
Risk management and internal control
The Board has overall responsibility for
determining the nature and extent of the
principal risks it is willing to take to achieve
its strategic objectives and for establishing
and maintaining a sound system of risk
management and internal control, and
then reviewing its effectiveness.
The principal risks and uncertainties facing the
Company and how these are being managed/
mitigated are detailed on pages 30 to 34.
The Group’s risk management and internal
control system is designed to manage the
risks facing the Group and safeguard its assets.
No system of internal control can provide
absolute assurance against material
misstatement or loss. The Group’s system
is designed to provide the Directors with
reasonable assurance that issues are
identified on a timely basis and are dealt
with appropriately.
The Audit Committee (whose composition,
remit and report are set out on page 51 and
pages 56 to 59) assists the Board in reviewing
the effectiveness of the Group’s risk
management and internal controls, including
financial, operational and compliance controls
and risk management systems. This is carried
out with the assistance of the Chief Financial
Officer and the Risk and Assurance Director
and supported by the findings of specific
projects/investigations completed by the
internal audit team, which are presented to
the Audit Committee during the financial year.
Whistleblowing
The Company has a formal whistleblowing
process, whereby any colleague may, in
complete anonymity, contact certain nominated
members of senior management to raise any
concerns. These concerns are then investigated
independently and the results shared with
the whistleblower for further discussion
if appropriate/possible. This process is
communicated to all colleagues at least
annually and the policy and relevant details
are also made available to colleagues on
a dedicated section of the Group intranet,
HSS World.
Whistleblowing notifications are reviewed at
least annually by the Audit Committee.
Modern Slavery Act 2015
The Group published its Modern Slavery
Act statement for the financial year ended
26 December 2020 on its website during
the first six months of 2021, in accordance
with guidelines.
Going concern
Note 1(e) to the Financial Statements sets out
the basis on which the Directors continue to
adopt the going concern basis in preparing the
Annual Report and Accounts.
In summary, taking into account the adequacy
of the Group’s debt facilities, its ability to deploy
mitigating actions where appropriate and the
principal risks and uncertainties (see pages 30
to 34) and, after making appropriate enquiries,
they have a reasonable expectation that the
Group has adequate resources to continue in
operational existence for the foreseeable future.
Accordingly, they continue to adopt the going
concern basis in preparing the Financial
Statements included within this Annual Report.
Statement on disclosure of information to
the auditor
The Directors who held office as at 27 April
2022 each confirm that:
– so far as the Director is aware, there is no
relevant audit information of which the
Company’s auditor is unaware; and
– he/she has taken all the steps that he/she
ought to have taken as a Director in order
to make himself/herself aware of any
relevant audit information and to establish
that the Company’s auditor is aware of
that information.
This confirmation is given and should be
interpreted in accordance with the provisions
of Section 418 of the Companies Act 2006.
54
HSS Hire Group plc
Annual Report and Financial Statements 2021
CORPORATE GOVERNANCE continued
Remuneration
The Remuneration and Audit Committees
are composed exclusively of Independent
Non-Executive Directors, able to judge and
achieve an appropriate balance between
incentivising Executive Directors and the
potential impact on the Company’s risk profile.
The Remuneration Committee (whose
composition, remit and report are set out
on page 51 and pages 62 to 65) sets the policy
for and terms of executive remuneration.
Relations with shareholders and other
capital providers
Shareholder engagement
The Board remains committed to
communicating with shareholders and
stakeholders in a clear and open manner,
and seeks to ensure effective engagement
through the Company’s website, its public
announcements, the AGM and other investor
relations activities.
The Company’s engagement activities during
FY21 are detailed on pages 43 to 45.
The Company reports its financial results to
shareholders twice a year, with the publication
of its Annual and Half-Year Financial Reports.
Shorter, less detailed trading updates are also
provided to the market periodically.
All of the above mentioned reports are
made available for download to shareholders
in the investor relations section of the
Company’s website, www.hsshiregroup.com/
investor-relations.
Annual General Meeting
The Company’s AGM is planned to be held
at 11.00am on 21 June 2022. Details of the
resolutions proposed and being voted on are
included in the Notice of AGM provided to
shareholders and are also available on the
Group’s website, www.hsshiregroup.com.
Shareholders should refer to the Notice of
Meeting and any further updates provided
in the ‘News & Resources’ section at
hsshiregroup.com regarding the 2022 AGM
in light of the COVID-19 pandemic.
Significant shareholders
Based on TR-1 notifications received, the parties who hold 3% or more of the issued share capital of the Company as at 6 April 2022 are as follows:
Name
Exponent1
Ravenscroft (CI) Limited2
Hestia Investments NV
Merchant Capital
Lombard Odier Investment Managers
Number of
ordinary shares
of 1p
235,681,708
188,280,487
39,000,000
28,000,000
24,765,761
%
holding
33.43
26.71
5.53
3.97
3.51
1 Comprises shareholdings held by Exponent Private Equity Partners GP II, LP (UK) and Exponent Havana Co-Investment GP Limited Partners (UK).
2 Ravenscroft (CI) Limited is an investment services provider regulated by the Guernsey Financial Services Commission and Jersey Financial Services Commission,
which holds certain shares on behalf of Ravensworth International Limited.
Details of Directors’ interests in the Company’s ordinary share capital are provided in the Directors’ Remuneration Report on page 68.
Governance
HSS Hire Group plc
Annual Report and Financial Statements 2021
55
NOMINATION COMMITTEE REPORT
Alan Peterson OBE
Committee Chairman
Roles and responsibilities
Committee membership
The Committee’s full terms of reference
N Nomination Committee
can be found on the Company’s website at
A Audit Committee
www.hsshiregroup.com/investor-relations/
R Remuneration Committee
corporate-governance. Its key
M Market Disclosure Committee
responsibilities include:
Committee Chair
– leading a formal, rigorous and
transparent process for Board
appointments and making
recommendations to the Board;
– reviewing the structure, size and
composition of the Board, including its
skills, knowledge, independence and
diversity (including of gender, social and
ethnic backgrounds, and cognitive and
personal strengths) and making
recommendations to the Board;
– succession planning, including
overseeing the development of a diverse
pipeline for succession;
– strategic issues and commercial
changes affecting the Group and the
market in which it operates;
– Board and sub-committee performance
evaluation; and
– Stakeholder engagement.
Board evaluation
The FY21 Board evaluation comprised an
internal evaluation of the Board using feedback
collated from Board members’ responses to an
evaluation questionnaire. The questionnaire
addressed the key requirements of the QCA
Code in relation to the Board and its sub-
committees, including each Committee’s terms
of reference, composition and frequency of
meetings. Additional questions focused on
leadership, diversity, the relationship between
the Executive and Non-Executive Directors, the
role of the Chairman, workforce engagement,
issues of material importance concerning the
Group and information on the Group’s risk
management systems. The responses to the
questionnaire were summarised and shared
with the Board and discussed as appropriate.
Alan Peterson OBE
Looking ahead
In 2022, the Committee has scheduled
meetings in February and September, and
any additional meetings will be arranged
as required.
Having considered feedback from the
Board and colleagues, progress made
against previous objectives and the
adoption of the QCA Code, the Committee
considered it appropriate to focus on the
following action areas during 2022:
– Stakeholder interests & engagement
– Succession planning
– ESG programme
DEAR SHAREHOLDER
On behalf of the Nomination
Committee (the Committee), I am
pleased to present our report for
the 2021 financial year.
Our approach
The Committee’s primary purpose is to
ensure that the Group has the best possible
leadership and clear plans for Director and
senior management succession and colleague
development and engagement. Its primary
focus is therefore to concentrate upon the
strength of the Board and the selection of
the best candidates for posts, based on
objective criteria.
Policy on diversity
In performing its activities through the
year, the Committee has applied the Group’s
equality and diversity policy, which it believes
is appropriate for application at all levels of
the business, including Board and senior
management appointments and succession
planning. Further detail on the Group’s equality
and diversity policy is provided on page 71.
Activities
The Committee had two scheduled meetings
in 2021.
At the meeting held in February 2021, the
findings of the internal Board evaluation in
respect of FY20 were considered and the
resulting actions, as reported in the 2020
Annual Report, were agreed.
At the meeting held in September 2021, people
and workforce engagement were discussed, with
a particular focus on wellbeing, given the ongoing
impact of COVID-19 and many colleagues
working from home and/or being affected
by illness themselves or of family members.
The actions for 2021 agreed by the Committee
have been reviewed by the Committee and also
by the Board, noting in particular as follows:
– Specialist expertise – the Committee
was satisfied that there is a good blend of
specialist skills across the business and an
independent IT audit undertaken during the
year had been useful in identifying some
development opportunities.
– Succession planning – the Committee
noted that the People process had
recommenced, which includes Leadership
Development and Apprenticeship
programmes, leading to more internal
promotions.
– Colleague and stakeholder engagement
– the Committee had been impressed with
the number and quality of activities which
had taken place throughout the year, with a
strong focus on colleague wellbeing.
56
HSS Hire Group plc
Annual Report and Financial Statements 2021
AUDIT COMMITTEE REPORT
DEAR SHAREHOLDER
On behalf of the Audit Committee
(the Committee), I am pleased to
present our report for the 2021
financial year.
The Committee has reviewed the contents
of the 2021 Annual Report and Accounts and
advised the Board that it considers the Report
to be fair, balanced and understandable, and
provides the information necessary for readers
to assess the Company’s position and
performance, business model and strategy.
It has been a busy year for the Committee as the
wider economy recovered from the more severe
COVID-19 lockdowns and restrictions imposed
during 2020 and HSS returned to pre-pandemic
levels of revenue. Alongside the recovery, HSS
has also delivered the remaining elements of its
2017 strategy, including reducing non-IFRS 16
net debt leverage to 0.8x following the improved
performance of the Group, ongoing working
capital management and strategic divestitures of
Laois Hire Services Limited (Laois) and All
Seasons Hire Limited (ASH); all of which enabled
the successful refinancing in November 2021.
The Committee also continued to fulfil its core
areas of responsibility.
Core activities
The Committee met six times in 2021.
All meetings were conducted via video
conference call in light of COVID-19 restrictions,
although the Committee plans to meet in
person during 2022. All members attended
the 2021 meetings.
The Committee’s core activities during 2021
included, and will include in 2022:
– reviewing and challenging management’s
assumptions and enhancing disclosure in
areas of judgement and estimates within the
notes to the Financial Statements;
– establishing that the Annual Report, taken as
a whole, is fair, balanced and understandable
via review of the document and gaining an
understanding as to how it was completed;
– reviewing internal control systems and
policies;
– regular review of the work and findings of the
internal audit function;
– considering risk management systems;
– reviewing the risk register; and
FY21 has been
another busy year
for the Committee
given the strong
recovery of the
business and high
level of strategic
progress made.”
Ad hoc activities
Specific additional work streams undertaken
by the Committee during the year and up to
accounts approval included:
– COVID-19 – although the impact of the
pandemic has reduced in the year, work
has been required to ensure the ongoing
situation is properly considered in the
accounting and disclosures as well as
changes to risk assessments as we
progressed through the year;
– Builders Merchant review – the Builders
Merchant network is now a significant part of
HSS’s operating model (see pages 14 to 15)
and the Committee conducted a review of
the partner selection process, new location
set-up process and ongoing auditing of each
site and was pleased to note the robustness
of processes and controls in place;
– detailed review and challenge to ensure
robustness of going concern modelling
throughout the year (see next page);
– monitoring the implementation of IFRS 16
Leases which the Group adopted in the 2020
Annual Report and Accounts;
– consideration of anti-theft technology with
regard to protecting the Group’s hire fleet;
– reviewing the accounting treatment of the
Group’s refinance in November;
– participating in the third party reviews of the
Group’s cyber security policies and
procedures;
– meeting with the external auditor, agreeing its
– review of a three-year plan for the Internal
audit plan and assessing its findings.
Audit function; and
– reviewing the Group’s accounting treatment
related to the disposals of Laois and ASH
announced in April and September
respectively.
Doug Robertson
Committee Chairman
Roles and responsibilities
The Committee has responsibility for
overseeing the financial reporting and
internal financial and risk management
controls of the Company, as well as
maintaining an appropriate relationship
with the external auditor and reporting
its findings and recommendations to
the Board.
The Committee’s full terms of reference can
be found on the Company’s website at
www.hsshiregroup.com/investor-relations/
corporate-governance. Its key
responsibilities include:
– receiving and reviewing the Annual
Report and Accounts, half-year Financial
Statements and all related public
financial announcements, and advising
the Board on whether the Annual Report
and Accounts are fair, balanced and
understandable;
– receiving and reviewing reports from the
external auditor;
– monitoring the external auditor’s
effectiveness and independence and
approving its appointment and its terms
of engagement;
– monitoring the effectiveness of the
Group’s risk management system;
– reviewing the effectiveness of the
Group’s system of internal financial
controls and internal control and
compliance systems, in relation to the
financial reporting process (see page 57)
and advising the Board as appropriate;
and
– overseeing the Group’s procedures
for detecting fraud and whistleblowing
arrangements.
Governance
HSS Hire Group plc
Annual Report and Financial Statements 2021
57
External financial reporting
The Committee is responsible for monitoring and
reviewing the Financial Statements and reviewing
compliance with legal, regulatory and statutory
requirements, giving due consideration to the
provisions of the QCA Code.
The Committee reviewed the annual and interim
Financial Statements along with trading and
market updates released during the year.
This year there was an additional spotlight
on the disposals of Laois and ASH and on the
appropriateness of estimates and judgements
as well as the following significant areas:
– hire stock existence and valuation;
– carrying value of goodwill and other
intangible and tangible assets;
– revenue recognition – cut-off, sales rebate
and credit note provisions;
– debtor recoverability, particularly in light of
COVID-19;
– property accounting including onerous
contract and dilapidations provisions;
– share option schemes and management
incentives generally;
– capitalisation of IT development;
– management assessment of going concern;
– Environmental, Social and Governance
factors;
– exceptional items; and
– IFRS 16 Leases.
These areas are identified as significant due
to their complexity, size, level of judgement
required and/or potential impact on the
Financial Statements and our strategy.
An overview of each of these areas is set
out below:
Hire stock existence and valuation
Rental income earned on materials and
equipment held for hire which is owned by the
Group (hire stock) remains a large component
of the Group’s revenues. As such, the existence
of hire stock is important to the ongoing ability
of the Group to generate revenue from its assets.
Certain of the Group’s funding arrangements are
also linked to specific assets or asset classes.
The Committee has therefore given careful
consideration to the controls in place to verify
the physical existence and appropriate valuation
of hire stock together with the processes for
verifying the reliability of the accounting
systems and records, and has concluded
that appropriate systems are in place.
Carrying value of goodwill and other
intangible and tangible assets
The carrying value of goodwill, intangible and
tangible assets was tested as part of year-end
reporting. At the interim reporting date the
Committee concluded a full review was not
required given the recovery of the Group’s
Revenue and profit since the last review which
was conducted at year-end 2020.
The Group’s methodology has been consistent
with that used in 2020 and applied to individual
cash generating units, taking account of market
outlook, risk-adjusted discounted future cash
flows, sensitivities and other factors which may
have a bearing on impairment considerations.
Of note this year is the impact of the ASH
disposal as ASH comprised a CGU in its own
right, which has consequently been removed
leaving two CGUs – HSS Core and Power
Generation. As a result of this work, the
Committee has concluded that no impairments
are required to goodwill or intangibles and that
the impairment provisions made related to
tangible assets are appropriate.
Revenue recognition – cut-off, sales rebates
and credit note provisions
The Committee examined the procedures and
controls in place to ensure that the reporting
and recognition of revenue, especially for open
hires over the year-end, and also the
recognition of any revenue-related rebate
accruals or credit note provisions, is appropriate
and complete. The Committee also considered
the requirements of IFRS 15 Revenue from
Contracts with Customers as part of its review
of revenue recognition and the approach to
provisioning as part of its assessment of the
FY21 results. Following these reviews, the
Committee has concluded that the procedures
and controls are adequate.
Debtor recoverability, particularly in light
of COVID-19
The Committee reviewed the methodology
and judgements applied to arriving at the
Group’s expected credit loss provisions in
relation to Trade debtors and Accrued income,
and in particular the additional risk weighting
applied to historical loss rates to allow for
management’s expectation that customer
defaults driven by the impact of COVID-19 on
the economy have not yet peaked.
The Committee also reviewed the disclosures
made in this regard.
Property accounting including onerous
contract and dilapidation provisions
2021 has seen the Group be very successful
in its efforts to surrender the remaining dark
stores following the decision to permanently
close 134 branches announced in October
2020. Associated right-of-use assets were
fully impaired in 2020 however significant lease
liability and onerous contract cost provisions
were carried forward into 2021. During the
year 66 properties were surrendered resulting in
material releases of lease liability and
associated onerous property cost and
dilapidations provisions. The Committee
reviewed with management the impact of
these surrenders within the FY21 Financial
Statements. The significantly lower remaining
onerous contract (non-lease) and dilapidations
provisions were reviewed, including the
estimates and judgements applied by
management in assessing the existence and
level of provision. The Committee assesses
that the approach adopted is reasonable.
Share option schemes and management
incentives generally
During the year the Group has made new
awards of restricted stock to certain senior
managers, and announced the inception of a
value creation plan for the Executive Directors.
In addition a retention scheme has been
implemented for Directors and senior managers
to secure the resource required to deliver the
next set of strategic initiatives. A 2019 option
based long-term incentive scheme remains
in flight (refer to the Director’s Remuneration
Report on pages 66 to 69 for further details).
The Committee has reviewed the accounting
and disclosures made with regard to incentive
schemes and concluded that these
are appropriate.
Capitalisation of IT development
The Group has significantly increased its
investment in internally-generated software
with the development of Brenda and HSS
Pro as well as ongoing improvements to
HSS.com. The Committee scrutinised the 2021
capitalisation for these and other projects and
concluded that the treatment was appropriate.
Management assessment of going concern
Once again the Committee has spent a
significant amount of time in FY21 reviewing
and challenging the Group’s forecasts and
advising the Board on going concern
throughout the year, particularly when
approving the interim Financial Statements
and entity statutory accounts. The risk
presented by ongoing waves of COVID-19
and possible restrictions means that forecasts
have been kept under constant review.
58
HSS Hire Group plc
Annual Report and Financial Statements 2021
AUDIT COMMITTEE REPORT continued
Completion of
a capital raise
in December
2020 significantly
improved the
Group’s liquidity and
net debt, and this,
combined with cash
generated from
strategic disposals
and improved
trading in 2021,
meant the Group
was able to repay
debt and refinance
in November at
a significantly lower
interest cost.”
The completion of a capital raise in December
2020 significantly improved the Group’s liquidity
and net debt, and this, combined with cash
generated from strategic disposals and
improved trading in 2021, meant the Group was
able to repay debt and refinance in November
at a significantly lower interest cost. As at
1 January 2022, the Group’s financing
arrangements include a fully drawn senior
finance facility of £70.0m, an undrawn revolving
credit facility of £17.2m and undrawn overdraft
facilities of £6.0m. Cash at the balance sheet
date was £42.3m providing liquidity headroom
of £65.5m (FY20: £103.6m). Both the senior
finance facility and revolving credit facility
are subject to net debt leverage and interest
cover financial covenant tests every quarter.
At the financial year-end the Group had
44% and 49% headroom against these
covenants respectively.
With regard to the assessment of going
concern, the Committee has reviewed the
Group’s cash flow forecasts, taking into
account strategic initiatives and sensitivity
analysis based on reasonably possible changes
in trading performance. The Group’s base case
for the 12 months to 29 April 2023 assumes a
continued recovery of revenue during 2022.
The Board has considered various downside
scenarios including a ’reasonable worst case’
driven by lower than forecast market growth
rates, the loss of a major customer contract,
increased inflationary pressures and an
increase in debtor days. In addition, it assumes
that continued strategic investment in
technology does not deliver the expected uplift
in revenue. This reasonable worst-case
scenario has been modelled without mitigating
actions and, despite this, the Group is forecast
to maintain headroom against its working
capital requirements and financial covenants
within the assessment period.
These facts reinforce that it is appropriate to
adopt the going concern assumption in the
preparation of the accounts.
Environmental, Social and
Governance factors
As is noted below, the Committee reviewed the
Group’s position on the risk presented by ESG
factors generally, but also with regard to
financial reporting matters.
Exceptional items
The Committee reviewed with management
the expenses classified as exceptional during
the year. Exceptional items included the release
of liabilities related to dark stores and costs
associated with the Group’s restructure into
two new divisions – HSS Pro Service and HSS
Operations – as well as the strategic disposals
of Laois and ASH and refinancing costs.
The Committee concluded that, given the size
and nature of these items, and the associated
disclosures in the notes to the accounts, the
approach adopted in respect of exceptional
items is appropriate.
IFRS 16 Leases
IFRS 16 Leases was adopted by the Group
during 2020. IFRS 16 is a complicated standard
and HSS has a large number of leases creating
material positions on the balance sheet.
The complexity was amplified following the
material restructuring of the Group’s branch
network and successful surrender of the
majority of sites. As such IFRS 16 remains a
significant area in the Annual Report going
forward. The Committee has reviewed the
Group’s accounting and disclosures related
to IFRS 16 as well as the finalisation of
implementing IFRS 16 in the Group’s
primary ledgers.
FRC review of 2020 Annual Report and
Accounts
In November 2021 the Company received a
letter from the Financial Reporting Council
(FRC) which made enquiries related to a
number of disclosures in the 2020 Annual
Report and subsequent updates in the 2021
interim results. The FRC’s questions focused
mainly on the accounting treatment and
disclosures arising from the Group’s decision
to permanently close 134 locations in October
2020 as part of the Group’s acceleration of
strategy (as explained in the 2020 Annual
Report) and the subsequent success
in surrendering dark stores as well as
the disclosure of impairment loss on
trade receivables.
The FRC highlighted that the impairment loss
on trade receivables should be separately
disclosed on the face of the Consolidated
Income Statement. Previously it was included
within administration expenses. The figure is
now shown separately with no impact on profit.
In addition, certain other disclosures in the
notes to the financial statements have been
enhanced to provide greater clarity for readers
of the Annual Report and Accounts.
The FRC closed its enquiry in February 2022.
Scope and limitations of the FRC’s review
The Company recognises that the FRC’s review
was based on the Annual Report and Accounts
for the year ended 26 December 2020 and did
not benefit from detailed knowledge of the
Company’s business or an understanding of
the underlying transactions entered into.
The FRC’s review provides no assurance that
the Company’s Annual Report and Accounts
are correct in all material respects; the FRC’s
role is not to verify the information provided but
Governance
HSS Hire Group plc
Annual Report and Financial Statements 2021
59
to consider compliance with reporting
requirements. The FRC’s letters are written
on the basis that it (and its officers, employees
and agents) accepts no liability for reliance
on them by the Company or any third party,
including but not limited to investors
and shareholders.
External auditor
The Committee oversees the Group’s
relationship with BDO and formally reviews the
relationship, policies and procedures to ensure
its independence. BDO also reports to the
Committee on the steps it has taken through
the year to safeguard its independence and to
comply with the relevant professional and
regulatory requirements. The BDO partner in
charge of the audit is Sophia Michael. She has
held the role for three years (including FY21).
The maximum term for which a partner in
charge can perform the role is five years.
BDO has been auditor to certain companies
within the Group for 17 years since its
appointment in respect of the 2004 year-end,
with the lead audit partner being rotated on a
regular basis, most recently in 2019 as noted
above. The last tender for the audit of HSS
Hire Service Group Limited and its subsidiaries
occurred in 2005.
BDO has been auditor to the Public Interest
Entity, HSS Hire Group plc, for six years,
following its incorporation in January 2015.
It is the Group’s intention to put the audit out to
tender at least once every ten years.
The Company has therefore complied with the
relevant provisions of the Competition and
Markets Authority Final Order on the statutory
audit market and the Statutory Auditors and
Third Country Auditors Regulations 2016 (SI
2016/649) and the transitional arrangements
therein for the year ended 1 January 2022.
During the year, the Committee has reviewed
and agreed the scope of BDO’s work, its audit
fees and terms of engagement for the half-year
interim results review and full-year FY21 audit.
The fees for both audit and non-audit services
paid to BDO are set out in note 9 to the
Financial Statements.
The Committee also reviewed the
effectiveness of the external audit process
during the year. This assessment was based
on the Committee’s interaction with BDO at
Committee meetings, during separate meetings
between the Audit Committee Chair and Audit
Partner and through feedback from the Group
Finance team on its interaction with BDO.
As a result of this exercise, the Committee has
satisfied itself that BDO continues to provide an
effective external audit service to the Company
and its subsidiaries and the Committee has
made a recommendation to the Board that
a resolution for the re-appointment of BDO
be proposed at the AGM.
Non-audit work and independence
The Committee maintains a policy for non-audit
services provided by the Group’s external
auditor which segregates services into
Permitted Engagements, Excluded
Engagements and Potential Engagements.
The policy is available on the Group’s website
at www.hsshiregroup.com/investor-relations/
corporate-governance. The policy is designed
to ensure that in the event the Group’s external
auditor is engaged to provide non-audit
services the provision of those services does
not impair, nor can it be seen to impair, the
external auditor’s independence and objectivity.
During 2021, BDO provided non-audit-related
services to the Group; these totalled £39,000
representing 5.2% of the total fees payable
to BDO. The non-audit fees mainly relate
to reviewing and agreeing the Group’s
responses to the FRC enquiries noted above.
Notwithstanding the non-audit fees, the
Committee concluded that the independence
of the external auditor has not been
compromised in any way.
Risk management and internal controls
An overview of the Company’s approach to risk
management and internal controls through
2021, together with a summary of the principal
risks facing the Group, is provided on pages 30
to 34.
During 2021, the Committee reviewed the
overall risk management and internal control
framework, the work and role of the internal
audit team and the underlying process for
capturing and reporting risk and control data.
This assessment was assisted through the
provision of various documents through the
year by the Chief Financial Officer, Risk and
Assurance Director and other senior personnel
in the head office functions. These documents
included but were not limited to: quarterly
risk management summary documents,
which assess any changes in risk profiles,
descriptions and ratings through the year;
and quarterly summaries of work completed
and work planned by the internal audit team,
assessing both areas of risk and the existing
controls in place. In addition, the Committee
has completed a review of the three-year plan
for the internal audit function to ensure that
it continues to cover the full scope of HSS
activities business and wider environment
continue to develop.
It is pleasing to note that the Group continued
to have a sharp focus on the management of
risk in the year. The impact of COVID-19
receded and the Group’s success in
completing strategic objectives strengthened
the financial footing of the business.
The potential impact of Environmental, Social
and Government factors has resulted in a new
key risk being identified and the Group has split
out Safety from Legal and Regulatory risk.
The Committee has kept itself abreast of
developments in both areas, and supported the
focus on these important topics.
As a result of this review, and the work streams
undertaken through the year, the Committee
has satisfied itself that the Group has an
appropriate risk management and internal
control framework in place. This work will
continue in 2022.
Following the year-end, the Committee
has considered the impact of the war in
Ukraine – from a risk management and
disclosure perspective.
Financial reporting and preparation
of accounts
The main features of the Group’s risk
management and internal controls in respect
of financial reporting and the preparation of
accounts are:
– a comprehensive annual business planning
and budgeting process, subject to Board
approval, through which risks are identified
and considered;
– a single financial reporting system within
which actual and forecast results are
compared with approved budgets on a
monthly basis and reviewed by the Board;
– Group accounting policies, which are
regularly reviewed and reported against
at Audit Committee; and
– an investment evaluation process to ensure
capital expenditure is properly approved.
Whistleblowing
The Committee believes that appropriate
arrangements and policies are in place to
facilitate the proportionate and independent
investigation and implementation of appropriate
follow-up action, in relation to confidential
concerns raised by staff via the whistleblowing
process (see page 53). The Committee
confirmed the steps taken to ensure awareness
of the policy and process across the business
remained in place and conducted a review of
the Group’s whistleblowing register.
Meeting schedule
The Committee meets at least four times a year
at appropriate times in the financial reporting
and audit cycle. Additional meetings can be
scheduled where deemed necessary by the
Chairman. The external auditor, Chief Financial
Officer and Risk and Assurance Director are
normally invited to attend a number of these
meetings. Other members of the senior
management team attend as invited and
as appropriate to the content matter
being discussed.
Doug Robertson
Committee Chairman
60
HSS Hire Group plc
Annual Report and Financial Statements 2021
INTRODUCTION TO DIRECTORS’ REMUNERATION REPORT
Amanda Burton
Chair of the Remuneration Committee
Roles and responsibilities
Committee membership
The Committee’s full terms of reference can
N Nomination Committee
be found on the Company’s website at
A Audit Committee
www.hsshiregroup.com/investorrelations/
R Remuneration Committee
corporategovernance.
M Market Disclosure Committee
Committee Chair
The key responsibilities include:
– determining the Company’s policy on
remuneration of Executive Directors and
other senior management to support
sustainable growth
– ensuring the Company complies with
disclosure requirements of the QCA
DEAR SHAREHOLDER
I am pleased to present, on
behalf of the Board, our Directors’
Remuneration Report in respect
of the year ended 1 January 2022,
which comprises three sections:
– This annual statement
– The Group’s Directors’ Remuneration Policy
(the Policy)
– The Annual Report on Remuneration, which
provides details of the amounts earned by
Directors in respect of FY21 and
remuneration for FY22
This is the first Directors’ Remuneration Report
to be presented following the Company’s
transition from the Main Market to AIM. As an
AIM company, we are no longer subject to the
remuneration reporting regulations of fully listed
UK companies, and therefore the disclosures in
this Report are provided on a voluntary basis.
In preparing this Report, we have taken into
account the remuneration reporting regulations
and guidance from the QCA.
We believe that our shareholders should
continue to have ‘a say on executive pay’.
Therefore, in line with good governance for
AIM companies, the Directors’ Remuneration
Report is subject to an advisory vote at the
2022 AGM.
The Committee’s terms of reference can
be found on the Company’s website at
https://www.hsshiregroup.com/investor-
relations/corporate-governance.
Ensuring a reward
strategy that
supports short,
and long-term
sustainable
growth.”
Review of the Policy
Our current Policy was approved by
shareholders at the 2019 AGM and later
amended at the 2020 AGM (receiving a vote
in favour of 99.98% and 99.99% respectively),
and is reaching the end of its three-year term.
A new Policy will therefore be subject to
shareholder approval at the 2022 AGM, as
part of an advisory vote on the 2021 Directors’
Remuneration Report.
There are two key changes to the Policy
as follows:
– The Executive Directors will not participate in
any new long-term incentive arrangements
during the three-year Policy period.
This reflects their participation in the Value
Creation Plan as announced on 25 February
2021, further information in relation to which
is set out on page 67.
– Under the current Policy, Executive Directors
are required to defer any annual bonus
earned in excess of 50% of the maximum
award into shares for a two year-period.
Taking into account AIM market practice and
the maximum annual bonus opportunity
(100% of salary), the Committee has agreed
that any bonus earned under the Policy will
be paid fully in cash. The Committee has also
agreed that the FY21 bonus will be paid fully
in cash.
Governance
HSS Hire Group plc
Annual Report and Financial Statements 2021
61
Colleague engagement
With our colleagues at the heart of
our business, we believe that colleague
engagement is key to our success and we have
continued to build on our colleague voice and
feedback channels to ensure wider workforce
remuneration is considered when determining
executive pay. A colleague dashboard that
provides key information on workforce
demographics and wider workforce pay and
reward is reviewed annually by the Committee.
Conclusion
We aim to provide clear and transparent
reporting on executive remuneration, taking into
account good governance practice amongst
larger AIM listed companies. I look forward to
receiving your support at our 2022 AGM, where
I will be available to respond to any questions
shareholders may have on this Directors’
Remuneration Report or in relation to any
of the Committee’s activities.
Amanda Burton
Chair of the Remuneration Committee
27 April 2022
ESA Plan
The Committee believes that the Executive
Directors have performed exceptionally well
since their respective appointments, making
significant progress towards the turnaround
of the business. Performance-based long-term
incentive awards were granted in FY17 and
FY18, which were capable of vesting
following FY20 and FY21, subject to stretching
performance targets. Despite best efforts,
the targets were not achieved and the awards
have lapsed in full. Therefore, in order to
recognise their performance and to continue
to incentivise them, Steve Ashmore and Paul
Quested were granted one-off awards under
an Existing Schemes Award Plan (ESA Plan) on
25 February 2021. The Committee consulted
with the Company’s three major shareholders
on the terms of the awards. Further information
is set out on page 67.
Reward for FY22
Executive Director salaries
In line with the salary review timetable for
all other employees, the Executive Directors’
salaries will be reviewed during June 2022,
with any changes taking effect from 1 July
2022. Any increase is expected to be modest
and will be in line with the range of salary
increases awarded to other colleagues in
the Group.
Incentive arrangements
No changes are proposed to the maximum
opportunity of the annual bonus, which will
remain at 100%. The bonus will be subject to
Adjusted EBITA performance, core hire rental
revenue, the reduction of overdue debt and the
reduction of RIDDORs.
We will be evolving our Environmental, Social
and Governance (ESG) strategy during 2022.
As part of this process, the Committee will
consider how ESG performance will be
incorporated within the FY23 annual bonus.
Similar to previous years, and as noted above,
the FY22 annual bonus will incorporate
Health and Safety performance (through
RIDDOR targets).
As noted above, the Executive Directors will
not be granted any long-term incentive
arrangements during FY22.
FY21 salary increase
Executive Directors received a 2% salary
increase effective from 1 July 2021, in line with
the average increase for the wider workforce.
Non-Executive Directors also received a 2%
salary increase.
FY21 performance and variable
pay outcome
The FY21 annual bonus was subject to
Adjusted EBITDA (50% weighting), core hire
rental revenue growth (20%), Net Leverage
Ratio (net debt/Adjusted EBITDA) performance
(20%), and a RIDDOR target (10%).
Furthermore, payment of any bonus was
subject to the achievement of a threshold
Adjusted EBITDA target.
Performance in FY21 was excellent with
revenue back to pre-pandemic levels and
adjusted EBITDA up 17.1% on 2020. RIDDORs,
at 5, were up on the prior year but under target
despite the increased operations. All measures
reached the stretch target and as a result
maximum payout was achieved (refer to page
66 for details).
Long-term incentive awards were granted to
the Executive Directors on 8 October 2018
(FY18 LTIP awards) and 4 June 2019 (FY19
LTIP awards).
The FY18 LTIP awards were structured as
market value share options, which would vest
subject to the achievement of challenging share
price performance targets over a four-year
period through to the end of FY21. The share
price targets were not achieved and therefore
the awards have lapsed in full.
The FY19 LTIP awards were structured as
nil-cost share options, which would vest subject
to the achievement of Adjusted EPS and ROCE
performance targets over a three-year period
through to the end of FY21. The Executive
Directors waived their entitlement to the FY19
LTIP awards in light of being granted an Existing
Schemes Award. Further information is set
out below.
VCP awards
As disclosed in our 2020 Directors’
Remuneration Report, in light of the Company’s
admission to AIM, the Committee undertook
a review of incentive arrangements for the
Executive Directors. As part of the review, the
Committee consulted with the Company’s three
largest shareholders (who held 77.12% of the
Company’s shares at the time the awards were
granted) who supported the implementation
of a Value Creation Plan (VCP). Awards were
granted to Executive Directors under the VCP
on 25 February 2021 and further information
is set out on page 67.
62
HSS Hire Group plc
Annual Report and Financial Statements 2021
DIRECTORS’ REMUNERATION POLICY
Policy table for Executive Directors
Component
Base salary
Purpose and link
to strategy
To provide a
competitive base
salary for the market in
which the Group
operates to attract and
retain Executives of a
suitable calibre.
Operation
Salaries are usually reviewed
annually taking into account a
number of factors, including
(but not limited to):
– underlying Group
performance;
– role, experience and
individual performance;
– competitive salary levels and
market forces; and
– pay and conditions elsewhere
in the Group.
Benefits
To provide broadly
market competitive
benefits as part of the
total remuneration
package.
Executive Directors receive
benefits in line with market
practice, and these include life
insurance, private medical
insurance, company car or car
allowance and, where relevant,
relocation expenses.
Other benefits may be provided
based on individual
circumstances. These may
include, for example, travel
expenses.
Performance
measures
Not applicable.
Not applicable.
Maximum
opportunity
While there is no maximum
salary, increases will normally
be in line with the range of
salary increases awarded (in
percentage of salary terms) to
other employees in the Group.
Salary increases above this level
may be awarded to take
account of individual
circumstances, such as, but not
limited to:
– where an Executive Director
has been promoted or has
had a change in scope or
responsibility;
– an individual’s development
or performance in role (e.g.
to align a newly appointed
Executive Director’s salary
with the market over time);
– where there has been a
change in market practice; or
– where there has been a
change in the size and/or
complexity of the business.
Increases may be implemented
over such time period as the
Committee deems appropriate.
Whilst the Committee has not
set an absolute maximum on
the level of benefits Executive
Directors may receive, the value
of benefits is set at a level which
the Committee considers to be
appropriately positioned taking
into account relevant market
levels based on the nature and
location of the role and
individual circumstances.
Governance
HSS Hire Group plc
Annual Report and Financial Statements 2021
63
Component
Retirement
benefits
Purpose and link
to strategy
To provide an
appropriate level of
retirement benefit (or
cash allowance
equivalent).
Annual
bonus
Rewards performance
against targets which
support the strategic
direction of the Group.
Operation
Executive Directors are eligible to
participate in the Group defined
contribution pension plan.
In appropriate circumstances,
such as where contributions
exceed the annual or lifetime
allowance, Executive Directors
may be permitted to take a
cash supplement instead of
contributions to a pension plan.
Awards are based on
performance (typically
measured over a financial year)
against key financial targets
and/or the delivery of strategic/
individual objectives.
For up to two years following
the payment of a bonus award,
clawback provisions will apply
such that the Committee may
require the repayment of some
or all of the award in the
circumstances set out at
the foot of this table.
The Committee has discretion
to amend the pay-out should
any formulaic output not reflect
the Committee’s assessment
of overall business performance
over the performance period.
Maximum
opportunity
Maximum contribution is 10%
of salary.
Performance
measures
Not applicable.
Maximum annual bonus
opportunity is 100% of salary.
Targets are set
annually reflecting
the Company’s
strategy and
aligned with key
financial, strategic
and/or individual
targets.
At least 75% of the
annual bonus is
assessed against
key financial
performance
measures of the
business and the
balance may be
based on
non-financial
strategic/personal
objectives.
Shareholding guidelines
In order to further align the Executive Directors’
long-term interests with those of shareholders,
share ownership guidelines are in place that
expect the CEO and other Executive Directors
to build up and maintain (as relevant) a
shareholding in the Company equivalent in value
to 200% and 125% of annual salary respectively.
Existing arrangements
The Committee reserves the right to settle the
vesting of existing arrangements, which includes:
– Awards granted to Executive Directors under
the Value Creation Plan on 25 February 2021.
– Awards granted to Executive Directors under
the Existing Schemes Award Plan on
25 February 2021.
– Restricted share awards granted to
Executive Directors on 2 July 2020.
Circumstances in which malus
and/or clawback may apply
– A material misstatement of the Group’s
financial results;
– An error in the information or assumptions on
which the award was granted or vests
including an error in assessing any applicable
performance conditions;
– A material failure of risk management by the
Group;
– Serious reputational damage to the Group;
– Material corporate failure; or
– Material misconduct on the part of the
participant.
Explanation of performance
measures chosen
Performance measures are selected that
are aligned with the performance of the
Group and the interests of shareholders.
Stretching performance targets are set each
year for the annual bonus. When setting these
performance targets, the Committee will take
into account a number of different reference
points, which may include the Company’s
business plans and strategy and the economic
environment. Full vesting will only occur for
what the Committee considers to be
stretching performance.
64
HSS Hire Group plc
Annual Report and Financial Statements 2021
DIRECTORS’ REMUNERATION POLICY continued
Policy table for Non-Executive Directors
Purpose and link to strategy
Approach of the Company
Non-Executive Directors’
fees are set at a level that
reflects market conditions
and is sufficient to attract
individuals with appropriate
knowledge and experience.
Fees are normally reviewed annually.
Fees paid to the Chairman are determined by the Committee. Fees paid to other Non-Executive Directors for their
services are approved by the Board. Fees may include a basic fee and additional fees for further responsibilities
(for example, chairmanship of board committees or holding the office of Senior Independent Director).
Typically, any fee increase will be in line with the wider workforce. Fee increases may be awarded above this
level in certain circumstances such as (but not limited to):
– where there has been a change in market practice;
– where there has been a change in the size and complexity of the Company; or
– where there has been an increase in the Non-Executive Director’s time commitment to the role.
Overall fees paid to Non-Executive Directors will remain within the limits set by the Company’s Articles
of Association.
Non-Executive Directors cannot participate in any of the Company’s share schemes or annual bonus and are
not eligible to join the Company’s pension scheme. Non-Executive Directors may be eligible to receive benefits
such as the use of secretarial support, travel costs or other benefits that may be appropriate.
Policy for the remuneration of
employees more generally
The Remuneration Policy applied to the
Executive Directors and Senior Leadership
Team is similar to the policy for the wider
management team and senior functional
colleagues in that a significant element of
remuneration is dependent on Company and
individual performance and all are typically
working towards the same financial measures
under the annual bonus. The key principles
of the remuneration philosophy are applied
consistently across the Group below this
level, taking into account seniority and
market practice.
Base salaries are reviewed annually and
increases become effective from 1 July.
The Committee is kept informed of salary
increases across the wider workforce.
Recruitment remuneration
The policy aims to facilitate the appointment
of individuals of sufficient calibre to lead the
business and execute the strategy effectively for
the benefit of shareholders. When appointing a
new Executive Director, the Committee seeks
to ensure that arrangements are in the best
interests of the Company and not to pay more
than is appropriate.
The Committee will take into consideration a
number of relevant factors, which may include
the calibre of the individual, the candidate’s
existing remuneration package, and the specific
circumstances of the individual including the
jurisdiction from which the candidate
was recruited.
The Committee will typically seek to align the
remuneration package with the above Policy.
The Committee may include other elements
of pay which it considers are appropriate,
where the Committee believes there is a need
to do so in the best interests of the Company
and shareholders.
The Committee may make payments or awards
in respect of hiring an employee to ‘buyout’
remuneration arrangements forfeited on leaving
a previous employer. When doing so the
Committee will take account of relevant factors
including any performance measures attached
to the forfeited arrangements and the time over
which they would have vested. The Committee
will generally seek to structure buyout awards
or payments on a like-for-like basis to the
remuneration arrangements forfeited.
Fees payable to a newly-appointed Chairman
or Non-Executive Director will be in line with the
fee policy in place at the time of appointment.
Service contracts
Executive Directors’ service contracts are
on a rolling basis and may be terminated
on 12 months’ notice by the Company or the
Executive. Service contracts for new Executive
Directors will not exceed 12 months’ notice by
the Company.
All Non-Executive Directors have fixed-term
agreements with the Company of no more than
three years.
Governance
HSS Hire Group plc
Annual Report and Financial Statements 2021
65
Details of the Directors’ service contracts and notice periods are set out below:
Name
S Ashmore
P Quested
A Peterson
A Burton
D Robertson
T Sweet-Escott(2)
Date of initial
appointment
Expiry of
current term Notice period
1 June 2017
22 August 2016
9 February 2015
9 January 2015
9 January 2015
9 January 2015
N/A(1)
N/A(1)
2 years
2 years
2 years
2 years
12 months
12 months
N/A
N/A
N/A
N/A
(1) Executive Directors’ service contracts are on a rolling basis and have no defined expiry date.
(2) Under the Relationship Agreement, Exponent is able to appoint a Non-Executive Director to the Board for so long as the Exponent shareholders are entitled to exercise
or to control the exercise of 10% or more of the votes able to be cast on all or substantially all matters at general meetings of the Company. Mr Sweet-Escott is
Exponent’s current appointee.
Payments for loss of office
The principles on which the determination of payments for loss of office will be approached are set out below:
Policy
Payment in lieu of notice
The Company has discretion to make a payment in lieu of notice. Such a payment would include salary and
compensation for benefits and pension contributions for the unexpired period of notice.
Annual bonus
Mitigation
Other payments
Existing awards
This will be at the discretion of the Committee on an individual basis and the decision as to whether or not to
award an annual bonus award in full or in part will be dependent on a number of factors, including the
circumstances of the individual’s departure and their contribution to the business during the annual bonus
period in question. Any annual bonus award amounts paid will normally be pro-rated for time in service during
the annual bonus period and will, subject to performance, be paid at the usual time (although the Committee
retains discretion to pay the annual bonus award earlier in appropriate circumstances).
The Committee’s practice is that if an Executive Director’s employment is terminated any compensation
payment will be calculated in accordance with normal legal principles, including the application of mitigation to
the extent appropriate to the circumstances of the termination.
There is a mechanism within the service contracts to reduce termination payments by up to 50% where the
Executive Director commences alternative employment during the notice period.
In appropriate circumstances, payments may also be made in respect of accrued holiday, outplacement and
legal fees.
The extent to which FY20 restricted share awards, FY21 VCP awards and FY21 ESA awards vest will be
determined in accordance with the relevant rules and, as regards the FY20 restricted share awards, the
Remuneration Policy under which they were granted.
Shareholder views
The Committee is committed to an ongoing
dialogue with shareholders and welcomes
feedback on Executive and Non-Executive
Directors’ remuneration. The Committee
consulted with major shareholders in relation
to the VCP and Existing Schemes Award.
The Committee reserves the right to make
additional exit payments where such payments
are made in good faith in discharge of an
existing legal obligation (or by way of damages
for breach of such an obligation) or by way of
settlement or compromise of any claim arising
in connection with the termination of a
Director’s office or employment.
Where the Committee retains discretion it
will be used to provide flexibility in certain
situations, taking into account the particular
circumstances of the Director’s departure
and performance.
There is no entitlement to any compensation in
the event of Non-Executive Directors’ fixed-term
agreements not being renewed or the
agreement terminating earlier.
66
HSS Hire Group plc
Annual Report and Financial Statements 2021
DIRECTORS’ REMUNERATION REPORT
Annual Report on Remuneration
Single figure table
The following table sets out total remuneration for each Director in respect of FY21 and FY20.
Salary and fees1
£000
Benefits2
£000
Pension
£000
Subtotal
£000
Bonus
£000
LTIP
£000
Subtotal
£000
Total
remuneration
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
Executive Directors
Steve Ashmore
Paul Quested
Non-Executive Directors
Alan Peterson
Amanda Burton
Douglas Robertson
Thomas Sweet-Escott3
371
268
280
203
3
18
17
17
31
24
31
24
404
310
328
247
371
268
152
113
51
51
40
38
38
30
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
152
113
51
51
40
38
38
30
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
371
268
–
–
–
–
–
–
–
–
–
–
776
578
328
247
152
113
51
51
40
38
38
30
1 The Board agreed to a 98% reduction in salary and fees for the period 1 April to 30 June 2020 in response to COVID-19. The salaries and fees disclosed in the FY20
column are after the 98% reduction.
2 The taxable value of benefits received in the year, which are principally medical insurance, company car allowance.
3 Thomas Sweet-Escott’s fee is paid directly to Exponent.
Additional disclosures in respect of the single figure table
Base salary
Details of annual base salaries for Executive Directors for FY21 and FY20 are set out below.
Steve Ashmore
Paul Quested
Base salary at
25 December
2021
£000
Base salary at
28 December
2020
£000
375
270
368
265
FY21 annual bonus
The maximum annual bonus opportunity for FY21 was maintained at 100% of salary. The bonus was set subject to stretching performance measures
based on Adjusted EBITDA performance (50%), core hire rental revenue growth (20%), Net Leverage Ratio (Net Debt/Adjusted EBITDA) (20%), and a
reduction in RIDDORs (10%). These bonus measures reflect the KPIs of the business and support the strategy of growth, profit improvement and
balance sheet strength.
Furthermore, payment of any bonus was subject to the achievement of a threshold Adjusted EBITDA target.
The following table sets out the bonuses earned by the Executive Directors for FY21 and how this reflects performance for the year against targets.
The financial targets were adjusted by the Committee to take into account the sale of Laois Hire Services Limited in April 2021 and All Seasons Hire
Limited in September 2021. The Committee considered that the revised targets were no less challenging.
Performance measure
Adjusted EBITDA (non-IFRS 16)
Core hire rental revenue growth
Net Leverage Ratio (Net Debt/Adjusted EBITDA)
Number of RIDDORs
Total
Proportion
of bonus
determined by
measure
50%
20%
20%
10%
100%
Threshold
performance
(25%)
Target
performance
(50%)
Maximum
performance
(100%)
Actual
performance
Actual
Performance
(% of salary)1
40.4
134.0
1.88x
8
42.5
136.7
1.78x
7
44.6
139.5
1.69x
6
53.9
146.6
0.8x
5
50%
20%
20%
10%
100%
1 Subject to achieving a threshold Adjusted EBITDA target of £40.4m.
The Committee considered the bonus outcome to be appropriate taking into account underlying financial performance during the performance period.
Governance
HSS Hire Group plc
Annual Report and Financial Statements 2021
67
LTIP awards vesting in respect of FY21
FY18 LTIP awards
The Company received shareholder approval via a General Meeting on 7 August 2018 to grant an exceptional LTIP award to the Executive Directors
outside of the approved Policy. The awards were granted on 8 October 2018. The awards were structured as market value share options, which would
vest subject to the achievement of challenging share price performance targets over a four-year period through to the end of FY21. The threshold share
price target was not achieved and therefore the awards have lapsed in full.
FY19 LTIP awards
The FY19 LTIP awards were structured as nil-cost share options, which would vest subject to the achievement of Adjusted EPS and ROCE performance
targets over a three-year period through to the end of FY21. Following the year end, the Executive Directors’ waived their entitlement to the FY19 LTIP
awards in light of being granted an Existing Schemes Award. Further information is set out below.
VCP awards granted during FY21
On 25 February 2021, Steve Ashmore and Paul Quested were granted one-off awards under a new VCP.
Participants will share in a total 20% of any increase in value of the Company up to the time of a change of control (or other relevant event) (the VCP
Pool). Steve Ashmore and Paul Quested will each be entitled to one-third of the VCP Pool.
The increase in the value of the Company will be calculated by reference to the increase in its market capitalisation from an opening value of
£104,471,648 (based on a share price of £0.15) to the closing market capitalisation on an exit event. Appropriate adjustments shall be made in respect of
any capital raised from or returned to shareholders over the period. Awards will be settled in cash other than in certain circumstances where an award
which vests early to a ‘good leaver’ may be settled in shares.
Malus and clawback provisions apply.
ESA
The Committee believes that the Executive Directors have performed exceptionally well since their respective appointments, making significant progress
towards the turnaround of the business. Performance-based long-term incentive awards were granted in FY17 and FY18, which were capable of vesting
following FY20 and FY21, subject to stretching performance targets. Despite best efforts, the targets were not achieved and the awards have lapsed in
full. Therefore, in order to recognise their performance and to continue to incentivise them, Steve Ashmore and Paul Quested were granted one-off
awards under an Existing Schemes Award Plan (ESA Plan) on 25 February 2021.
The awards will ordinarily vest on 1 January 2023 subject to continued employment and meeting a liquidity threshold. The awards will ordinarily be
settled in cash unless the Committee determines that the awards should be settled in shares.
The maximum value of the awards for Steve Ashmore and Paul Quested is £2,194,037 and £1,370,254 respectively. The awards will be reduced by the
value of FY20 RSP awards (based on the market value of the underlying shares on 31 December 2022).
Malus and clawback provisions apply.
Payments made to former Directors and payments for loss of office during FY21
There were no payments made to former Directors and no payments made for loss of office during FY21.
68
HSS Hire Group plc
Annual Report and Financial Statements 2021
DIRECTORS’ REMUNERATION REPORT continued
Directors’ share interests
The Chief Executive is expected to build up and maintain a shareholding in the Company equivalent in value to at least 200% of annual salary, and other
Executive Directors are expected to build up and maintain a shareholding in the Company equivalent in value to at least 125% of annual salary.
Since joining the Group in May 2017, Steve Ashmore has built his shareholding in the Company to 78% of annual salary. Since joining the Group in
August 2016, Paul Quested has built his shareholding in the Company to 47% of annual salary.
The interests of the Directors and their connected persons in the Company’s ordinary shares as at 25 December 2021 were as follows:
Executive Directors
Steve Ashmore
Type
Shares
Paul Quested
Shares
FY20 restricted shares (nil-cost share options)
FY20 restricted shares (nil-cost share options)
Non-Executive Directors
Alan Peterson
Amanda Burton
Douglas Robertson
Shares
Shares
Shares
Unvested and
subject to
performance
conditions
Unvested and
not subject to
performance
conditions
Total as at
25 December
2021
Owned
outright
1,068,560
–
219,916
–
22,021
110,118
29,362
–
–
–
–
–
–
–
–
1,068,560
841,348
–
606,685
–
–
–
841,348
219,916
606,685
22,021
110,118
29,362
As noted on page 67, FY18 LTIP awards (and CSOP options) lapsed in full following FY21 as the share price performance measure was not achieved. As noted on page 67,
Steve Ashmore and Paul Quested waived their entitlement to the FY19 LTIP awards.
As at 27 April 2022, the Company has not been advised of any changes to the interests of the Directors and their connected persons as set out in the
table above, save for in respect of Alan Peterson who acquired 1,498,525 shares on 13 January 2022 and 888,409 shares on 24 January 2022.
Thomas Sweet-Escott holds no direct interest in the Company’s ordinary shares. However, he has an indirect interest in the Company’s ordinary shares
as a result of his interest in Exponent.
Governance
HSS Hire Group plc
Annual Report and Financial Statements 2021
69
Implementation of the Policy for FY22
Salary/fees and benefits
In line with the salary review timetable for all other employees, the Executive Directors’ base salaries will be reviewed during June 2022, with any
changes taking effect from 1 July 2022. Any increase is expected to be modest and will be in line with the range of salary increases awarded to other
employees in the Group.
Incentive arrangements
The maximum bonus opportunity for FY21 is maintained for FY22. The annual bonus will be subject to Adjusted EBITA performance (50% of overall
opportunity), core hire rental revenue (20% of overall opportunity), the reduction of overdue debt (20% of overall opportunity), and the reduction of
RIDDORS (10% of the overall opportunity).
The Executive Directors will not be granted any long-term share incentive arrangements during FY22.
Statement of voting at last AGM and General Meeting
The following table sets out actual voting in respect of the resolutions to approve the Policy and Annual Report on Remuneration.
Resolution
Policy (2019 AGM)
Amendments to the Policy and LTIP (2020 AGM)
Annual Report on Remuneration (2021 AGM)
Votes for
% of vote
Votes against
% of vote Votes withheld
132,930,615
146,802,910
559,584,773
99.98
99.99
99.93
21,900
11,185
398,763
0.02
0.01
0.07
3,498
5,483
28,911
Advisers to the Remuneration Committee
During FY21, the Committee received independent advice from Deloitte LLP in relation to the Committee’s consideration of matters relating to Directors’
remuneration. Deloitte is a founder member of the Remuneration Consultants Group and as such voluntarily operates under its Code of Conduct in
relation to executive remuneration in the UK.
Approval
This Report was approved by the Board on 27 April 2022 and signed on its behalf by:
Amanda Burton
Chair of the Remuneration Committee
27 April 2022
70
HSS Hire Group plc
Annual Report and Financial Statements 2021
DIRECTORS’ REPORT AND OTHER STATUTORY DISCLOSURES
DIRECTORS’ REPORT AND OTHER
STATUTORY DISCLOSURES
The table below details where certain other information, forming part of the Directors’ Report, can
be found within this Annual Report:
Information
Dividends
Directors’ powers
Directors’ indemnities
Location within Annual Report
Chairman’s Statement (page 4)
Page 70
Page 70
Statement on disclosure of information to the auditor
Corporate Governance (page 53)
Greenhouse gas emissions
ESG section (page 40)
Political donations and expenditure
Financial instruments
Events and developments impacting the Company
Acquisition of own shares
Equality and diversity
Employee engagement
Page 70
Page 70
Page 70
Page 71
Page 71
Pages 40 and 42
Impact of change of control/takeover bid
Page 71
Directors’ interests
Share capital
Restrictions on share transfers
Significant shareholders
Shares related to employee share schemes
Voting rights and restrictions
Appointment and replacement of Directors
Directors’ Remuneration Report
(page 68)
Note 24 to the Financial Statements
(page 117)
Page 71
Relations with shareholders (page 54)
Page 71
Page 71
Page 72
Amendments to the Company’s Articles of Association
Page 72
Matters of strategic importance
Pages 18 to 19
Directors’ powers
At the AGM to be held on 21 June 2022,
shareholders will be asked to renew the
Directors’ power to allot shares, grant rights
to subscribe for or convert any security into
shares or buy back shares in the Company
and to renew the disapplication of pre-
emption rights.
Directors’ indemnities
In addition to the indemnity provisions in their
Articles of Association, the Company and other
Group companies have entered into a direct
indemnity agreement with each of the Directors
and certain other officers or senior employees
of the Group. These indemnities constitute
qualifying indemnities for the purposes of the
Companies Act 2006 (the Act) and remain in
force at the date of approval of this Report
without any payment having been made under
them. The Company maintains Directors’ and
officers’ liability insurance which gives
appropriate cover for legal action brought
against its Directors.
Political donations and expenditure
At the AGM held on 30 June 2021, the
Company and its subsidiaries were authorised
to make certain political donations or incur
political expenditure. No political expenditure
was made by the Company or its subsidiaries
during the FY21 year (FY20: £nil).
Financial instruments
Information on the Group’s financial risk
management objectives and policies and the
exposure of the Group to market risk, credit
risk, liquidity risk and cash flow risk is provided
in note 27 of the Financial Statements on pages
119 and 120.
Events and developments impacting
the Company
The likely future developments of the
Company and Group are referred to in the
Chief Executive Officer’s Review on page 8
in the Strategic Report.
Governance
HSS Hire Group plc
Annual Report and Financial Statements 2021
71
Acquisition of own shares
At the AGM held on 30 June 2021, the
Company was authorised to make market
purchases of up to 69,647,764 of its ordinary
shares. The Company has made no purchases
of its own ordinary shares pursuant to this
authority. This authority expires at the close of
the 2022 AGM. A special resolution will be
proposed at this year’s AGM to authorise the
Company to make market purchases of up to
105,748,193 ordinary shares.
Equality and diversity
The Group is committed to promoting diversity
and creating a positive and supportive working
environment for all colleagues. We aim to
attract, engage and develop a diverse
workforce reflective of the communities we
serve. Raising awareness of diversity and
having respect for all is at the heart of our
mandatory all-colleague training.
The Group’s policy is to recruit based
on competence, experience and skills.
No candidate, whether internal or external,
will be discriminated against in respect of age,
gender, sexual orientation, disability, race,
religion, or beliefs, or on any other criteria
unrelated to an individual’s ability to perform
in a role. We promote an inclusive culture and
are committed to equal opportunity for all
colleagues, no matter their background and
characteristics and encourage colleagues
to reach their full potential through open
dialogue to calibrate performance and agree
development needs. Training is based on
colleagues’ individual development needs
and the requirements of the role.
If a colleague becomes disabled during
employment, the Group makes every effort
to enable them to continue in employment
by making reasonable adjustments in the
workplace and where necessary providing
retraining for suitable alternative roles.
Employee engagement
The Company is committed to communicating
and engaging with colleagues and uses a
variety of channels to do so.
Full details of our colleague and stakeholder
engagement activities are included in the
Strategic Report, on pages 43 to 45.
Funding agreement
Summary of change of control provision
Senior finance facility
Revolving credit facility
Finance leases
(from various finance providers)
Following a change of control the Group would be required
to offer to repay the outstanding sums including an amount
to cover accrued and unpaid interest which would be
dependent on the remaining term.
Following a change of control all outstanding amounts,
together with accrued interest, would become immediately
due and payable.
Certain of the Group’s (pre-IFRS 16) finance leases
have conditions where a change of control could lead
to early repayment.
Uncertificated shares
Subject to the provisions of the Uncertificated
Securities Regulations 2001, the Board may
permit the holding of shares in any class of
shares in uncertificated form and the transfer
of title to shares in that class by means of
a relevant system and may determine that
any class of shares shall cease to be a
participating security.
Shares related to employee share
schemes
No shares have been issued in relation to
employee share schemes, although options
have been issued under the senior management
long-term incentive schemes (as detailed earlier).
Voting rights and restrictions
Subject to the rights or restrictions set out
below or detailed in the Notice of AGM, on a
show of hands every member who is present in
person shall have one vote and on a poll every
member present in person or by proxy shall
have one vote for every share of which he
is the holder.
No member shall be entitled to vote at any
general meeting in respect of a share unless
all monies presently payable by him in respect
of that share have been paid.
Impact of change of control/takeover bid
There are no agreements between the
Company and its Directors or employees
providing for compensation for loss of office
or employment (whether through resignation,
purported redundancy or otherwise) that
occurs because of a change of control/
takeover bid.
A number of the Group’s funding agreements
contain change of control provisions. These are
summarised in the table above.
In addition, there are a number of commercial
agreements which either the Company or a
subsidiary of the Company is party to which
are terminable upon a change in control of the
Company or the Group following a takeover.
None of these are deemed to be significant in
terms of their potential impact on the business
of the Group as a whole. Upon a change of
control, options and awards granted to senior
managers under the Company’s share plans
may vest and become exercisable, subject
to the extent to which any applicable
performance conditions have been met at
that time, as may the ESA and VCP Awards
granted to certain senior executives, as
announced on 25 February 2021.
Restrictions on share transfers
Certificated shares
The Board may, in its absolute discretion, refuse
to register the transfer of a certificated share
which is not a fully paid share, provided that the
refusal does not prevent dealings in shares in
the Company from taking place on an open
and proper basis. The Board may also refuse
to register the transfer of a certificated share
unless the instrument of transfer is (i) lodged,
duly stamped (if stampable), at the office or
at another place appointed by the Board
accompanied by the certificate for the share to
which it relates and such other evidence as the
Board may reasonably require to show the right
of the transferor to make the transfer; (ii) is in
respect of one class of share only; and (iii) is in
favour of not more than four transferees.
72
HSS Hire Group plc
Annual Report and Financial Statements 2021
DIRECTORS’ REPORT AND OTHER STATUTORY DISCLOSURES continued
If at any time the Board is satisfied that any
member, or any other person appearing to
be interested in shares held by such member,
has been duly served with a notice under
Section 793 of the Act and is in default for
the prescribed period in supplying to the
Company the information thereby required,
or, in purported compliance with such a notice,
has made a statement which is false or
inadequate in a material respect, then the
Board may, in its absolute discretion at any
time thereafter by notice to such member,
direct that, in respect of the shares in relation
to which the default occurred, the member
shall not be entitled to attend or vote either
personally or by proxy at a general meeting
or at a separate meeting of the holders of that
class of shares or on a poll.
The Notice of AGM specifies deadlines for
exercising voting rights and appointing a proxy
or proxies to vote in relation to resolutions to be
passed at the AGM. All proxy votes are counted
and the numbers for, against or withheld in
relation to each resolution are announced at
the AGM and published on the Company’s
website after the meeting.
Under the Financial Conduct Authority
(FCA) rules, the election or re-election by the
shareholders of an Independent Non-Executive
Director must be approved by an ordinary
resolution of the shareholders and separately
approved by those shareholders who are
not controlling shareholders (the
independent shareholders).
As a result, by virtue of Exponent’s 33.43%
shareholding in the Company, any votes by
Exponent on any resolutions relating to the
election or re-election of Independent
Non-Executive Director(s) will not be counted
for the purposes of approving those resolutions.
Appointment and replacement
of Directors
Unless otherwise determined by ordinary
resolution, the number of Directors shall be
not less than two but shall not be subject
to any maximum in number. Directors may
be appointed by ordinary resolution of
shareholders or by the Board.
Under the Relationship Agreement, Exponent
is able to appoint a Non-Executive Director to
the Board for so long as the Exponent
Shareholders are entitled to exercise or to
control the exercise of 10% or more of the votes
able to be cast on all or substantially all matters
at general meetings of the Company. Mr Sweet-
Escott is the current appointee. In addition, in
accordance with the Relationship Agreement,
Exponent has appointed an observer to attend
Board meetings. Following completion of the
capital raise in December 2020, Ravensworth
International Limited has the right to appoint an
observer to the Board, who can attend but not
vote. This right will continue for so long as
Ravensworth owns or controls 20% or more
of the issued share capital of the Company.
At every AGM all Directors at the date of the
Notice of AGM shall retire from office and
resolutions for the re-appointment of those
Directors who wish to be re-appointed shall be
put to the meeting. All appointments are subject
to the Company’s Articles of Association and
the annual re-election by shareholders.
The Company may remove any Director from
office, and appoint another person in place
of a Director removed from office, both
by ordinary resolution.
A person ceases to be a Director as soon as:
– he/she ceases to be a Director by virtue of
any provision of the Act or is prohibited from
being a Director by law;
– he/she is subject to a bankruptcy order or
compounds with his/her creditors generally;
– he/she becomes physically or mentally
incapable of acting as a Director and may
remain so for more than three months;
– he/she resigns or retires;
– he/she is absent for more than six
consecutive months without permission of
the Board from meetings of the Board held
during that period and the Board resolves
that his/her office be vacated; or
– he/she receives notice signed by not less
than three-quarters of the other Directors
stating that that person should cease to
be a Director.
Amendments to the Company’s Articles
of Association
The Company’s Articles of Association may
only be amended by the passing of a special
resolution at a general meeting of shareholders.
Approval of the Directors’ Report
The Directors’ Report on pages 70 to 72 was
approved by the Board of Directors on 27 April
2022 and is signed on its behalf by:
Steve Ashmore
Director
27 April 2022
Governance
HSS Hire Group plc
Annual Report and Financial Statements 2021
73
DIRECTORS’ RESPONSIBILITY STATEMENT
DIRECTORS’ RESPONSIBILITY
STATEMENT
The Directors are responsible for
preparing the Annual Report and the
Financial Statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare
Financial Statements for each financial year.
Under that law the Directors are required to
prepare the Group Financial Statements in
accordance with international accounting
standards in conformity with the requirements
of the Companies Act 2006 and have elected
to prepare the Company Financial Statements
in accordance with United Kingdom Generally
Accepted Accounting Practice (United
Kingdom Accounting standards and applicable
law). Under company law the Directors must
not approve the Financial Statements unless
they are satisfied that they give a true and fair
view of the state of affairs of the Group and
Company and of the profit or loss for the
Group for that period.
In preparing the Financial Statements, the
Directors are required to:
– select suitable accounting policies and then
apply them consistently;
– make judgements and accounting estimates
that are reasonable and prudent;
– state whether international accounting
standards in conformity with the
requirements of the Companies Act 2006
have been followed, subject to any material
departures disclosed and explained in the
Financial Statements;
– prepare the Financial Statements on the
going concern basis unless it is inappropriate
to presume that the Group or Parent
Company will continue in business; and
– prepare a Directors’ Report and a Strategic
Report which comply with the requirements
of the Companies Act 2006.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Company’s
transactions and disclose with reasonable
accuracy at any time the financial position
of the Company and enable them to ensure
that the Financial Statements comply with
the Companies Act 2006. They are also
responsible for safeguarding the assets of
the Company and hence for taking reasonable
steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for ensuring
the Annual Report and the Financial
Statements are made available on a website.
Financial Statements are published on the
Company’s website in accordance with
legislation in the UK governing the preparation
and dissemination of Financial Statements,
which may vary from legislation in other
jurisdictions. The maintenance and integrity of
the Company’s website is the responsibility of
the Directors. The Directors’ responsibility also
extends to the ongoing integrity of the Financial
Statements contained therein.
74
HSS Hire Group plc
Annual Report and Financial Statements 2021
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF HSS HIRE GROUP PLC
Opinion on the financial statements
Conclusions relating to going concern
In our opinion:
– the financial statements give a true and fair view of the state of the
Group’s and of the Parent Company’s affairs as at 1 January 2022 and
of the Group’s profit for the year then ended;
– the Group financial statements have been properly prepared in
accordance with UK adopted international accounting standards;
– the Parent Company financial statements have been properly prepared
in accordance with United Kingdom Generally Accepted Accounting
Practice; and
– the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements of HSS Hire Group plc (the
‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended
1 January 2022 which comprise the Consolidated Income Statement, the
Consolidated Statement of Comprehensive Income, the Consolidated
and Company Statements of Financial Position, the Consolidated and
Company Statements of Changes in Equity, the Consolidated Statement
of Cash Flows and notes to the Consolidated and Company financial
statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation
of the Group financial statements is applicable law and UK adopted
international accounting standards. The financial reporting framework that
has been applied in the preparation of the Parent Company financial
statements is applicable law and United Kingdom Accounting Standards,
including Financial Reporting Standard 101 Reduced Disclosure
Framework (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for
the audit of the financial statements section of our report. We believe that
the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remain independent of the Group and the Parent Company in
accordance with the ethical requirements that are relevant to our audit of
the financial statements in the UK, including the FRC’s Ethical Standard
as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
In auditing the financial statements, we have concluded that the Directors’
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the Directors’
assessment of the Group and the Parent Company’s ability to continue to
adopt the going concern basis of accounting included:
– Assessment of the internal forecasting processes to ascertain whether
the projections used are:
– prepared by appropriate personnel who have appropriate
understanding of the business’ strategy, customer base and
expected performance; and
– reflective of the potential impacts of COVID-19 and inflationary
pressures on the business, including those trends that have
emerged more significantly following the year end.
– Review of the forecasts and challenge of the key assumptions against
prior year, current economic risks and our knowledge of the business;
– Challenge of the appropriateness of the reasonably possible downside
scenarios, and consideration of whether other scenarios (or specific
events) might be appropriate to incorporate into the assessment;
– Review of the assessment of various downside scenarios, including
challenge of assumptions used, to analyse: the levels of revenue
reduction; the extent of the impact of inflation; the availability of any
mitigating actions; and an increase in debtor days that could be
sustained without breaching banking covenants; and
– Consideration of the adequacy of the disclosures in the financial
statements against the requirements of the accounting standards and
consistency of the disclosure against the specific risks posed and
scenarios that the Directors have considered in reaching its going
concern assessment.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or collectively,
may cast significant doubt on the Group and the Parent Company’s ability
to continue as a going concern for a period of at least twelve months from
when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to
going concern are described in the relevant sections of this report.
Overview
Coverage
91% (2019: 94%) of Group net profit for the financial period
91% (2019: 94%) of Group revenue
96% (2019: 96%) of Group total assets
Hire stock
Leases – IFRS 16
Key audit matters
Revenue recognition
Carrying value of goodwill and other intangible assets
1 January
2022
26 December
2020
Materiality
The carrying value of goodwill and other intangible assets is no longer considered to be a key audit matter after
evaluation of the associated risk attached to the area after considering headroom and performance in FY21
and year to date.
Group financial statements as a whole
£1.2m (2019: £0.9m) based on 4% (2019: 4%) of adjusted earnings before interest, tax and amortisation
Financial Statements
HSS Hire Group plc
Annual Report and Financial Statements 2021
75
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control, and
assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls,
including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.
We identified two reporting units which, in our view, required a full scope audit due to their size or their risk characteristics and were therefore considered
to be significant components.
All audit work on the three units was performed by the Group engagement team. The work on the other components of the Group, which was carried
out by the Group engagement team, comprised analytical procedures and certain tests of detail aimed at specific areas of risk.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which
had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key audit matter
Hire stock
Refer to page 88
(accounting policy)
and pages 106-107
(financial disclosures).
How the scope of our audit addressed the key audit matter
Hire stock represents a very large number of
assets, numbering over 1 million, which have a
high frequency of movement in individual assets
through asset purchases, hires, disposals, and
transfers around the operations network.
Our procedures included the following:
– We tested the operating effectiveness of key controls in respect of the
existence and value of hire stock, including authorisation of additions and
use of unique asset identification numbers;
– We have reconciled the fixed asset registers to the accounting records;
Judgement is required in ensuring that
depreciation charges are accurately calculated,
having regard to economic useful lives and
residual values, together with calculation of the
cost of renovation work undertaken on specific
classes of assets.
– We attended a sample of the hire stock asset counts to test the
effectiveness of controls and performed test counts ourselves in order to
test the accuracy of the counting performed, and therefore the existence
of assets. We also tested that the records from the counts had been used
to update the fixed asset register and the accounting ledgers;
– We further evidenced the existence of a sample of assets with reference
Therefore, we consider the existence and
valuation of hire stock to be a key audit matter.
to their continuing hire;
– We selected a sample of assets acquired in the year and agreed the
amounts recorded on the fixed asset registers to invoices;
– For a sample of items we recalculated the depreciation in the fixed asset
registers for the current year, and reconciled this to the charge included in
the accounting ledgers;
– For the principal asset classes we assessed the appropriateness of the
useful economic lives applied by management by reference to historic
data and the group’s industry peers; and
– We agreed, on a sample basis, the calculation of the cost of the
renovation work undertaken to supporting documentation and assessed
whether the capitalisation was appropriate with reference to the
underlying asset.
Key observations
Through the performance of these procedures, we found the judgements
made in accounting for hire stock to be reasonable. We also found the
renovation costs to be appropriately calculated.
76
HSS Hire Group plc
Annual Report and Financial Statements 2021
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF HSS HIRE GROUP PLC Continued
Key audit matter
IFRS 16 – “Leases”
Refer to page pages
92-93 (accounting
policy) and pages
108-109 & 111-113
(financial disclosures).
How the scope of our audit addressed the key audit matter
The Group’s portfolio of c.1,500 leases is
significant, and there is a risk that the
interpretation of IFRS 16 – “Leases”, which has a
number of complexities and areas of judgement
required, specifically the incremental borrowing
rates (“IBRs”) used and consideration of whether
changes represent modifications or new leases,
could lead to misstatement of the Group’s
financial statements.
Our procedures included the following:
– For a sample of lease modifications, we discussed the movement with
management including whether they are new leases or modifications,
obtained the revised lease agreements and recalculated the impact
on the related right of use assets and lease liabilities; and
– We also considered the appropriateness of the IBRs applied by
comparing them to third party documentation for fleet vehicles, and
by comparing against publicly available mortgage rates for properties
on banks’ websites.
There have been significant changes to the
Group’s leases during the year, with c.50 lease
modifications and c.250 disposals having taken
place. There is therefore a risk that the
accounting for the impact of the movements
within the year is incorrect.
We therefore consider accounting for the impact
of lease modifications and the treatment of the
disposal of leases to be a key audit matter.
There is a risk that revenue is incorrectly
calculated or recorded in the wrong period,
including accrued revenue arising on hires
around the year end.
There is also a risk that manual adjustments
made to revenue could result in material errors,
specifically in respect of rebates payable to
customers being omitted or incorrectly
calculated, and that credit note provisions may
be incorrectly calculated.
Therefore, we consider revenue recognition
to be a key audit matter.
Revenue
recognition
Refer to page 87
(accounting policy)
and pages 94-96
(financial disclosures).
– We tested a sample of disposals, obtaining supporting documentation
for each including termination letters, and deeds of transfers.
Key observations
Through performing these procedures, we found that the accounting for the
impact of lease modifications and disposals of leases was appropriate and
in line with the requirements of IFRS 16 – “Leases”. We also found the IBR’s
used to be appropriate.
Our procedures included the following:
– We tested the operating effectiveness of key controls over revenue
recognition. In respect of the front-of-house systems, we performed a
reconciliation of revenue, including accrued revenue and rebates,
between that systems and the accounting records.
– We obtained management’s calculations of accrued revenue at the year
end and the underlying data. For a sample, we agreed the inputs to
customer contracts, recalculated the amounts accrued, and tested that
there was a subsequent invoice to a third party and that the revenue
recognition criteria used were in accordance with the stated
accounting policy.
– We tested the calculation of rebates payable for a sample of customers
with reference to sales data and their underlying agreements; compared
rebates by customer against those payable in previous years to evaluate
completeness; and investigated any significant variances;
– We tested the calculation of the credit note provision and associated
assumptions, including analysing historic loss rates, whether rebate
related credit notes are excluded appropriately from the calculation as
they are provided for separately and whether invoices credited as they
were originally raised to the wrong customer were subsequently correctly
rebilled. A review of post-year end credit notes was also performed in
order to assess the appropriateness of the of the provision.
Key observations
Based on our audit procedures, we consider that revenue has been
recorded in the appropriate period and the calculations for manual
adjustments to revenue, rebate and credit provisions are reasonable.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to
be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis
of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance
materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as
we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the
financial statements as a whole.
Financial Statements
HSS Hire Group plc
Annual Report and Financial Statements 2021
77
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:
Materiality
1.2
0.9
1.1
0.8
Group financial statements
Parent company financial statements
1 January 2022
£m
26 December 2020
£m
1 January 2022
£m
26 December 2020
£m
Basis for determining materiality
Rationale for the benchmark applied
4% of adjusted EBITA.
90% of group materiality
We used our judgement to allocate materiality,
including taking account of aggregation risk.
We considered adjusted EBITA to be the most
appropriate measure for the basis of materiality
given it is a key performance indicator for the
Group. Adjustments are included on the
Consolidated Income Statement and detailed
in notes 7 and 9 to the financial statements.
Adjusted measures have been used as we believe
this more appropriately reflects the Group’s
underlying performance.
Performance materiality
Basis for determining
performance materiality
0.7
0.5
0.7
0.5
60% of materiality. In setting our performance materiality, we considered a number of factors
including the expected total value of known and likely misstatements (based on past experience
and other factors) and management’s attitude towards proposed adjustments.
Component materiality
We set materiality for each component of the Group based on a percentage of between 27% and 90% (FY20: 15% and 90%) of Group materiality
dependent on the size and our assessment of the risk of material misstatement of that component. Component materiality ranged from £0.3m to £1.1m
(FY20: £0.1m to £0.8m). In the audit of each component, we further applied performance materiality levels of 60% (FY20: 60%) of the component
materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £36k (FY20: £27k). We also agreed to
report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
Other information
The directors are responsible for the other information. The other information comprises the information included in the Annual Report and Financial
Statements other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and
ISAs (UK) to report on certain opinions and matters as described below.
Strategic report and
Directors’ report
Matters on which we are
required to report by
exception
In our opinion, based on the work undertaken in the course of the audit:
– the information given in the Strategic report and the Directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
– the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and Parent Company and its environment obtained in
the course of the audit, we have not identified material misstatements in the strategic report or the Directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us
to report to you if, in our opinion:
– adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
– the Parent Company financial statements are not in agreement with the accounting records and returns; or
– certain disclosures of Directors’ remuneration specified by law are not made; or
– we have not received all the information and explanations we require for our audit.
78
HSS Hire Group plc
Annual Report and Financial Statements 2021
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF HSS HIRE GROUP PLC Continued
Our audit procedures were designed to respond to risks of material
misstatement in the financial statements, recognising that the risk of not
detecting a material misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery, misrepresentations or through
collusion. There are inherent limitations in the audit procedures performed
and the further removed non-compliance with laws and regulations is
from the events and transactions reflected in the financial statements, the
less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Parent
Company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than
the Parent Company and the Parent Company’s members as a body, for
our audit work, for this report, or for the opinions we have formed.
Sophia Michael FCA (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
UK
27 April 2022
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
Responsibilities of Directors
As explained more fully in the Directors’ Responsibility Statement, the
Directors are responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view, and for such
internal control as the Directors determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for
assessing the Group’s and the Parent Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the Directors
either intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance
but is not a guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these
financial statements.
Extent to which the audit was capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws
and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures are
capable of detecting irregularities, including fraud is detailed below:
– We gained an understanding of the legal and regulatory framework
applicable to the Group and the industry in which it operates and
considered the risk of acts by the Group that were contrary to
applicable laws and regulations, including fraud.
– We considered the processes and controls that the Group has
established to address risks identified, or that otherwise prevent,
deter and detect fraud and potential breaches of applicable laws
and regulations; and how management monitors those processes
and controls.
– Our audit planning identified fraud risks in relation to management
override, and revenue recognition (revenue recognition has been
assessed as a Key Audit Matter above). Fraud risks, and applicable
laws and regulations, were communicated to all members of the audit
team during both the planning and execution of the audit.
– Our procedures included journal entry testing, with a focus on large or
unusual transactions and journals with characteristics of audit interest,
year end consolidation journals, journals processed by users with
privileged IT systems access rights and those relating to revenue.
Based on our knowledge and understanding of the business, we held
enquiries with Group management about known or suspected
irregularities and non-compliance with laws and regulations, including
fraud; and focused testing on specifically identified audit risks, including
those referred to in the Key Audit Matters section above. We focused on
laws and regulations that could give rise to a material misstatement in the
financial statements, including, but not limited to, the Companies Act
2006, International Financial Reporting Standards and tax legislation.
Financial Statements
HSS Hire Group plc
Annual Report and Financial Statements 2021
79
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 1 JANUARY 2022
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Impairment losses on trade receivables and contract assets2
Other operating income
Adjusted EBITDA
Less: Depreciation
Adjusted EBITA
Less: Exceptional items (non-finance)
Less: Amortisation
Operating profit/(loss)
Finance expense
Adjusted profit/(loss) before tax
Less: Exceptional items (non-finance)
Less: Exceptional items (finance)
Less: Amortisation
Profit/(loss) before tax
Income tax credit/(charge)
Profit/(loss) from continuing operations
Profit on disposal of discontinued operations
Profit from discontinued operations, net of tax1
Profit/(loss) for the financial period
Earnings/(loss) per share (pence)
Continuing operations
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Adjusted basic earnings/(loss) per share3
Adjusted diluted earnings/(loss) per share3
Continuing and discontinued operations
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Adjusted basic earnings/(loss) per share3
Adjusted diluted earnings/(loss) per share3
Year ended
1 January
2022
£000s
Year ended
26 December
2020
Restated1
£000s
303,269
250,063
(146,271)
(124,881)
156,998
125,182
(21,915)
(25,312)
(100,435)
(112,606)
(1,835)
1,708
(3,085)
11,150
69,777
(38,120)
31,657
8,039
(5,175)
59,560
(46,193)
13,367
(13,016)
(5,022)
34,521
(4,671)
(28,455)
(24,968)
13,147
8,039
(9,945)
(5,175)
6,066
1,239
7,305
41,242
5,179
53,726
1.05
1.02
1.52
1.49
7.71
7.52
2.15
2.11
(11,228)
(13,016)
(373)
(5,022)
(29,639)
(42)
(29,681)
–
6,100
(23,581)
(15.13)
(15.13)
(4.64)
(4.64)
(12.02)
(12.02)
(2.03)
(2.03)
Note
5
18
6
5, 33
9
33
7
9
8
7
7
9
12
7, 29
29
13
13
13
13
13
13
13
13
1 As required by IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, the income statement and related notes for the prior year have been restated to
2
separately present the results of discontinued operations (note 4z).
Impairment losses on trade receivables and contract assets, as determined in accordance with IFRS 9 Financial Instruments (notes 4z and 18), previously included in
administration expenses have been shown separately.
3 Adjusted earnings/(loss) per share is defined as profit before tax with amortisation and exceptional costs added back less tax at the prevailing rate of corporation tax
divided by the weighted average number of ordinary shares.
The notes on pages 84 to 123 form part of these Financial Statements.
80
HSS Hire Group plc
Annual Report and Financial Statements 2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 1 JANUARY 2022
Profit/(loss) for the financial period
Items that may be reclassified to profit or loss:
Foreign currency translation differences arising on consolidation of foreign operations
Foreign currency reserve disposal as part of business divestiture (note 29)
Gains arising on cash flow hedges
Other comprehensive (loss)/gain for the period, net of tax
Total comprehensive profit/(loss) for the period
Attributable to owners of the Company
The notes on pages 84 to 123 form part of these Financial Statements.
Year ended
1 January
2022
£000s
Year ended
26 December
2020
£000s
53,726
(23,581)
(720)
(49)
–
(769)
617
–
306
923
52,957
52,957
(22,658)
(22,658)
Financial Statements
HSS Hire Group plc
Annual Report and Financial Statements 2021
81
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 1 JANUARY 2022
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Hire equipment1
Non-hire assets
Right of use assets
Hire equipment1
Non-hire assets
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Lease liabilities
Borrowings
Provisions
Current tax liabilities
Non-current liabilities
Lease liabilities
Borrowings
Provisions
Deferred tax liabilities
Total liabilities
Net assets
EQUITY
Share capital
Share premium
Warrant reserves
Merger reserve
Foreign exchange translation reserve
Retained earnings/(deficit)
Total equity
Year ended
1 January
2022
Note
£000s
Year ended
26 December
2020
Restated1
£000s
14
15
15
16
16
23
17
18
19
20
21
22
20
21
22
23
24
24
25
147,648
158,498
44,332
15,605
20,651
55,329
2,404
50,429
17,946
20,576
62,912
–
285,969
310,361
2,682
78,680
42,269
123,631
409,600
(78,704)
(19,310)
–
(4,713)
(293)
3,183
75,880
97,573
176,636
486,997
(61,821)
(23,395)
(15,000)
(7,448)
(1)
(103,020)
(107,665)
(57,255)
(68,166)
(19,110)
(148)
(144,679)
(247,699)
(66,177)
(179,099)
(26,206)
(260)
(271,742)
(379,407)
161,901
107,590
7,050
45,552
–
97,780
(754)
6,965
45,580
2,694
97,780
15
12,273
(45,444)
161,901
107,590
1 Leased assets transferred to right-of-use assets on adoption of IFRS16 were overstated in the prior year due to the inclusion of expired leases. These have been
re-presented as owned assets. The net book value of the assets as at 26 December 2020 was £6.4m – there is no impact to total non-current assets (notes 4z,15 and
16).
The notes on pages 84 to 123 form part of these Financial Statements.
The Financial Statements were approved and authorised for issue by the Board of Directors on 27 April 2022 and were signed on its behalf by:
P Quested
Director
27 April 2022
82
HSS Hire Group plc
Annual Report and Financial Statements 2021
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 1 JANUARY 2022
Share
capital
£000s
Share
premium
£000s
Warrant
reserve
£000s
Merger
reserve
£000s
Foreign
exchange
translation
reserve
£000s
Cash flow
hedging
reserve
£000s
Retained
earnings/
(deficit)
£000s
Total
equity
£000s
At 27 December 2020
6,965
45,580
2,694
97,780
Profit for the period
Foreign currency translation differences arising
on consolidation of foreign operations
Foreign currency reserve disposal as part of
business divestiture (note 29)
Total comprehensive (loss)/profit
for the period
Transactions with owners recorded
directly in equity
Warrants exercised
2020 Share issue cost
Share-based payment charge
Share-based payment transfer to reserves
–
–
–
–
85
–
–
–
–
–
–
–
–
(28)
–
–
At 1 January 2022
7,050
45,552
–
–
–
–
(2,694)
–
–
–
–
15
–
(720)
(49)
(769)
–
–
–
–
–
–
–
–
–
–
–
–
97,780
(754)
–
–
–
–
–
–
–
–
–
–
(45,444)
107,590
53,726
53,726
–
–
(720)
(49)
53,726
52,957
2,694
–
85
(28)
1,374
1,374
(77)
(77)
12,273
161,901
At 29 December 2019
Loss for the period
Foreign currency translation differences arising
on consolidation of foreign operations
Hedging of financial instruments
Total comprehensive profit/(loss) for the period
Transactions with owners recorded directly in
equity
Share issue
Share-based payment charge
At 26 December 2020
Share
capital
£000s
1,702
–
–
–
–
–
–
–
–
–
Share
premium
£000s
Warrant
reserve
£000s
Merger
reserve
£000s
Foreign
exchange
translation
reserve
£000s
Cash flow
hedging
reserve
£000s
Retained
earnings/
(deficit)
£000s
Total
equity
£000s
2,694
97,780
(602)
(306)
(22,316)
78,952
–
–
–
–
–
–
–
–
–
–
–
–
–
617
–
617
–
–
15
–
–
306
306
(23,581)
(23,581)
–
–
617
306
(23,581)
(22,658)
–
–
–
–
453
50,843
453
(45,444)
107,590
5,263
45,580
–
–
6,965
45,580
2,694
97,780
The notes on pages 84 to 123 form part of these Financial Statements.
Financial Statements
HSS Hire Group plc
Annual Report and Financial Statements 2021
83
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 1 JANUARY 2022
Profit/(loss) after income tax
Adjustments for:
– Tax
– Profit on disposal of discontinued operations
– Amortisation
– Depreciation
– Accelerated depreciation relating to hire stock customer losses and hire stock write-offs
– Impairment of property, plant and equipment and right of use assets
– Disposal of sub-lease
– Loss on disposal of property, plant and equipment and right of use assets
– Lease disposals
– Capital element of receipts from net investment in sublease
– Rent concessions
– Share-based payment charge
– Foreign exchange (gains)/loss on operating activities
– Finance expense
Changes in working capital (excluding the effects of disposals and exchange differences on consolidation):
– Inventories
– Trade and other receivables
– Trade and other payables
– Provisions
Net cash flows from operating activities before purchase of hire equipment
Purchase of hire equipment
Cash generated from operating activities
Interest paid
Income tax (paid)/received
Net cash generated from operating activities
Cash flows from investing activities
Proceeds from disposal of business, net of cash disposed of
Proceeds from disposal of assets as part of business divestiture
Purchases of non-hire property, plant, equipment and software
Net cash generated from/(used by) investing activities
Cash flows from financing activities
(Costs associated with)/proceeds from capital raise (net of share issue costs paid)
Proceeds from borrowings (third parties)
Facility arrangement fees
Repayment of borrowings
Capital element of lease liability payments
Net cash (paid)/received from financing activities
Net (decrease)/increase in cash
Cash at the start of the year
Cash at the end of the year – continuing operations
Cash at the end of the year – discontinued operations
Cash at the end of the year
The notes on pages 84 to 123 form part of these Financial Statements.
12
29
9
9
9
9
9
20
20
26
8
17
18
19
22
Year ended
1 January
2022
£000s
Year ended
26 December
2020
£000s
53,726
(23,581)
Note
(1,156)
(41,242)
5,310
36,128
3,761
497
–
2
(6,222)
311
–
1,374
(506)
15
–
5,197
44,709
4,727
11,557
59
2,110
(4,012)
356
(996)
453
535
28,527
25,065
252
(6,999)
23,671
(8,401)
89,033
15
(17,468)
29
29
14, 15
24
21
32
21
20
71,565
(26,628)
(779)
44,158
62,813
526
(6,651)
56,688
(1,471)
70,000
(1,946)
(199,182)
(23,551)
(156,150)
(55,304)
97,573
42,269
–
42,269
552
9,845
(1,780)
(5,181)
69,630
(13,673)
55,957
(22,052)
552
34,457
–
–
(5,814)
(5,814)
52,335
17,200
–
–
(23,263)
46,272
74,915
22,658
94,978
2,595
97,573
84
HSS Hire Group plc
Annual Report and Financial Statements 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 JANUARY 2022
1. Basis of preparation
a) Reporting entity
The Company is a public limited company which was listed on the London Stock Exchange up until 14 January 2021, when the Group’s ordinary
shares of one pence each were admitted to trading on AIM. The Company is incorporated under the Companies Act and domiciled in the United Kingdom.
The address of the Company’s registered office is Building 2, Think Park, Mosley Road, Manchester, M17 1FQ. These Consolidated Financial
Statements comprise the Company and its subsidiaries (the Group).
b) Statement of compliance
The Group Financial Statements of HSS Hire Group plc have been prepared in accordance with International Financial Reporting Standards as adopted
by the UK (IFRS).
The Directors have taken advantage of the option within Section 390 of the Companies Act 2006 to prepare their Financial Statements up to a date seven
days either side of the Company’s accounting reference date of 31 December, and these accounts cover the 53-week period from 27 December 2020 to
1 January 2022 (2020: 29 December 2019 to 26 December 2020).
c) Functional and presentational currency
These Financial Statements are presented in pounds sterling (£), which is the Group’s presentational currency. The functional currency of the parent
and subsidiaries is pounds sterling, except for those that are incorporated in the Republic of Ireland, which have the euro as their functional currency.
All amounts have been rounded to the nearest thousand, unless otherwise indicated.
d) Basis of preparation
These Financial Statements have been prepared on a historical cost basis with the exception of derivative financial instruments, which are measured
at fair value on each reporting date. The accounting policies set out below have been applied consistently to all periods presented in these
Financial Statements.
e) Going concern
At 1 January 2022, the Group’s financing arrangements consisted of a fully drawn term loan of £70m, an undrawn revolving credit and overdraft facility
(RCF) of £23.2m and finance lines to fund hire fleet capital expenditure, of which £12.6m had not been utilised. Both the term loan and RCF are subject
to net debt leverage and interest cover covenant tests each quarter. At the financial year-end the Group had significant headroom against these
covenants. Cash at 1 January 2022 was £42.3m.
The Directors have prepared a going concern assessment up to 29 April 2023, which confirms that the Group is capable of continuing to operate within
its existing facilities and can meet its covenant tests during that period. The key assumptions on which the projections are based include an assessment
of the impact of future market conditions on projected revenues and the capital investment required to support that level of revenue.
The Group’s base case for the 12 months to 29 April 2023 assumes a continued recovery of revenue during 2022. The Board has considered various
downside scenarios including a ’reasonable worst-case’ driven by lower than forecast market growth rates, the loss of a major customer contract,
increased inflationary pressures and an increase in debtor days. In addition, it assumes that continued strategic investment in technology does not
deliver the expected uplift in revenue. This reasonable worst-case scenario has been modelled without mitigating actions and, despite this, the Group
is forecast to maintain headroom against its working capital requirements and financial covenants within the assessment period.
Whilst the Directors consider that there is a degree of subjectivity involved in their assumptions, taking into account the adequacy of the Group’s
debt facilities, its ability to deploy mitigating actions where appropriate and the principal risks and uncertainties (see pages 30 to 34) and, after making
appropriate enquiries, they have a reasonable expectation that the Group has adequate resources to continue in operational existence for
the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Financial Statements included within this
Annual Report.
f) Basis of consolidation
Subsidiaries are all entities over which the Company has control. The Company controls an entity when it is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from
the date on which control is transferred.
Unless merger accounting has been adopted in specific circumstances, the Group applies the acquisition method to account for business
combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred to former
owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting
from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date. Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree
is re-measured to fair value at the acquisition date with any gains or losses arising from such re-measurement are recognised in the profit or loss.
Any contingent consideration is measured at fair value at the acquisition date. If the contingent consideration is classified as equity then it is not
re-measured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of contingent consideration are recognised
in profit or loss.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation.
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2. Critical accounting estimates and judgements
In preparing these Financial Statements, management has made judgements, estimates and assumptions that affect the application of the Group’s
accounting policies and the reported amount of assets, liabilities, income, expenses and other disclosures. The estimates and underlying assumptions
are based on historical experience and various other factors that are believed to be reasonable under the circumstances. The estimates and underlying
assumptions are reviewed on an ongoing basis.
Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimate was based, or as a result of new
or further information. Such changes are recognised in the year in which the estimate is revised.
Key assumptions about the future and key sources of estimation uncertainty that have a risk of causing a material adjustment to the carrying value
of assets and liabilities over the next year are set out below.
a) Estimates
Useful economic life and residual value of assets
Sensitivity analysis has not been carried out in relation to the useful economic life and residual value of assets held for hire due to the volume of the items
involved and that multiple systems are used by the Group to record property, plant and equipment. Instead, the Directors regularly review useful
economic lives and residual values to ensure that the depreciation charge is appropriate. Following the implementation of a new asset management
system in the 2020 financial year, continuing improvements have been made in the recording and monitoring of fixed assets in the core UK hire business.
Going forward, the Directors expect to make further improvements to the recording, reporting and management of property, plant and equipment
across the Group.
Useful economic life of intangible assets
The Directors have assessed the brands of ABird and Apex and estimated that they have useful economic lives of 20 years. The Directors have estimated
the customer relationship intangible assets recognised on the acquisition of Hero Acquisitions Limited and Apex Generators Limited as having useful
economic lives of ten years. Further details of the net carrying value of intangible assets are give in note 14.
Impairment of goodwill, intangible assets, property, plant and equipment and right of use assets
To assess if any impairment exists, estimates are made of the future cash flows expected to result from the use of the asset and its eventual disposal.
Actual outcomes could vary from such estimates of discounted future cash flows. Such calculations require assumptions related to the appropriate
discount rate, the long-term growth rate, the rate of inflation and also short-term performance and cash flows. The Directors consider historic
performance as well as referencing to external information to arrive at these assumptions. Further details of the impairment reviews undertaken,
assumptions and sensitivities are given in note 14.
Onerous property costs
Provisions have been made for onerous property costs on non-trading stores, distribution centres and unused office space within the Group’s property
portfolio. Due to the interdependency of assets within the branch and distribution centre network, the assessment of whether a site is onerous is based
predominately on whether it is contributing to the wider network’s profit. Provisions for onerous property costs relate to the current value of contractual
liabilities for future rates payments and other non-lease related unavoidable costs. Future operating losses are not provided for. The carrying amount of
the onerous property costs for closed locations will be affected by changes in the discount rate, inflation and general market conditions. Further details
of the assumptions and sensitivities are given in note 22.
Dilapidations provisions
An amount equivalent to the provision for dilapidation is recognised as part of the cost of the related property. The timing and amounts of future cash
flows related to lease dilapidations are subject to uncertainty. The provision recognised is based on management’s experience and understanding of the
commercial retail property market and, in some cases, third party surveyors’ reports commissioned for specific properties in order to best estimate the
future outflow of funds, requiring the exercise of judgement applied to existing facts and circumstances, which can be subject to change. The amount
recognised is the estimated cost of dilapidations, discounted to its net present value, and since the cash outflow can take place many years in the future,
the carrying amount of the provision is reviewed regularly and adjusted to take account of changing facts and circumstances, including the age and
condition of the property, experience of actual spend on similar properties, third party surveyors’ reports, specific lease obligations, market practice
generally and agreements reached with landlords in respect of a given property. Changes in the estimated timing of dilapidations or dilapidations cost
estimates are dealt with prospectively by recording an adjustment to the provision, and a corresponding adjustment to property, plant and equipment.
The unwinding of the discount on the dilapidations provision is included as a finance expense. Further details of the assumptions and sensitivities are
given in note 22.
Discount rates
The Group has assessed that the interest rate implicit in the lease is not readily determinable for leases other than hire fleet financed via the lines agreed
for that purpose with the Group’s lenders. The Group therefore uses an incremental borrowing rate for all other leases, taking advantage of the IFRS 16
expedient available to apply a single rate to leases of similar characteristics.
The incremental borrowing rate in use at transition and for new leases in the period is 3.5% for vehicles and equipment and between 5.1% and 6.0%
for property leases. The discount rate selected for non-property leases is the rate at which the Group expects to finance assets of a similar class.
For property, rates are those at which the Group might expect to borrow if acquiring an interest in property over five- and ten-year tenures.
These rates are adjusted for properties based on the level of risk driven by geographic region or age. Further details on the lease liabilities are given in
note 20.
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2. Critical accounting estimates and judgements continued
Recoverability of trade receivables
Estimates are required in assessing the recoverability of overdue trade receivables and determining whether a provision against those receivables
is required. The Group monitors the risk profile of debtors and makes provisions for amounts that may not be recoverable based on past default
experience and on the Directors’ assessment of the economic environment. The recoverability of overdue receivables is considered together with the
sales credit note provision. The Group makes provision for credit notes raised and expected to be raised after the end of the reporting period that relate
to customer income recognised before the end of the period. The Group’s bad debt and credit note provisions are disclosed in note 18.
b) Judgements
Determining whether an arrangement constitutes a lease
Any arrangement that is dependent on the use of a specific asset or assets should be accounted for as a lease. The Directors have concluded that none
of the Group’s contracts with customers are dependent on the use of a specific asset or group of specific assets as the Group can swap hire stock as
required to provide tool and equipment hire services to them, and therefore are not leases.
Useful economic life of intangible assets
The HSS brand was first established in the late 1950s, and therefore given its longevity, the Directors consider this to have an indefinite life and it is not
amortised, but instead subjected to annual impairment testing. Further details of the impairment reviews undertaken, assumptions and sensitivities are
given in note 14.
Lease term
The lease term under IFRS 16 will correspond to the duration of the contracts signed except in cases where the Group is reasonably certain that it will
exercise contractual termination or extension options.
For property, the Group’s policy is to use the full lease term (as opposed to first exercisable break date) for trading branches, distribution centres and
offices unless there is an intention to exit the property at the reporting date. For properties which are occupied beyond lease end date, liabilities are
calculated based on specific extension clauses if they exist. Where they do not, the Group reviews leases at least twice annually and extends for a
maximum of six months provided notice has not been served by the Group or relevant landlord.
For properties which are no longer trading, costs, including dilapidations provisions, are provided on the assumption that leases will not be surrendered
before the first exercisable break date because management believe that it is very difficult to make such an estimate of early surrender reliably.
Therefore a prudent view is taken, which could lead to release of provisions in the event an early surrender is obtained.
Given the tenures and values involved, any similar judgements applied to vehicle and equipment leases are immaterial.
Exceptional items
Exceptional items are disclosed separately in the income statement where it is necessary to do so to provide further understanding of the underlying
financial performance of the Group. Exceptional items are items of income or expense that have been shown separately due to the significance of their
nature or amount. Exceptional items for the year ended 1 January 2022 are listed and explained in note 7.
Deferred tax assets
The assessment of probability of utilisation of tax losses is a key judgement discussed in further detail in note 23.
3. New accounting standards, accounting standards not yet effective and changes in accounting policy
Standards issued and effective beginning on or after 2021
The new standards, interpretations and amendments that are effective for the first time for the financial year beginning 27 December 2020 are detailed
below:
COVID-19- Related Rent Concessions beyond 30 June 2021: Amendments to IFRS 16
The IASB issued these amendments on 28 May 2020. The amendments provide relief to lessees from applying IFRS 16 guidance on lease modification
accounting for rent concessions arising as a direct consequence of the COVID-19 pandemic. As a practical expedient, a lessee that makes this election
accounts for any change in lease payments resulting from the COVID-19 related rent concession the same way it would account for the change under
IFRS 16, if the change were not a lease modification.
These amendments have not had a material impact on the group.
Standards effective in future periods
The Company is currently assessing the impact of the following accounting standards and amendments:
– IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (Amendment – Definition
of Material);
– IAS 1 Presentation of Financial Statements (Amendment – Classification of Liabilities as Current or Non-Current);
– IAS 1 and IFRS Practice Statement 2 (Amendment – Disclosure of Accounting Policies);
– IFRS 3 Business Combinations (Amendment – Definition of Business);
– Revised Conceptual Framework for Financial Reporting;
– Annual Improvements to IFRS: 2018-2020 Cycle;
– IAS 37 Provisions, Contingent Liabilities and Contingent Assets (Amendment – Onerous Contracts – Cost of Fulfilling a Contract);
– IAS 16 Property, Plant and Equipment (Amendment – Proceeds before Intended Use);
– IFRS 17 Insurance Contracts; and
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– IAS 12 Deferred Tax (Amendment – Assets and Liabilities Arising from a Single Transaction).
– Interest Rate Benchmark Reform – Phase 2: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
4. Accounting policies
a) Revenue recognition
The Group’s activities consist of supplying hire and equipment services within the UK and the Republic of Ireland. Revenue is measured based on the
consideration specified in a contract with a customer and excludes value added taxes. The Group recognises revenue when it transfers control over a
good or service to a customer.
The following table provides information about the nature and timing of the satisfaction of performance obligations in contracts with customers, including
significant payment terms, and the related revenue recognition policies:
Type of product
or service
Hire and
rehire activities
Nature and timing of satisfaction of performance
obligations, including significant payment terms
Approach to revenue recognition
Equipment on hire to customers is available
for use by the customer from the point of
collection or delivery until its return or
notification that it is available for collection.
Cash customers pay a deposit to secure the
hire for which the charges are settled on
return of the equipment. Account customers
pay 30 days from the end of the month of
invoice or to such terms as have been
specifically negotiated up to a maximum of
90 days from the end of the month of invoice.
Resale and ancillary
revenue to hire
including fuel and
consumables
Customers obtain control of the goods at
the point of collection or delivery and settle
as above.
Revenue is recognised over time as the hire period progresses. The
stand-alone selling price is determined based on the contracted prices at
which the Group hires out the equipment under the specific contract with
the customer and commences when the equipment is collected or has been
delivered to a customer’s premises and has been accepted by the customer.
Revenue is recognised to the extent that it is highly probable that a significant
reversal in the amount of cumulative revenue recognised will not occur.
Therefore, the amount of revenue recognised is adjusted for expected
returns, contract corrections and any negotiated rebate, which are estimated
based on historical data. For expected returns and contract corrections an
estimate of the impact is treated as a correction to the asset’s carrying value
by deducting this from the amount recognised as a trade receivable. Rebates
are recognised as a separate liability and included within accruals (see note
19). The Group reviews its estimate of all these items at each reporting date
and updates the amounts of the reduction in the asset or the liability
accordingly.
Revenue is recognised when the goods are collected or have been delivered
to a customer’s premises and have been accepted by customers. Revenue is
recognised to the extent that it is highly probable that a significant reversal in
the amount of cumulative revenue recognised will not occur. Therefore, the
amount of revenue recognised is adjusted for expected returns, contract
corrections and any negotiated rebate, which are estimated based on
historical data. For expected returns and contract corrections an estimate
of the impact is treated as a correction to the asset’s carrying value and
deducted from the amount recognised as a trade receivable. Rebates are
recognised as a separate liability and included within accruals (see note 19).
The Group reviews its estimate of all these items at each reporting date and
updates the amounts of the reduction in the asset or the liability accordingly.
When the loss or damage is identified and quantified.
In circumstances where a customer loses or
damages the equipment they have on hire,
the Group is entitled to reclaim the costs of
repair or the replacement cost in case of loss.
Settlement is at the point the cost is finalised
for cash customers and under normal
settlement terms for account customers.
Damaged/lost
hire stock
compensation
Ex-hire fleet
asset sales
Training course
income
Customers obtain control of the goods at
the point of collection or delivery and settle
as above.
Revenue is recognised when the goods are collected; or have been delivered
to a customer’s premises and have been accepted by the customer; or have
otherwise been accepted by the customer. Payment is on or before collection.
Customers obtain the benefit of the service
at the point of delivery. Training courses are
paid for in advance or for account customers,
in arrears in accordance with their normal
settlement terms.
Revenue is recognised when the training course or support service is provided
to the customer.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 1 JANUARY 2022
4. Accounting policies continued
b) Contract costs
Costs associated with the award of significant contracts by customers are deferred in the balance sheet and amortised to the income statement over
the life of the contract where such costs are incremental and are expected to be covered by the profits generated on the contract.
c) Cost of sales, distribution costs and administrative expenses
Cost of sales includes direct costs associated with the Group’s principal business of equipment hire. Such costs include equipment rehire, resale fuel,
cost of reselling plant and equipment, maintenance, depreciation, amortisation and asset write-off and disposals. Distribution expenses comprise
vehicle costs and transportation staff wages. Administrative expenses comprise principally staff and property costs and costs of acquisitions.
d) Segment reporting
IFRS 8 Operating Segments requires operating segments to be reported in a manner consistent with the internal reporting provided to the chief
operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating
segments, has been identified as the management team, including the Chief Executive Officer, Chief Financial Officer and Chief Commercial Officer.
Details of the Group’s segments are given in note 5.
e) Foreign currency translation
Foreign currency transactions are translated into an entity’s functional currency using the exchange rates prevailing at the dates of the transactions.
Foreign currency translation gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates
of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Foreign currency translation gains and
losses that relate to borrowings and cash and cash equivalents are presented in the income statement within finance income or finance expense.
All other foreign currency translation gains and losses are presented in the income statement within administrative expenses.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to the Group’s
presentational currency, sterling, at foreign currency exchange rates ruling at the reporting date.
The revenues and expenses of foreign operations are translated at an average rate for the year, which approximates the foreign currency
exchange rates ruling at the dates of the transactions. Exchange differences arising from the translation of foreign operations are reported
in other comprehensive income.
f) Property, plant and equipment
Useful economic life and residual value of assets
The Group’s policy for applying useful economic lives and residual values of assets has been determined through applying historical experience and
taking into consideration the nature of assets and their intended use, and achieved values on sale when disposed.
Land and buildings comprise leasehold and freehold branches, workshops and offices, and are stated at cost, less depreciation or provision for
impairment where appropriate. Land is not depreciated and depreciation on other assets is calculated using the straight-line method to allocate their
cost or revalued amounts to their residual values over their estimated useful lives, as follows:
Material and equipment held for hire:
Tools and general equipment
Powered access
Power generation
Climate control
Non-hire assets:
Two to ten years
Five to ten years
Five to ten years
Two to ten years
Leasehold properties with less than fifty years unexpired
Over unexpired period of lease
Freehold buildings and long leasehold properties
Plant and machinery
Over fifty years
Two to ten years
The Group reviews its depreciation policy annually and has made no changes in 2021 to the depreciation rates applied.
Materials and equipment held for hire purposes are stated at cost, less depreciation or provision for impairment where appropriate. Materials and
equipment are written off over their useful economic life to the asset’s residual value which is estimated at between 20% of cost and nil. Residual values
are only applied to powered access and power generation assets. Profits or losses arising when customers are invoiced for loss of equipment held for
hire purposes are calculated by reference to average written down values and net proceeds.
Profit or loss on disposal
Gains and losses on disposals of materials and equipment held for hire are calculated as the difference between the proceeds received and the carrying
amount of the asset and are recognised in profit or loss.
Depreciation
For the purpose of calculating Adjusted EBITDA and Adjusted EBITA, depreciation, as disclosed on the face of the income statement, includes: the
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.
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g) Intangible assets
Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the difference between the fair value of the consideration transferred and the fair value
of the acquired assets, liabilities and contingent liabilities.
Intangible assets acquired in a business combination
When an acquisition is completed intangible assets are separately identified from goodwill and measured at fair value. Brands are valued using the relief
from royalty method. Customer relationships are valued using the excess of earnings method.
The HSS brand was first established in the late 1950s, and therefore given its longevity, the Directors consider this to have an indefinite life and it is not
amortised, but instead subjected to annual impairment testing.
All other brands and customer relationships are amortised on a straight-line basis over their useful economic life. The Directors have assessed the
brands of ABird and Apex and estimated that they have useful economic lives of 20 years. The Directors have estimated the customer relationship
intangible assets recognised on the acquisition of Hero Acquisitions Limited and Apex Generators Limited as having useful economic lives of ten years.
Amortisation is charged to administrative expenses.
Software development costs
Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Development costs that are directly
attributable to the design, test and build of identifiable and unique software products controlled by the Group are recognised as intangible assets when
the following criteria are met:
– it is technically feasible to complete the software product so that it will be available for use;
– management intends to complete the software product and use or sell it;
– there is an ability to use or sell the software product;
– it can be demonstrated how the software product will generate probable future economic benefits;
– adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and
– the expenditure attributable to the software product during its development can be reliably measured.
Computer software development costs recognised as assets are amortised over their estimated useful lives, which do not exceed four years.
With regard to Software as a Service (SaaS) arrangements, where the Group controls the underlying software, configuration and customisation costs
are capitalised as part of bringing the identified intangible asset into use. Where the Group does not control the underlying software, but the related
configuration and customisation costs are not distinct from access to the software, these costs are expensed over the SaaS contract term. In all other
circumstances, configuration and customisation costs are recognised as an expense as incurred, except in the limited instances where these costs
result in a separately identifiable intangible asset.
Other intangible assets
Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and any
accumulated impairment losses. Other intangible assets are amortised over their useful economic life, and the amortisation charge is included within
administrative expenses.
h) Impairment of intangible, property, plant and equipment and right of use assets
These assets are reviewed annually or more frequently if there is an indication of impairment to ensure that they are not carried above their estimated
recoverable amounts. Impairment reviews are undertaken whenever events or changes in circumstances indicate the carrying value of these assets may
not be recoverable. Other than for goodwill, where an impairment loss subsequently reverses, the carrying amount is increased to the revised estimate,
but restricted so that the increased amount does not exceed the carrying amount that would have been determined had no impairment loss been
recognised in prior years. Any impairment losses or reversals are recognised immediately in the income statement.
Testing for impairment
For the purpose of impairment testing, all assets, including goodwill, acquired in a business combination are allocated to one or more of the cash
generating units (CGUs) that are expected to benefit from the synergies of the combination. A CGU is the smallest group of assets that generates cash
inflows from continuing use that are largely independent of the cash flows of other assets or CGUs.
The carrying value of a CGU is compared to its recoverable amount, which is the higher of its value in use and the fair value less costs of disposal.
i) Derivative financial instruments
The Group uses derivative financial instruments to manage its exposure to interest rate risk. Derivatives are initially recognised at fair value on the date
a derivative contract is entered into and are subsequently re-measured at their fair value at each reporting date. Where hedge accounting is not applied,
the resulting gain or loss is recognised in profit or loss immediately. Derivatives are carried as financial assets when their fair value is positive and as
financial liabilities when their fair value is negative.
A derivative is presented as a non-current asset or non-current liability if the remaining maturity of the instrument is more than one year and the derivative
is not expected to be realised or settled within one year. Where this is not the case, derivatives are presented as current assets or current liabilities.
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4. Accounting policies continued
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in other
comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss as part of other gains and losses.
Amounts recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item is
recognised in profit or loss in the same line of the statement of profit or loss and other comprehensive income as the recognised hedged item. However,
when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously
accumulated in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.
Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised,
or no longer qualifies for hedge accounting. Any gain or loss accumulated in equity at that time remains in equity and when the forecast transaction
is ultimately recognised in profit or loss, such gains and losses are recognised in profit or loss, or transferred from equity and included in the initial
measurement of the cost of the asset or liability as described above. When a forecast transaction is no longer expected to occur, the cumulative gain
or loss that was accumulated in equity is recognised immediately in profit or loss.
j) Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business,
less applicable variable selling expenses. Provision is made for those inventory items where the net realisable value is estimated to be lower than cost.
Net realisable value is based on both historical experience and assumptions regarding estimated future sales value.
k) Trade receivables and contract assets
Trade and other receivables are recognised initially at fair value, which is deemed to be the transaction price. Subsequently, trade and other receivables
are measured at amortised cost using the effective interest method, less any provision for impairment.
Contract assets relate to the group’s right to consideration for work completed but not billed at the reporting date and consist of accrued income.
Contract assets are recognised initially at fair value, which is deemed to be the agreed transaction price. The contract assets are transferred to trade
receivables when an invoice has been issued at which point the right to payment becomes unconditional.
Recoverability of trade receivables and contract assets
The provision for impairment of trade receivables and contract assets consists of a bad debt and a credit note provision (see note 2). For bad debt
provisioning, the Group applies the IFRS 9 simplified approach of using a lifetime expected credit loss provision for trade receivables and contract assets
based upon past default experience. Trade receivables and contract assets are grouped based on similar credit risk and ageing.
The estimated credit loss rates are based on historical loss rates and then adjusted for current and forward-looking macroeconomic factors affecting
the Group’s operating environment. The Group has identified expected GDP growth, inflation and unemployment rates as key in this regard.
Receivables over two years past their due date are expensed in their entirety and written back to income if subsequently recovered.
The creation and release of bad debt provision are charged or credited to administrative expenses in the income statement and movements in the credit
note provision are charged or credited to revenue. If material, the impairment loss is disclosed on the face of the Consolidated Income Statement.
l) Cash
In the statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid
investments with maturities of three months or less and bank overdrafts. In the statement of financial position, bank overdrafts are shown within
borrowings in current liabilities.
m) Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables
are recognised initially at fair value and subsequently measured at amortised cost. Trade payables are classified as current liabilities if payment is due
within one year or less, otherwise they are presented as non-current liabilities.
n) Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference
between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using
the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the
facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some
or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which
it relates.
The group derecognises borrowings when, and only when, the liability is extinguished. Where an exchange occurs between an existing lender of
borrowings with substantially different terms this is considered as an extinguishment of the existing borrowings and the new borrowings are recognised.
o) Provisions
Provisions for onerous property costs, contracts, restructuring costs and legal claims are recognised when:
– the Group has a present legal or constructive obligation as a result of past events;
– it is probable that an outflow of resources will be required to settle the obligation; and
– the amount has been reliably estimated.
Financial Statements
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Annual Report and Financial Statements 2021
91
Onerous property costs
Provisions have been made for onerous property costs (excluding lease costs) on non-trading stores, distribution centres and unused office space within
the Group’s property portfolio. Trading stores form part of a wider network of assets and are not judged to be onerous as they contribute to the wider
network. Provisions for onerous property costs relate to the current value of contractual liabilities for future rates payments and other non-lease
unavoidable costs to the first exercisable break under the related lease. These provisions are recognised on a property-by-property basis. The carrying
amount of the onerous property costs will be affected by changes in the discount rate and property disposals. The actual costs and timing of cash flows
are dependent on future events and market conditions. Any difference between management estimates and actual costs is accounted for in the period
when such determination is made. Further details of the assumptions and sensitivities are given in note 22.
Dilapidations provisions
An amount equivalent to the provision for dilapidation is recognised as part of the cost of the related property. The timing and amounts of future cash
flows related to lease dilapidations are subject to uncertainty. The provision recognised is based on management’s experience and understanding of
the commercial retail property market and third party surveyors’ reports commissioned for specific properties in order to best estimate the future outflow
of funds, requiring the exercise of judgement applied to existing facts and circumstances, which can be subject to change. The amount recognised is
the estimated cost of dilapidations, discounted to its net present value, and since the cash outflow can take place many years in the future, the carrying
amount of the provision is reviewed regularly and adjusted to take account of changing facts and circumstances, including the age and condition of
the property, experience of actual spend on similar properties, third party surveyors’ reports, specific lease obligations, market practice generally and
agreements reached with landlords in respect of a given property. Changes in the estimated timing of dilapidations or dilapidations cost estimates are
dealt with prospectively by recording an adjustment to the provision, and a corresponding adjustment to property, plant and equipment for all occupied
properties held prior to 29 December 2019 (IFRS 16 transition date). From 29 December 2019 adjustments are reflected against the right of use asset for
any new properties. Where a property is non-trading any increase or decrease in the dilapidations provision will be reflected directly in profit and loss.
The unwinding of the discount on the dilapidations provision is included as a finance expense.
Further details of the assumptions and sensitivities are given in note 22.
Restructuring provisions
Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating
losses. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific to the obligation.
Onerous contract provisions
Contracts are considered to be onerous when cash is paid to a third party but the Group derives no economic benefit.
p) Share capital and reserves
Ordinary shares
The Group’s ordinary shares are classified as equity instruments. Incremental costs directly attributable to the issue of ordinary shares are recognised as
a deduction from equity, net of any tax effects.
Retained earnings/accumulated deficit
The retained earnings/accumulated deficit represents the accumulated profits, losses and distributions of the Group.
Foreign exchange reserve
The foreign exchange reserve represents cumulative exchange differences arising from the translation of foreign operations and reported in other
comprehensive income (note 4e).
Merger reserve
The merger reserve is the amount arising on the difference between the nominal value of shares issued on a merger and the carrying value of the
interest in the subsidiary. The merger reserve arose in 2015 when the Group underwent a capital reconstruction in advance of its initial public offering
on 9 February 2015, and increased during 2016 via acquisition of a ‘cash box’ company.
Warrant reserve
The warrant reserve represents the issue-date fair value of warrants that will be settled by a future issue of shares in the Group.
Cash flow hedging reserve
The cash flow hedging reserve represents the effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges and recognised in other comprehensive income (note 4i).
q) Finance income and expense
Finance income comprises interest receivable on cash balances.
Finance expense comprises interest payable on borrowings, interest payable on lease liabilities, amortisation and write-off of debt issuance costs and
the unwinding of the discount on non-current provisions. Interest is recognised in profit or loss as it accrues, using the effective interest rate.
Interest payable on borrowings includes a charge in respect of attributable transaction costs, which are recognised in profit or loss over the period of the
borrowings on an effective interest basis. The finance element of lease payments is charged to the income statement over the lease period.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 1 JANUARY 2022
4. Accounting policies continued
r) Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to
items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly
in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the reporting date. Management periodically
evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions
where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the
statement of financial position. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is
not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively
enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary
differences can be utilised.
Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, except for deferred income tax
liabilities where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not
reverse in the foreseeable future.
Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries only to the extent that it is
probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can
be utilised. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same
taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
s) Employee benefits
Short-term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group
has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can
be estimated reliably.
Pension obligations
The Group operates employee-optional stakeholder retirement and death benefit schemes; these are defined contribution schemes. Both employees
and employers are required to make contributions, with the employer’s contributions for each employee determined by the level of contribution made by
the employee and the employees’ length of service within the Group or subsidiary company. The employer’s contributions are charged to profit and loss
in the year in which the contributions are due.
Termination benefits
Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts
voluntary redundancy in exchange for these benefits. The Group recognises termination benefits at the earlier of the following dates: (a) when the Group
can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for a restructuring and involves the payment of termination
benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees
expected to accept the offer. Benefits falling due more than one year after the end of the reporting period are discounted to their present value.
Share-based payments
Share-based payment transactions in which the Group receives goods or services as consideration for its own equity instruments are accounted for
as equity-settled share-based payments. The grant date fair value of the share-based payment granted to employees is recognised as an employee
expense, with a corresponding increase in equity, over the period that the employee becomes unconditionally entitled to the awards. The fair value of the
options granted is measured using an option valuation model, taking into account the terms and conditions upon which the options were granted, and is
charged to the income statement on a straight-line basis over the vesting period of the award.
The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related service and non-market vesting
conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet
the related service and non-market performance conditions at the vesting date.
t) Leases
A right of use (ROU) asset representing the Group’s right to use the underlying asset and a corresponding lease liability representing its obligation to
make lease payments, is recognised. The ROU asset is depreciated over the lease term on a straight-line basis, except where the Group has the right,
and expects to exercise that right, to take ownership of the assets after the end of the lease; in such cases the assets are depreciated over their useful
life. The finance element of lease payments is charged to the income statement over the lease term.
Lease liabilities are initially measured at the present value of future rent payments, and discounted at the interest rate implicit in the lease, or, where
this cannot readily be determined, the Group’s incremental borrowing rate. The Group’s incremental borrowing rate is the rate the Group would have
to pay to borrow the funds necessary to obtain an asset of similar value over a similar term and with similar security to the ROU asset in a similar
economic environment.
ROU assets are measured at cost comprising: the initial measurement of lease liability, initial direct costs, restoration costs and lease payments made on
or before transition date.
Financial Statements
HSS Hire Group plc
Annual Report and Financial Statements 2021
93
IFRS 16 and COVID-19 concessions
The Group has taken advantage of the practical expedient available under the amendment to IFRS 16. As such the Group assessed if rent concessions
that occurred as a direct consequence of the COVID-19 pandemic meet the following conditions:
– the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration
for the lease immediately preceding the change;
– any reduction in lease payments affects only payments originally due on or before 30 June 2021; and
– there is no substantive change to other terms and conditions of the lease.
Where these conditions were met the change in the lease payments were not accounted for as a lease modification. The amount of qualifying rent
concessions recorded in the income statement amounted to £0.2m (2020: £1.3m).
(u) Holiday pay accrual
A liability is recognised to the extent of any unused holiday pay entitlement which is accrued at the balance sheet date and carried forward to future
periods. This is measured at the undiscounted salary cost of the future holiday entitlement accrued at the balance sheet date.
(v) Government grants
The Group received grant income as a result of Government support in response to the COVID-19 pandemic. Government grant income is reported
within other operating income. The income is recognised when there is a reasonable assurance that the relevant entity or the wider Group will comply
with the conditions attached to the grant and that the grants will be received. The grant income is recognised in the same period as any related costs
for which the grants are intended to compensate.
w) Fair value measurement
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and
liabilities. Set out below is an analysis of the valuation method of the Group’s financial instruments:
The different levels in the fair value hierarchy have been defined as follows:
– Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
– Level 2: inputs other than quoted prices included within level 1 that are observable, for the asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices).
– Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Fair values have been determined for measurement purposes based on the following methods:
Derivative instruments (level 2)
The fair values of interest rate swaps are calculated as the present value of the estimated future cash flows based on the terms and maturity of
each contract and using market interest rates as applicable for a similar instrument at the measurement date. Fair values reflect the credit risk
of the instrument and include adjustments to take account of the credit risk of the Group entity and counterparty where appropriate.
The fair values of interest rate swap contracts are calculated by management based on external valuations received from the Group’s bankers and
are based on anticipated future interest yields.
x) Exceptional items
Items of income or expense have been shown as exceptional either because of their size or nature or because they are outside the normal course
of business.
y) Dividends
Dividends on ordinary share capital are recognised as a liability in the Group’s Financial Statements in the period in which they are declared by the
Company. In the case of interim dividends, these are considered to be declared when they are paid and in the case of final dividends, these are declared
when authorised by the shareholders.
z) Prior period restatements
The group made two strategic divestitures during the year ended 1 January 2022 (see note 29). These meet 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 £3.1m on the face of the Consolidated Income Statement. Previously it
was included within administrative expenses (which has now decreased by the corresponding amount of £3.1m to £112.6m) and disclosed within note
18. There was no impact on profit.
Subsequent to the approval of the financial statements for the year ended 26 December 2020, the Directors established that certain assets that had
previously been held under finance leases had been incorrectly classified as right of use assets. The balances have been amended in these financial
statements and shown as a prior year adjustment. The effect of this adjustment has been to increase property, plant and equipment, as at 26 December
2020, by £6.4m and decrease right of use assets by £6.4m. There has been no effect on the profit and loss reserve or on net assets.
94
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Annual Report and Financial Statements 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 1 JANUARY 2022
5. Segment 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 and power generation
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 either not held within or available from HSS’s 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.
During the year the Group recognised £0.2m in grant income from participation in the Republic of Ireland’s job retention scheme which had been
received in 2020 and deferred. In 2020, £9.1m was recognised as a result of participation in the UK COVID-19 Job Retention Scheme and a similar
scheme operated in the Republic of Ireland. Income has been allocated to segments based on where the underlying costs were incurred. This resulted
in £0.1m (2020: £2.7m) being allocated to Rental and related contribution, £nil (2020: £0.7m) to Services contribution, £0.1m (2020: £5.2m) to branch and
selling costs, £nil (2020: £0.3m) to central costs, and £nil (2020: £0.2m) to exceptional items.
In 2020, £0.6m of grant income related to property rates was allocated to branch and selling costs – no such grant income was received in 2021.
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 year (2020: one customer was more than 10%).
Year ended 1 January 2022
Rental
(and related
revenue)
£000s
Services
£000s
Central
£000s
Total revenue from external customers
191,158
112,111
Contribution
Branch and selling costs
Central costs
Adjusted EBITDA
Less: Exceptional items
132,583
16,209
Total
£000s
303,269
148,792
–
–
(49,229)
(29,786)
(49,229)
(29,786)
8,039
69,777
8,039
Less: Depreciation and amortisation
(22,350)
(826)
(20,119)
(43,295)
Operating profit
Net finance expenses
Profit before tax from continuing operations
Income tax credit
Profit after tax from continuing operations
Profit on disposal of discontinued operations
Profit for the year from discontinued operations
Profit for the financial period
34,521
(28,455)
6,066
1,239
7,305
41,242
5,179
53,726
Financial Statements
HSS Hire Group plc
Annual Report and Financial Statements 2021
95
Additions to non-current assets
Property, plant and equipment
Right of use assets
Intangibles
Non-current assets net book value
Property, plant and equipment
Right of use assets
Intangibles
Deferred tax assets
Current assets
Current liabilities
Non-current liabilities
Total revenue from external customers from continuing operations
Contribution
Branch and selling costs
Central costs
Adjusted EBITDA
Less: Exceptional items
Less: Depreciation and amortisation
Operating loss
Net finance expenses
Loss before tax from continuing operations
Income tax charge
Profit for the year from discontinued operations
Loss after tax and discontinued operations
Rental
(and related
revenue)
£000s
18,558
8,558
2,928
44,332
20,651
143,553
Year ended 1 January 2022
Services
£000s
Central
£000s
Total
£000s
16
56
39
129
384
836
2,750
6,826
1,361
21,324
15,440
4,328
15,476
54,945
3,259
2,404
123,631
(103,020)
(144,679)
59,937
75,980
147,648
2,404
123,631
(103,020)
(144,679)
161,901
Year ended 26 December 2020
Restated1
Rental
(and related
revenue)
£000s
160,615
Services
£000s
89,448
116,812
10,737
Central
£000s
–
–
Total
£000s
250,063
127,549
(46,202)
(21,787)
(46,202)
(21,787)
(25,134)
(600)
(13,016)
(25,481)
59,560
(13,016)
(51,215)
(4,671)
(24,968)
(29,639)
(42)
6,100
(23,581)
1 The notes supporting the income statement have been restated to disclose continuing operations (note 4z).
96
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Annual Report and Financial Statements 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 1 JANUARY 2022
5. Segment reporting continued
Additions to non-current assets
Property, plant and equipment
Right of use assets
Intangibles
Non-current assets net book value
Property, plant and equipment
Right of use assets
Intangibles
Current assets
Current liabilities
Non-current liabilities
Rental
(and related
revenue)
£000s
14,099
4,880
979
50,429
20,576
153,804
Year ended 26 December 2020
Restated2
Services
£000s
Central
£000s
Total
£000s
59
–
861
203
212
1,246
2,286
4,357
1,477
16,444
9,237
3,317
17,743
62,700
3,448
176,636
(107,665)
(271,742)
68,375
83,488
158,498
176,636
(107,665)
(271,742)
107,590
2 Leased assets transferred to right-of-use assets on adoption of IFRS16 were overstated in the prior year due to the inclusion of expired leases. These have
been re-presented as owned assets. The net book value of the assets as at 26 December 2020 was £6.4m – there is no impact to total non-current assets
(see notes 4z, 15 and 16).
6. Other operating income
COVID-19 Government grant income: job retention schemes
COVID-19 Government grant income: rates grants
Insurance proceeds (net of fees)
Sub-lease rental and service charge income
Year ended
1 January
2022
£000s
232
–
1,203
273
1,708
Year ended
26 December
2020
Restated1
£000s
9,118
595
1,216
221
11,150
During the year, the Group recognised £0.2m as a result of earlier participation in the Republic of Ireland’s job retention scheme. The income was
received during 2020 with recognition deferred pending confirmation of eligibility. In 2020, the Group received and recognised £9.1m of grant income
from the UK COVID-19 Job Retention Scheme and a similar scheme in the Republic of Ireland; and COVID-19 rates grants of £0.6m. During the year the
Group also received £1.2m (2020: £1.2m) from COVID-19 business interruption insurance claims. Sub-let rental income of £0.3m (2020: £0.2m) was
received on vacant properties.
1 The notes supporting the income statement have been restated to disclose continuing operations (note 4z).
Financial Statements
HSS Hire Group plc
Annual Report and Financial Statements 2021
97
7. Exceptional items
Items of income or expense have been shown as exceptional either because of their size or nature or because they are outside the normal course
of business. As a result, during the year ended 1 January 2022 the Group has recognised exceptional items as follows:
Onerous property (credits)/costs
Costs expensed on refinancing
Costs relating to restructure
Onerous contract
Capital Raise and Aim listing
Exceptional items continuing operations
Profit arising on business divestiture – discontinued operations
Total
During the year ended 26 December 2020, the Group recognised exceptional costs analysed as follows:
Included
in cost
of sales
£000s
Included in
distribution
costs
£000s
Included in
administrative
expenses
£000s
Onerous property costs
Network restructure
Onerous contract
Capital Raise and AIM listing
–
305
–
–
305
–
25
–
–
25
7,010
4,422
557
868
Included in
administrative
expenses
£000s
Included
in other
operating
income
£000s
(7,982)
(106)
–
556
(257)
(250)
(7,933)
(41,242)
(49,175)
Included in
finance
expense
£000s
Year ended
1 January
2022
£000s
223
9,730
–
(8)
–
9,945
–
9,945
(7,865)
9,730
556
(265)
(250)
1,906
(41,242)
(39,336)
Included in
finance
expense
£000s
Year ended
26 December
2020
£000s
373
–
–
–
7,362
4,602
557
868
–
–
–
–
(106)
–
(106)
Restated1
Included
in other
operating
income
£000s
(21)
(150)
–
–
12,857
(171)
373
13,389
1 The notes supporting the income statement have been restated to disclose continuing operations (note 4z).
Exceptional items incurred in 2021 and 2020
Costs related to onerous properties: branch and office closures
In October 2020 the Group announced a decision to permanently close 134 stores as part of an acceleration of strategy. Since that date the Group has
been working to agree exits from these and pre-existing dark stores. An exceptional credit of £7.9m has been recognised in 2021 (2020 an exceptional
charge of £7.4m) was recognised. This relates mainly to the release of lease liabilities, onerous property cost and dilapidations provisions on surrender of
properties following the branch closures.
Right of use (ROU) assets valuing £9.5m were fully impaired following the decision to close stores in October 2020. As a result, any subsequent
surrender of the associated leases results in a gain on the disposal of remaining lease liability. 66 of the leases related to October 2020 restructuring
were disposed of in the year resulting in a gain of £4.0m (2020: 60 leases surrendered and net gain of £4.0m). Other dark stores exited in the year
resulted in a gain of £1.0m. The lease liability associated with the last nine dark stores is £1.1m.
Two closed stores were subject to lease modifications (rent reviews) during 2021. This resulted in the addition of lease liabilities and corresponding ROU
assets – which were immediately impaired – generating a charge of £0.1m.
In 2020, COVID-19 qualifying rent concessions of £0.3m were recognised as an exceptional credit because they related to stores that were non-trading
and previously had been considered onerous.
An interest charge (discount unwind) of £0.2m (2020: £0.4m) on dark store liabilities was recognised through exceptional finance costs.
Onerous property cost provisions for rates and utilities associated with surrendered dark stores have been released resulting in a credit of £3.0m (figure
is net of £1.1m in fees paid, mainly to the Group’s restructuring adviser). In 2020, onerous property costs of £2.1m were recognised, including £0.4m in
advisory fees.
As part of the surrender negotiations to exit dark stores dilapidations liabilities were agreed and a net credit of £0.2m was recognised. In 2020,
dilapidations assets totalling £1.2m were impaired as a result of the decision to close branches, following which settlements were agreed for certain
properties resulting in a release of liability of £1.2m. Reassessment of remaining non-trading store liabilities resulted in a further release of £0.3m in 2020.
The amounts remaining for onerous contract costs and dilapidations provisions on dark stores are £0.2m and £1.1m respectively (2020: £4.0m and
£3.9m respectively).
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Annual Report and Financial Statements 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 1 JANUARY 2022
7. Exceptional items continued
Onerous contract
The Group maintains a provision to cover the expected outflows related to its onerous contract with Unipart for the NDEC operation which ceased in late
2017 (note 22). The liability at the balance sheet date is £13.5m (2020: £17.0m). The discount rate used to calculate the present value of the provision is
the 5 year UK gilt rate of 0.81% (2020: -0.05%). Application of the new discount rate at the balance sheet date resulted in a credit to the income
statement of £0.3m (2020: debit of £0.6m), recognised as exceptional in line with the original provision.
Capital raise and AIM listing
In 2020 the Group successfully completed a capital raise to strengthen its balance sheet and moved its listing to AIM in January 2021. An over-accrual of
legal costs of £0.3m was released in 2021 (fees totalling £0.9m had been recognised in 2020). Costs that related specifically to the capital raise were
deducted from the net proceeds and included in the share premium account (note 24).
Exceptional items incurred in 2021 only
Costs expensed on refinancing
In October 2021, following the sale of All Seasons Hire Limited (see business divestitures below and note 29) the Group repaid £50.0m of the senior
finance facility in place at that time. The early repayment resulted in a prepayment penalty of £1.9m. In November 2021 the Group completed a
refinancing exercise. A new senior finance facility of £70m was agreed at a significantly reduced interest rate. The early repayment of the previous facility
resulted in a prepayment penalty of £4.5m. Repayments of the senior finance facility led to accelerated amortisation of debt issue costs of £3.3m.
Costs related to restructure
Following the changes made to its operating network in Q4 2020 and the roll-out of HSS Pro in Q1 2021, the Group has commenced an exercise to
legally separate the HSS Operations and Pro Service divisions into distinct entities. Fees incurred relating to the restructure of £0.6m have been
recognised as exceptional. The restructure is expected to complete in 2022 and to cost less than £2m in total.
Business divestiture
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:
Laois Hire Limited
Laois Hire Limited, the Irish large plant hire business was sold to Briggs Equipment Ireland Limited (Briggs) 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.
Exceptional items incurred in 2020 only
Network restructure (excluding onerous property items)
As a result of the decision to close branches and operate a more flexible structure, the Group incurred significant other, non-property costs.
300 colleagues were placed at risk of redundancy with the majority leaving the business on completion of consultation. £1.6m was recognised in this
regard. Property, plant and equipment with a net book value of £2.0m was impaired and a further £0.8m (note 9) disposed of. Excess resale stock
valued at £0.3m was written off.
8. Finance expense
Senior finance facility
Senior finance facility prepayment penalties (note 7)
Debt issue costs
Lease liabilities
Interest unwind on discounted provisions
Revolving credit facility
Interest on financial instruments
Bank loans and overdrafts
Accelerated amortisation of debt issue costs (note 7)
1 The notes supporting the income statement have been restated to disclose continuing operations (note 4z).
Year ended
1 January
2022
£000s
12,653
6,430
1,896
3,950
15
58
–
153
3,300
Year ended
26 December
2020
Restated1
£000s
16,334
–
2,398
4,950
424
382
320
160
–
28,455
24,968
Financial Statements
HSS Hire Group plc
Annual Report and Financial Statements 2021
99
9. Operating profit
Operating profit is stated after charging/(crediting):
Depreciation (see below for detail)
Amortisation (see below for details)
Write off inventory (note 17)
Operating lease rentals:
– motor vehicles and equipment for internal use
– hire stock
Sub-lease rental income (note 6)
Foreign currency translation gains
COVID-19 Government grant income (note 6)
Business interruption insurance proceeds (note 6)
Auditors’ remuneration
– audit of Group and Company Financial Statements
– audit of subsidiary Financial Statements
– other non-audit assurance services
Year ended
1 January
2022
£000s
38,120
5,175
256
984
662
(273)
(81)
(232)
(1,203)
£000s
148
712
39
899
Year ended
26 December
2020
Restated1
£000s
46,193
5,022
277
358
–
(221)
(400)
(9,713)
(1,216)
£000s
105
399
194
698
1 The notes supporting the income statement have been restated to disclose continuing operations (note 4z).
Below is a reconciliation of depreciation and amortisation across the asset categories:
Year ended
1 January 2022
£000s
Year ended
26 December
2020
£000s
Property,
plant and
equipment
£000s
Right of
use assets
£000s
Property,
plant and
equipment
£000s
Right of
use assets
£000s
Net
investment in
subleases
£000s
Total
£000s
16,735
19,393
36,128
20,173
24,536
3,370
91
264
634
997
233
4,004
4,324
403
1,088
497
2,028
2,016
82
9,541
20,460
21,257
41,717
28,541
34,562
(1,086)
(243)
–
–
(1,086)
(243)
–
–
–
–
–
–
59
–
59
–
–
Total
£000s
44,709
4,727
2,169
11,557
63,162
–
–
19,131
21,257
40,388
28,541
34,562
59
63,162
(1,364)
(472)
(1,836)
(2,779)
(618)
–
(432)
(432)
(4,004)
(9,568)
–
–
(3,397)
(13,572)
17,767
20,353
38,120
21,758
24,376
59
46,193
Depreciation (note 15,16)
Accelerated depreciation relating to
hire stock customer losses and hire
stock write-offs
Loss on disposals of non hire stock
assets
Impairment (note 15,16)
Total depreciation as per asset
notes
Less dilapidations profit on
surrender
Disposal of assets as part of
business divestiture (note 29)
Depreciation per consolidated
statement of cash flows
Less depreciation and loss on
disposal of assets from
discontinued operations (note 29)
Less exceptional profit on disposal
of leases
Depreciation as reported on a
continuing operations basis
100
HSS Hire Group plc
Annual Report and Financial Statements 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 1 JANUARY 2022
9. Operating profit continued
Amounts charged in respect of amortisation
Intangible assets
Amortisation (note 14)
Less amortisation relating to discontinued operation (note 29)
10. Employees
The average number of people employed by the Group (including Directors) during the year was as follows:
Distribution
Hire stock and inventory maintenance
Sales and administration
Discontinued operations
The aggregate remuneration costs of these employees were as follows:
Wages and salaries
Social security costs
Pension costs
Share-based payment expense
Discontinued operations
Year ended
1 January
2022
£000s
Year ended
26 December
2020
£000s
5,310
(135)
5,175
5,197
(175)
5,022
Year ended
1 January
2022
Year ended
26 December
2020
403
251
1,394
2,048
(145)
1,903
460
268
1,602
2,330
(163)
2,167
Year ended
1 January
2022
£000s
Year ended
26 December
2020
£000s
71,696
7,101
1,942
1,374
82,113
(3,383)
78,730
69,324
6,733
2,081
453
78,591
(6,231)
72,360
During the year, remuneration costs of £1.8m (2020: £1.2m) were capitalised as software development and infleeting of hire equipment costs.
These amounts have been excluded from the disclosures above. IAS 24 Related Party Disclosures (IAS 24) requires the Group to disclose all
transactions and outstanding balances with the Group’s key management personnel. IAS 24 defines key management personnel as those persons
having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any Director (whether
executive or otherwise) of that entity. The key management personnel of the Group comprise the Executive Directors along with senior managers from
central support services and divisional and regional operations.
The aggregate remuneration costs of key management personnel were as follows:
Wages and salaries
Employer’s national insurance contributions and similar taxes
Bonus
Other pension costs
Share-based payment expense
Year ended
1 January
2022
£000s
Year ended
26 December
2020
£000s
2,928
416
1,841
162
877
6,224
2,562
375
–
125
473
3,535
Financial Statements
HSS Hire Group plc
Annual Report and Financial Statements 2021
101
11. Directors’ remuneration
The remuneration costs of the Group’s Directors were:
Aggregate emoluments
Bonus
Pension costs
Directors’ emoluments
Share-based payment expense
Total charged to Consolidated income statement
Year ended
1 January
2022
£000s
Year ended
26 December
2020
£000s
954
639
55
1,648
278
1,926
736
–
55
791
217
1,008
Included above is the fee of £40,000 (2020: £30,000) for one Director (2020: one) that is paid to Exponent Private Equity LLP (note 30).
The remuneration of the highest paid Director was:
Aggregate emoluments
Bonus
Pension costs
Directors’ emoluments
Share-based payment expense
Total charged to Consolidated income statement
12. Income tax charge
(a) Analysis of tax charge in the year
Current tax charge/(credit)
UK corporation tax on the result for the year
Adjustments in respect of prior years
Total current tax charge
Deferred tax (credit)/charge for the year
Deferred tax credit for the year
Deferred tax impact of change in tax rate
Adjustments in respect of prior years
Total deferred tax credit (note 23)
Year ended
1 January
2022
£000s
Year ended
26 December
2020
£000s
374
371
31
776
168
944
297
–
31
328
132
460
Year ended
1 January
2022
£000s
1,151
(80)
1,071
(2,319)
(117)
126
(2,310)
Year ended
26 December
2020
Restated1
£000s
78
17
95
(592)
13
526
(53)
Income tax (credit)/charge
(1,239)
42
1 The notes supporting the income statement have been restated to disclose continuing operations (note 4z).
102
HSS Hire Group plc
Annual Report and Financial Statements 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 1 JANUARY 2022
12. Income tax charge continued
(b) Factors affecting the income tax (credit)/charge in the year
The tax assessed on the profit/(loss) for the year differs from the standard UK corporation rate of tax. The differences are explained below:
Profit/(loss) before tax from continuing operations
Year ended
1 January
2022
£000s
6,066
Year ended
26 December
2020
Restated1
£000s
(29,639)
Profit/(loss) before tax multiplied by the effective standard rate of corporation tax of 19% (2020: 19%)
1,153
(5,631)
Effects of:
Unprovided deferred tax movements on short-term temporary differences and capital allowance timing differences
Adjustments in respect of prior years
Expenses not deductible for tax purposes
Losses surrendered for no consideration
Foreign tax suffered
Recognition of prior year tax losses
Impact of change in tax rate
Income tax (credit)/charge
(2,958)
46
2,437
–
200
(2,000)
(117)
(1,239)
3,003
543
858
1,178
78
–
13
42
1 The notes supporting the income statement have been restated to disclose continuing operations (note 4z).
The charge of £2.4m (2020: £0.9m) arising in respect of expenses not deductible is mainly attributable to costs associated with the Group exiting
property leases and removing dormant entities from the Group structure. The credit of £2.0m (2020: £nil) arises from the recognition of a deferred tax
asset in respect of prior period losses. Based upon forecasts, the Group considers the recognition criteria in IAS 12 have been met. In 2020, the
adjustment in respect of prior years relates to an increase in deferred tax liability due to accelerated capital allowances in earlier periods.
(c) Factors that may affect future tax charge
The standard rate of UK corporation tax will increase to 25% from 1 April 2023. The increased rate has been used to calculate the above deferred tax
disclosures except where it is known the temporary differences will unwind before the new rate applies, in which case the existing rate of 19% has been
used.
The Group has an unrecognised deferred tax asset relating to temporary timing differences on plant and equipment, intangible assets and provisions of
£15.2m (2020: £12.8m) and relating to trading losses of £17.9m (2020: £13.3m). These potential deferred tax assets have not been recognised on the
basis that it is not sufficiently certain when taxable profits that can be utilised to absorb the reversal of the temporary differences will be made.
13. Earnings per share
Basic earnings/(loss) per share:
Year ended 1 January 2022
Year ended 26 December 2020
Profit/(loss)
after tax from
total
operations
£000s
Profit/(loss)
after tax from
continuing
operations
£000s
53,726
(23,581)
7,305
(29,681)
Weighted
average
number of
shares
000s
696,821
196,232
Earnings/(loss)
after tax from
total
operations per
share
pence
Earnings/(loss)
after tax from
continuing
operations per
share
pence
7.71
(12.02)
1.05
(15.13)
Basic earnings/(loss) per share is calculated by dividing the result attributable to equity holders by the weighted average number of ordinary shares in
issue for that year.
Diluted earnings/(loss) per share:
Year ended 1 January 2022
Year ended 26 December 2020
Profit/(loss)
after tax from
total
operations
£000s
Profit/(loss)
after tax from
continuing
operations
£000s
53,726
(23,581)
7,305
(29,681)
Diluted
weighted
average
number of
shares
000s
714,816
196,232
Earnings/(loss)
after tax from
total operations
per share
pence
Earnings/(loss)
after tax from
continuing
operations per
share
pence
7.52
(12.02)
1.02
(15.13)
Financial Statements
HSS Hire Group plc
Annual Report and Financial Statements 2021
103
Diluted earnings/(loss) per share is calculated using the profit/(loss) for the year 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, Sharesave Scheme share options and warrants, as disclosed in notes 25 and 26.
All of the Group’s potentially dilutive equity derivative securities were dilutive for the purpose of diluted earnings per share (2020: anti-dilutive for the
purpose of diluted basic loss per share).
The following is a reconciliation between the basic earnings/(loss) per share and the adjusted basic earnings/(loss) per share:
Basic earnings/(loss) per share
Add back:
Exceptional items per share1
Amortisation per share2
Tax per share
Charge:
Tax (credit)/charge at prevailing rate
Adjusted basic earnings/(loss) per share
Year ended
1 January
2022
pence
total
operations
Year ended
1 January
2022
pence
continuing
operations
Year ended
26 December
2020
pence
total
operations
Year ended
26 December
2020
pence
continuing
operations
7.71
1.05
(12.02)
(15.13)
(5.64)
0.76
(0.17)
(0.51)
2.15
0.27
0.74
(0.18)
(0.36)
1.52
6.85
2.65
0.01
0.48
(2.03)
6.82
2.56
0.02
1.09
(4.64)
1 Exceptional items per share is calculated as total exceptional items divided by the weighted average number of shares in issue through the year.
2 Amortisation per share is calculated as the amortisation charge divided by the weighted average number of shares in issue through the year.
The following is a reconciliation between the diluted earnings/(loss) per share and the adjusted diluted earnings/(loss) per share:
Diluted earnings/(loss) per share
Add back:
Exceptional items per share1
Amortisation per share2
Tax per share
Charge:
Tax (credit)/charge at prevailing rate
Adjusted diluted earnings/(loss)
Year ended
1 January
2022
pence
total
operations
Year ended
1 January
2022
pence
continuing
operations
Year ended
26 December
2020
pence
total
operations
Year ended
26 December
2020
pence
continuing
operations
7.52
1.02
(12.02)
(15.13)
(5.50)
0.74
(0.16)
(0.49)
2.11
0.27
0.72
(0.17)
(0.35)
1.49
6.85
2.65
0.01
0.48
(2.03)
6.82
2.56
0.02
1.09
(4.64)
1 Exceptional items per share is calculated as total finance and non-finance exceptional items divided by the diluted weighted average number of shares in issue through
the year.
2 Amortisation per share is calculated as the amortisation charge divided by the diluted weighted average number of shares in issue through the year.
The weighted average number of shares for the purposes of calculating the adjusted diluted earnings per share are as follows:
Basic
LTIP share options (note 26)
Restricted stock grants (note 26)
CSOP options (note 26)
Diluted
Year ended
1 January 2022
Weighted average
number of shares
000s
Year ended
26 December 2020
Weighted average
number of shares
000s
696,821
196,232
8,296
8,988
711
–
–
–
714,816
196,232
104
HSS Hire Group plc
Annual Report and Financial Statements 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 1 JANUARY 2022
14. Intangible assets
Cost
At 27 December 2020
Additions
Disposals
Business disposal (note 29)
Foreign exchange differences
At 1 January 2022
Amortisation
At 27 December 2020
Charge for the period
Disposals
Business disposal (note 29)
At 1 January 2022
Net book value
At 1 January 2022
Cost
At 29 December 2019
Additions
Disposals
At 26 December 2020
Amortisation
At 29 December 2019
Charge for the year
Disposals
At 26 December 2020
Net book value
At 26 December 2020
Goodwill
£000s
Customer
relationships
£000s
Brands
£000s
Software
£000s
Total
£000s
124,877
26,744
23,222
–
–
(9,018)
(4)
–
–
(1,344)
–
–
–
(632)
–
27,580
4,328
(52)
–
–
202,423
4,328
(52)
(10,994)
(4)
115,855
25,400
22,590
31,856
195,701
–
–
–
–
–
21,348
2,675
–
(722)
23,301
622
84
–
(408)
298
21,955
2,551
(52)
–
24,454
43,925
5,310
(52)
(1,130)
48,053
115,855
2,099
22,292
7,402
147,648
Goodwill
£000s
Customer
relationships
£000s
Brands
£000s
Software
£000s
Total
£000s
124,877
26,744
23,222
–
–
–
–
–
–
24,409
3,317
(146)
199,252
3,317
(146)
124,877
26,744
23,222
27,580
202,423
–
–
–
–
18,694
2,654
–
21,348
525
97
–
622
19,655
2,446
(146)
21,955
38,874
5,197
(146)
43,925
124,877
5,396
22,600
5,625
158,498
Financial Statements
HSS Hire Group plc
Annual Report and Financial Statements 2021
105
Analysis of goodwill, indefinite life brands, other brands and customer relationships by cash generating unit:
Allocated to
HSS Core
Power generation
At 1 January 2022
Allocated to
HSS Core
Climate control
Power generation
At 26 December 2020
Goodwill
£000s
Indefinite life
brands
£000s
Other
brands
£000s
Customer
relationships
£000s
109,802
6,053
115,855
21,900
–
21,900
–
392
392
1,900
199
2,099
Goodwill
£000s
Indefinite life
brands
£000s
Other
brands
£000s
Customer
relationships
£000s
111,497
21,900
7,327
6,053
–
–
124,877
21,900
236
273
191
700
4,397
708
291
5,396
Total
£000s
133,602
6,644
140,246
Total
£000s
138,030
8,308
6,535
152,873
The remaining life of intangible assets other than goodwill and indefinite life brands is between nil and 13 years (2020: nil and 14 years). For the purpose
of calculating Adjusted EBITDA and Adjusted EBITA, amortisation, as disclosed on the face of the income statement, is calculated as the total of the
amortisation charge for the year and the loss on disposal of intangible assets.
The Group tests property, plant and equipment, right of use assets, goodwill and brands for impairment annually and considers at each reporting date
whether there are indicators that impairment may have occurred. In identifying indicators of impairment management considers current market
capitalisation, asset obsolescence or closure, adverse trading performance and any other relevant wider economic or operational factors.
Following the disposal of All Seasons Hire Limited, which was the sole component of the Climate Control CGU, the Group has two cash generating units
(CGUs): HSS Core and HSS Power.
The recoverable amounts of the goodwill and indefinite life brands, which are allocated to CGUs, are estimated from value in use (VIU) calculations which
model pre-tax cash flows for the next five years (2020: five years) together with a terminal value using a long-term growth rate. The key assumptions
underpinning the recoverable amounts of the CGUs tested for impairment are those regarding the discount rate, forecast inflation rate, forecast revenue,
EBITDA and capital expenditure including cash flows required to maintain the Group’s right of use assets.
The key variables applied to the VIU calculations were determined as follows:
– Cash flows were derived based on the budget for 2022 and model of the business for the following two years (to the end of 2024).
– Operational activity then had a long-term growth rate applied to it while capital expenditure was specifically adjusted to reflect expectations of spend
in the following years giving a model of five years in total after which a terminal value was calculated. The long-term growth factor used was 2.0% for
each of the CGUs (2020: 1.8%).
– A pre-tax discount rate of 9.44% (2020: 9.16%), calculated by reference to a weighted average cost of capital (WACC) based on an industry peer
group of quoted companies and including a 2.0% premium reflective of the Group’s market capitalisation.
An impairment may be identified if changes to any of the factors mentioned above become significant, including under performance of the Group
against forecast, negative changes in the UK tool hire market or a deterioration in the UK economy, which would cause the Directors to reconsider their
assumptions and revise their cash flow projections.
Based on the VIU modelling and impairment testing, the Directors do not consider an impairment charge to be required in respect of any of the property,
plant and equipment, goodwill or indefinite life brand assets carried in the balance sheet at 1 January 2022 for either of the CGUs.
The Directors carried out sensitivity analysis on various inputs to the models, including growth rates, discount rates and percentage reductions to
ongoing cash flows which did not result in an impairment charge for either CGU. Given the level of headroom in VIU these calculations show, the
Directors did not envisage reasonably possible changes, either individually or in combination, to the key assumptions that would be sufficient to cause
an impairment charge at the balance sheet date. The Directors also noted that the market capitalisation of the group at the balance sheet date was
below the consolidated net asset position – which is an indicator that an impairment may exist. On consideration of various factors including the
concentrated shareholder base and recent shareholder and investor activity they concluded that an impairment was not required in this regard.
In respect of HSS Core (the more sensitive CGU) at 1 January 2022, the headroom between VIU and carrying value of the related assets was £156.0m
(2020: £75.1m). The Directors’ sensitivity analysis with regard to HSS Core shows that an increase in the discount rate to 15.0% (2020: 11.5%) or a
reduction in the long-term growth rate to a decline of 6.2% (2020: decline of 0.7%) would eliminate the headroom shown. In addition, the Directors have
assessed the combined impact of the long-term growth rate falling to zero (2020: zero) and an increase in the discount rate of 1% to 10.44%
(2020: 10.16%). This shows that the headroom drops to £64.7m (2020: £53.9m) for HSS Core but that impairment is not required for either CGU.
106
HSS Hire Group plc
Annual Report and Financial Statements 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 1 JANUARY 2022
15. Property, plant and equipment
Cost
At 27 December 2020
Transferred from right of use assets
Additions
Disposals1
Business disposal (note 29)
Foreign exchange differences
At 1 January 2022
Accumulated depreciation
At 27 December 2020
Transferred from right of use assets
Charge for the year
Impairment
Disposals1
Business disposal
Foreign exchange differences
Transfers
At 1 January 2022
Net book value
At 1 January 2022
Land &
buildings
£000s
Plant &
machinery
£000s
Materials &
equipment
held for hire
£000s
58,419
–
2,011
(22,394)
(702)
(31)
55,315
–
755
(11,193)
(1,683)
(31)
149,534
8,742
18,558
(16,515)
(26,064)
(581)
Total
£000s
263,268
8,742
21,324
(50,102)
(28,449)
(643)
37,303
43,163
133,674
214,140
45,208
–
2,543
264
(22,325)
(231)
(6)
–
50,580
–
1,710
–
(11,171)
(1,485)
(56)
(170)
99,105
5,200
12,482
–
(13,145)
(14,148)
(322)
170
194,893
5,200
16,735
264
(46,641)
(15,864)
(384)
–
25,453
39,408
89,342
154,203
11,850
3,755
44,332
59,937
1 Following the reduction in the Group’s branch network and surrender of the majority of dark stores (note 7), an asset verification exercise has been carried out. As a
result, land and buildings and property, plant and equipment assets with a gross book value of £19.6m, and which had previously been fully impaired, have been
disposed during the year.
The results of the impairment review for property, plant and equipment are included in note 14.
Financial Statements
HSS Hire Group plc
Annual Report and Financial Statements 2021
107
Cost
At 29 December 2019
Transferred to right of use assets at 29 December 2019 – as previously reported
Restatement1
Transferred to right of use assets – restated
Transferred from right of use assets – as previously reported
Restatement1
Transferred from right of use assets – restated
Additions
Disposals
Foreign exchange differences
At 26 December 2020
Accumulated depreciation
At 29 December 2019
Transferred to right of use assets at 29 December 2019 – as previously reported
Restatement1
Transferred to right of use assets – restated
Transferred from right of use assets – as previously reported
Restatement1
Transferred from right of use assets – restated
Charge for the year – as previously reported
Restatement1
Charge for the year – restated
Impairment
Disposals
Foreign exchange differences
Transfers
At 26 December 2020
Net book value
At 26 December 2020
Land &
buildings
£000s
Plant &
machinery
£000s
Materials &
equipment
held for hire
Restated
£000s
73,505
61,925
179,788
–
–
–
–
–
–
–
–
–
–
–
–
1,284
(16,408)
38
1,061
(7,748)
77
(46,888)
15,906
(30,982)
3,144
348
3,492
14,099
(17,328)
465
Total
Restated
£000s
315,218
(46,888)
15,906
(30,982)
3,144
348
3,492
16,444
(41,484)
580
58,419
55,315
149,534
263,268
54,437
55,936
–
–
–
–
–
–
3,516
–
3,516
1,789
(14,536)
2
–
–
–
–
–
–
–
2,139
–
2,139
227
(7,592)
40
(170)
102,994
(17,576)
213,367
(17,576)
7,843
(9,733)
1,652
377
2,029
14,518
1,683
16,201
–
7,843
(9,733)
1,652
377
2,029
20,173
1,683
21,856
2,016
(13,004)
(35,132)
448
170
490
–
45,208
50,580
99,105
194,893
13,211
4,735
50,429
68,375
1
‘Transferred to right of use assets’ category represents the transfer of assets held under finance lease to right of use (ROU) assets (note 16) on adoption of IFRS 16.
‘Transferred from right of use assets’ category represents the return of ROU assets at expiry of the lease in cases where title is transferred to the Group. Leased assets
transferred to right-of-use assets on adoption of IFRS 16 were overstated in the prior year due to the inclusion of expired leases. These have been re-presented as
owned assets. The net book value of the assets at transition was £8.1m – there is no impact to total non-current assets (see notes 4z and 16). The net book value of the
total restatement was £6.4m. The restatement has no impact on the consolidated income statement and no impact on net assets in the consolidated statement of
financial position.
108
HSS Hire Group plc
Annual Report and Financial Statements 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 1 JANUARY 2022
16. Right of use assets
Cost
At 27 December 2020
Additions
Re-measurements
Transfers to property, plant and equipment
Disposals
Business disposals (note 29)
Amount re-recognised on disposal of sublease
Foreign exchange differences
At 1 January 2022
Accumulated depreciation
At 27 December 2020
Transfers to property, plant and equipment
Charge for the period
Impairments
Disposals
Business disposals (note 29)
At 1 January 2022
Net book value
At 1 January 2022
Property
£000s
Vehicles
£000s
Equipment for
internal use
£000s
Equipment
for hire
£000s
61,253
1,882
3,407
–
(8,755)
(1,304)
544
(180)
23,681
5,000
128
–
(859)
(1,662)
–
(5)
562
–
(12)
–
–
(30)
–
–
21,998
8,558
–
(4,462)
(755)
–
–
–
Total
£000s
107,494
15,440
3,523
(4,462)
(10,369)
(2,996)
544
(185)
56,847
26,283
520
25,339
108,989
15,403
–
7,840
233
(7,975)
(397)
6,854
–
7,099
–
(642)
(538)
15,104
12,773
327
–
147
–
–
(30)
444
1,422
(920)
4,307
–
(121)
–
4,688
24,006
(920)
19,393
233
(8,738)
(965)
33,009
41,743
13,510
76
20,651
75,980
Financial Statements
HSS Hire Group plc
Annual Report and Financial Statements 2021
109
Property
£000s
Vehicles
£000s
Equipment for
internal use
£000s
Restated
Equipment
for hire
£000s
Restated
Total
£000s
Cost
Recognised on transition date at 29 December 2019 – as previously
reported
58,014
21,416
Restatement1
Recognised on transition date – restated
Additions
Re-measurements
Transfers to property, plant and equipment – as previously reported
Restatement1
Transfers to property, plant and equipment – restated
Disposals
Foreign exchange differences
At 26 December 2020
Accumulated depreciation
Transfers to property, plant and equipment – as previously reported
Restatement1
Transfers to property, plant and equipment – restated
Charge for the period – as previously reported
Restatement1
Charge for the period – restated
Impairments
Disposals
At 26 December 2020
Net book value
At 26 December 2020
–
58,014
1,317
6,931
–
–
–
(5,164)
155
–
21,416
3,040
17
–
–
–
(814)
22
61,253
23,681
–
–
–
10,999
–
10,999
9,541
(5,137)
15,403
–
–
–
7,613
–
7,613
–
(759)
6,854
789
–
789
–
–
–
–
–
(227)
–
562
–
–
–
554
–
554
–
(227)
327
29,312
(8,063)
21,249
4,880
–
(3,144)
562
(2,582)
(1,549)
–
109,531
(8,063)
101,468
9,237
6,948
(3,144)
562
(2,582)
(7,754)
177
21,998
107,494
(1,652)
533
(1,119)
5,370
(1,683)
3,687
–
(1,146)
1,422
(1,652)
533
(1,119)
24,536
(1,683)
22,853
9,541
(7,269)
24,006
45,850
16,827
235
20,576
83,488
1 Transfers to property, plant and equipment represents the return of ROU assets at expiry of the lease and where title is transferred to the Group. Leased assets
transferred to right of use assets on adoption of IFRS16 were overstated in the prior year due to the inclusion of expired leases. These have been re-presented as
owned assets. The net book value of the assets at transition was £8.1m – there is no impact to total non-current assets (see notes 4z and 15). The overall correction to
net book value at 27 December 2020 is £6.4m. The restatement has no impact on the consolidated income statement and no impact on net assets in the consolidated
statement of financial position.
Right of use (ROU) assets are depreciated over the lease term on a straight-line basis, except where the Group expects to exercise the right to take
ownership of the assets at the end of the lease; in such cases the assets are depreciated over the useful life and transferred to property, plant and
equipment at the end of the lease.
ROU assets are measured at cost comprising the initial measurement of lease liability, initial direct costs and restoration costs. During the year the Group
recorded re-measurements of £3.4m (2020: £6.9m) on its property leases due to changes in property footprint, including lease extensions and disposals
following the decision to close 134 branches in 2020 and subsequent negotiations with landlords to surrender leases. Under HSS accounting policy,
locations that have not been permanently closed are deemed to be part of a wider cash generating unit (CGU) when being tested for impairment.
The act of permanently closing a location has the effect of separating it from the CGU and is also a trigger for impairment. During the year rent reviews
were enacted on two closed stores resulting in the recognition and immediate impairment of additional ROU assets. In 2020 the value of ROU assets
impaired as a result of the decision to permanently close locations is £9.5m.
Disclosures relating to lease liabilities are included in note 20.
110
HSS Hire Group plc
Annual Report and Financial Statements 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 1 JANUARY 2022
17. Inventories
Inventories
Inventory spares
Total inventories
Provision for impairment
Inventories
Provision for impairment of inventories
Balance at the beginning of the year
Additions
Utilisation
Balance at the end of the year
1 January
2022
£000s
26 December
2020
£000s
1,972
1,310
3,282
(600)
2,682
2,038
1,245
3,283
(100)
3,183
1 January
2022
£000s
26 December
2020
£000s
100
500
–
600
344
250
(494)
100
The cost of inventories recognised as an expense and included in cost of sales is £25.5m (2020: £21.4m) and includes the write off of inventories to the
value of £0.3m (2020: £0.3m).
18. Trade and other receivables
Trade receivables
Accrued income
Total trade receivables and
contract assets
Net investment in sub-lease
Other debtors
Prepayments
Year ended 1 January 2022
Year ended 26 December 2020
Gross
£000s
73,873
4,165
Provision for
impairment
£000s
Provision for
credit notes
£000s
Net of
provision
£000s
(3,884)
(47)
(3,225)
–
66,764
4,118
Gross
£000s
66,434
6,965
Provision for
impairment
£000s
Provision for
credit notes
£000s
(2,916)
(107)
(2,458)
–
Net of
provision
£000s
61,060
6,858
78,038
(3,931)
(3,225)
70,882
73,399
(3,023)
(2,458)
67,918
961
1,282
5,555
–
–
–
–
–
–
961
1,282
5,555
1,497
3,502
2,963
–
–
–
–
–
–
1,497
3,502
2,963
Total trade and other receivables
85,836
(3,931)
(3,225)
78,680
81,361
(3,023)
(2,458)
75,880
The following table details the movements in the provisions for impairment of trade receivables and contract assets and credit notes:
Balance at the beginning of the year
Increase in provision
Utilisation
Business disposals (note 29)
Balance at the end of the period
1 January
2022
£000s
1 January
2022
£000s
26 December
2020
£000s
26 December
2020
£000s
Provision
for impairment
Provision for
credit notes
Provision
for impairment
Provision
for credit notes
(3,023)
(1,835)
910
17
(3,931)
(2,458)
(3,746)
2,752
227
(3,225)
(1,568)
(3,085)
1,630
–
(3,023)
(2,177)
(2,877)
2,596
–
(2,458)
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:
1 January 2022
Trade receivables and contract assets
Expected loss rate
Provision for impairment charge
Current
44,209
1.0%
435
0 to 60 days
past due
61 to 365 days
past due
1 to 2 years
past due
22,847
2.4%
544
9,376
19.7%
1,848
1,606
68.7%
1,104
Total
78,038
5.0%
3,931
Financial Statements
HSS Hire Group plc
Annual Report and Financial Statements 2021
111
26 December 2020
Trade receivables and contract assets
Expected loss rate
Provision for impairment charge
Contract assets consist of accrued income.
Current
61,197
1.4%
839
0 to 60 days
past due
61 to 365
days past due
1 to 2 years
past due
5,902
4.6%
272
4,962
25.7%
1,276
1,338
47.5%
636
Total
73,399
4.1%
3,023
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 balance sheet date, similar to 2020, the Group has not seen
a marked increase in debt write-offs. However, as has been widely reported, there is an expectation that the situation will deteriorate as companies that
continued trading only as a result of Government support fail now that the support has been withdrawn. Given these facts, the Group considers that
historical losses are not a reliable predictor of future failures and has exercised judgement in increasing the expected loss rates across all categories of
debt. In so doing the provision has been increased by around £1.2m (2020: £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.
The total amount expensed was £2.8m (2020: £4.1m). Unless the counter-party is in liquidation, these amounts are still subject to enforcement action.
Following a review of the Annual Report and Accounts for the year ended 26 December 2020 by the FRC’s Corporate Reporting Review Team, the
presentation of the income statement has been changed to separately disclose the impairment loss on trade receivables of £1.8m (2020: £3.1m) on the
face of the consolidated income statement. Previously it was included within administrative expenses (which has now decreased by the corresponding
amount of £1.8m (2020: £3.1m). There was no impact on profit.
In line with the requirements of IFRS 15, provisions are made for credit notes expected to be raised after year-end for income recognised during the year
(see note 2).
The combined provisions for bad debt and credit notes amount to 9.2% of trade receivables and contract assets at 1 January 2022 (2020: 7.5%).
A 0.5% increase in the combined provision rate would give rise to an increased provision of £0.4m (2020: £0.4m).
19. Trade and other payables
Current
Trade payables
Other taxes and social security costs
Other creditors
Accrued interest on borrowings
Accruals
Deferred income
20. Lease liabilities
Current
Lease liabilities
Non-current
Lease liabilities
1 January
2022
£000s
26 December
2020
£000s
43,062
5,175
1,308
271
28,494
394
78,704
23,957
5,109
2,300
3,442
26,907
106
61,821
1 January
2022
£000s
26 December
2020
£000s
19,310
23,395
57,255
76,565
66,177
89,572
112
HSS Hire Group plc
Annual Report and Financial Statements 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 1 JANUARY 2022
20. Lease liabilities continued
The interest rates on the Group’s lease liabilities are as follows:
Equipment for hire
Other
Floating
Fixed
%age above NatWest base rate (2020: LIBOR)
2.4 to 3.3%
2.4 to 2.9%
3.5 to 6.0%
3.5 to 6.0%
1 January
2022
26 December
2020
The weighted average interest rates on the Group’s lease liabilities are as follows:
Lease liabilities
The lease liability movements are detailed below:
At 27 December 2020
Additions
Re-measurements
Discount unwind
Payments (including interest)
Disposals
Business disposals (note 29)
Foreign exchange differences
At 1 January 2022
Recognised on transition
Additions
Re-measurements
Discount unwind
Payments (including interest)
COVID-19 rental concessions
Disposals
Foreign exchange differences
At 26 December 2020
1 January
2022
26 December
2020
4.8%
4.8%
Equipment
for hire and
internal use
£000s
15,530
8,591
(12)
5
Total
£000s
89,572
15,601
3,523
3,345
(6,675)
(26,896)
Property
£000s
57,181
1,981
3,407
2,805
(13,209)
(6,006)
(1,063)
(217)
44,879
Property
£000s
60,609
1,301
6,931
3,622
(10,241)
(996)
(4,012)
(33)
Vehicles
£000s
16,861
5,029
128
535
(7,012)
(216)
(1,048)
(30)
–
–
–
14,247
17,439
Equipment
for hire and
internal use
£000s
17,369
4,896
–
779
Vehicles
£000s
21,331
3,040
17
661
(8,213)
(7,514)
–
–
25
–
–
–
(6,222)
(2,111)
(247)
76,565
Total
£000s
99,309
9,237
6,948
5,062
(25,968)
(996)
(4,012)
(8)
57,181
16,861
15,530
89,572
Financial Statements
HSS Hire Group plc
Annual Report and Financial Statements 2021
113
The Group’s leases have the following maturity profile:
Less than one year
Two to five years
More than five years
Less interest cash flows:
Lease liabilities
Total principal cash flows
The maturity profile, excluding interest cash flows, of the Group’s leases is as follows:
Less than one year
Two to five years
More than five years
21. Borrowings
Current
Senior finance facility
Non-current
Senior finance facility
Revolving credit facility
1 January
2022
£000s
26 December
2020
£000s
23,015
48,755
19,354
91,124
27,452
55,544
23,483
106,479
(14,559)
76,565
(16,907)
89,572
1 January
2022
£000s
26 December
2020
£000s
19,310
41,417
15,838
76,565
23,395
47,030
19,147
89,572
1 January
2022
£000s
26 December
2020
£000s
–
15,000
68,166
–
68,166
161,899
17,200
179,099
The Senior finance facility is stated net of transaction fees of £1.8m (2020: £5.0m) which are being amortised over the loan period.
The nominal value of the Group’s loans at each reporting date is as follows:
Senior finance facility
Revolving credit facility
1 January
2022
£000s
26 December
2020
£000s
70,000
–
70,000
181,982
17,200
199,182
On 9 November 2021, the Group refinanced, replacing the existing Senior finance facility and Revolving credit facility (RCF). The new finance facility
consists of a Senior finance facility of £70.0m and a Revolving credit facility (RCF) of £25.0m both of which expire on 9 November 2025 with an option to
extend for a further 12 months.
The Senior finance facility and RCF are secured over the assets of a Group company, Hampshire BidCo Limited and Hero Acquisitions Limited, and all of
its subsidiaries. These subsidiaries comprise all of the trading activities of the Group. The overall £25.0m RCF includes a £6.0m overdraft facility and a
£1.8m guarantee arrangement to secure the Group’s card-acquiring services provided by a third party (note 28).
The Group had undrawn committed borrowing facilities of £35.8m at 1 January 2022 (2020: £20.7m), including £12.6m of finance lines to fund hire fleet
capital expenditure not yet utilised. Including net cash balances, the Group had access to £78.1m of combined liquidity from available cash and undrawn
committed borrowing facilities at 1 January 2022 (2020: £118.3m).
114
HSS Hire Group plc
Annual Report and Financial Statements 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 1 JANUARY 2022
21. Borrowings continued
The interest rates on the Group’s borrowings are as follows:
Senior finance facility
Revolving credit facility
Floating
Floating
%age above SONIA (2020: LIBOR)
%age above SONIA (2020: LIBOR)
The weighted average interest rates on the Group’s borrowings are as follows:
Borrowings
1 January
2022
26 December
2020
3.0%
3.0%
8.0%
2.5 to 3.0%
1 January
2022
26 December
2020
3.0%
9.8%
Amounts under the RCF are typically drawn for a one- to three-month borrowing period, with the interest set for each borrowing period based upon
SONIA (2020: LIBOR) and a fixed margin.
The Group’s borrowings have the following maturity profile:
Less than one year
Two to five years
Less interest cash flows:
Senior finance facility
Revolving credit facility
Total principal cash flows
22. Provisions
At 27 December 2020
Additions
Utilised during the period
Unwind of provision
Impact of change in discount rate
Releases
Business disposals (note 29)
Foreign exchange
At 1 January 2022
Of which:
Current
Non-current
Borrowings
1 January
2022
£000s
Borrowings
26 December
2020
£000s
2,235
76,498
78,733
30,581
208,725
239,306
(8,733)
–
70,000
(38,822)
(1,302)
199,182
Onerous
property
costs
£000s
3,959
86
(212)
(1)
(31)
(3,615)
–
–
Dilapidations
£000s
12,677
1,471
(2,538)
24
(457)
(643)
(361)
1
Onerous
contracts
£000s
17,018
–
(3,290)
(8)
(257)
–
–
–
Total
£000s
33,654
1,557
(6,040)
15
(745)
(4,258)
(361)
1
186
10,174
13,463
23,823
70
116
186
1,453
8,721
10,174
3,190
10,273
13,463
4,713
19,110
23,823
Financial Statements
HSS Hire Group plc
Annual Report and Financial Statements 2021
115
At 29 December 2019
Adoption of IFRS 16
Additions
Utilised during the period
Unwind of provision
Impact of change in discount rate
Releases
Foreign exchange
At 26 December 2020
Of which:
Current
Non-current
Onerous
property
costs
£000s
Dilapidations
£000s
4,833
(2,222)
5,326
(601)
7
88
(3,472)
–
3,959
1,328
2,631
3,959
16,209
–
1,452
(2,726)
204
747
(3,226)
17
12,677
2,823
9,854
12,677
Onerous
contracts
£000s
19,573
–
–
(3,330)
218
557
–
–
Total
£000s
40,615
(2,222)
6,778
(6,657)
429
1,392
(6,698)
17
17,018
33,654
3,297
13,721
17,018
7,448
26,206
33,654
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 additions of £0.1m (2020: £5.3m) and the release of the provision of
£3.6m (2020: £3.5m) have been treated as exceptional and are included in the property cost credit of £3.0m (2020: £2.1m) (note 7). The releases are the
result of early surrenders being agreed with landlords – the associated liabilities are generally limited to the date of surrender but provided to the date of
the first exercisable break clause to align with recognition of associated lease liabilities.
On adoption of IFRS 16, the Company took the practical expedient available to rely on its assessment of whether a lease was onerous by applying IAS
37 Provisions, Contingent Liabilities and Contingent Assets immediately before the date of initial application, reducing the carrying value of its right of use
asset on implementation. This resulted in the elimination of onerous property costs of £2.2m and a corresponding impairment of the right of use asset
on transition date.
The liabilities, assessed on a property-by-property basis, are expected to arise over a period of up to five years (2020: nine years) with the weighted
average age of the onerous property costs being 3.30 years (2020: 3.76 years). The onerous property cost provision has been discounted at a rate of
0.81% (2020: inflated at 0.1%). Sensitivity analysis has not been conducted due to the immaterial nature of the remaining provision.
Dilapidations
The timing and amounts of future cash flows related to lease dilapidations are subject to uncertainty. The provision recognised is based on management’s
experience and understanding of the commercial retail property market and third party surveyors’ reports commissioned for specific properties in order to
best estimate the future outflow of funds, requiring the exercise of judgement applied to existing facts and circumstances, which can be subject to change.
The estimates used by management in the calculation of the provision take into consideration the location, size and age of the properties. The weighted
average dilapidations provision at 01 January 2022 was £7.53 per square foot (psf) (2020: £6.65 psf). The increase is the result of a 5% uplift on the rates
used for estimates to reflect market conditions and the changing profile of the estate given the large number of properties surrendered in the year.
Estimates for future dilapidations costs are regularly reviewed as and when new information is available. Given the large portfolio of properties, the Directors
do not believe it is useful or practical to provide sensitivities on a range of reasonably possible outcomes on a site by site basis. Instead, consideration is
given to the impact of a sizeable shift in the average rate. A £1.00 psf increase in the dilapidations provision would lead to an increase in the provision at
01 January 2022 of £1.5m (2020: £0.50 psf lead to an increase of £0.7m).
The dilapidations provisions have been discounted depending on the remaining lease term and the rate is based on the 5 or 10 year UK gilt yields of
0.81% and 0.97% respectively (2020: ten-year UK gilt yields 0.25%). A 1% increase in both the discount rates at 01 January 2022 would decrease the
dilapidations provision by £0.6m (2020: £0.7m). The inflation rate applied in the calculation of the dilapidations provision was 3.0% (2020: 1.8%).
The Directors have noted the significant pressure on inflation towards the end of 2021 and especially in 2022, however most longer-range forecasts still
see inflation returning to 2%. Applying an inflation rate of 5% would result in the provision increasing by £1.3m.
The aggregate movement in additions, releases and change in discount rate of £0.4m has generated £0.8m of asset additions and a credit of £0.4m to
exceptionals (note 7).
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. Under the terms of that agreement, at 1 January 2022 £13.5m is payable over the period to 2026 (2020: £17.0m) and
£3.3m has been paid during the year (2020: £3.3m). The provision has been restated to present value by applying a discount rate of 0.81% (2020:
inflation rate of 0.1%). A 1% increase in the discount rate at 1 January 2022 would decrease the provision by £0.3m (2020: a 1% increase in the inflation
rate would increase the provision by £0.5m).
116
HSS Hire Group plc
Annual Report and Financial Statements 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 1 JANUARY 2022
23. Deferred tax
Deferred tax is provided in full on taxable temporary differences under the liability method using applicable tax rates.
At 27 December 2020
Credit to the income statement – continuing operations
Charge to the income statement – discontinued operations
Eliminated on business disposal (note 29)
At 1 January 2022 Deferred tax asset/(liabilities)
At 29 December 2019
Credit to the income statement – continuing operations
Credit to the income statement – discontinuing operations
At 26 December 2020 deferred tax assets/(liabilities)
Tax
losses
£000s
–
2,000
–
–
2,000
Property, plant
and equipment
and other items
£000s
Acquired
intangible
assets
£000s
66
289
–
49
404
(326)
21
(12)
169
(148)
Property, plant
and equipment
and other items
£000s
Acquired
intangible
assets
£000s
–
48
18
66
(341)
5
10
(326)
Total
£000s
(260)
2,310
(12)
218
2,256
Total
£000s
(341)
53
28
(260)
Deferred tax assets have been recognised to the extent that management consider it probable that tax losses will be utilised in the short term. Due to
trading losses in prior years, the directors expect to phase in the recognition of taxable losses expected to be utilised in the medium and long term as
they can better assess the probability of their utilisation. The level of losses to be utilised is measured by reference to the forecast as discussed in note 14
and 2b.
At 1 January 2022 £0.1m (2020: £0.3m) of the deferred tax liability is expected to crystallise after more than one year.
At 1 January 2022 the Group had an unrecognised deferred tax asset relating to trading losses of £17.9m (2020: £13.3m). The gross balance
at 1 January 2022 was £94.0m (2020: £69.8m).
The Group also has an unrecognised deferred tax asset relating to temporary differences on plant and equipment, intangible assets and provisions
of £15.2m (2020: £12.8m). The gross balance at 1 January 2022 was £80.0m (2020: £67.4m).
These potential deferred tax assets have not been recognised on the basis that it is not sufficiently certain when taxable profits that can be utilised
to absorb the reversal of the temporary difference will occur.
Financial Statements
HSS Hire Group plc
Annual Report and Financial Statements 2021
117
24. Share Capital and Capital raise
The number of shares in issue and the related share capital and share premium are as follows.
At 27 December 2020
2020 share issue cost
Shares issued
At 1 January 2022
Warrants issued in 2018 (note 25) have been exercised during the year ended 1 January 2022.
At 29 December 2019
Shares issued
At 26 December 2020
Ordinary
shares
Number
Ordinary
shares
£000s
Share
premium
£000s
696,477,654
6,965
45,580
–
8,510,300
–
85
(28)
–
704,987,954
7,050
45,552
Ordinary
shares
Number
170,207,142
526,270,512
696,477,654
Ordinary
shares
£000s
1,702
5,263
6,965
Share
premium
£000s
–
45,580
45,580
On 8 December 2020 the Group completed a capital raise from existing and new shareholders resulting in gross proceeds of £52.6m. 526,270,512
ordinary shares of 1p each were issued for 10p each.
Gross proceeds
Cost of share issue1
Net proceeds
Accounted for as:
Share capital
Share premium
Year ended
26 December
2020
£000
52,627
(1,784)
50,843
5,263
45,580
50,843
1 £1,492,000 of the £1,784,000 costs had not been paid as at 26 December 2020.
25. Warrant reserve
In 2018, the Group issued 8,510,300 warrants to the holders of its debt under the Senior finance facility leading to a warrant reserve of £2.7m being
recognised. The warrants were exercised at a subscription price of 1 pence following the repayment of the Senior finance facility.
Warrants
26. Share-based payments
1 January
2022
Number
1 January
2022
Nominal value
£000
26 December
2020
Number
26 December
2020
Nominal value
£000
–
–
8,510,300
2,694
The Group operates a number of share-based payment schemes as part of its reward and retention strategies. The key points of each of the Group’s
share schemes for grants up to 1 January 2022 are summarised below. All disclosure relates to both the Group and the Company.
Value creation plan
On 25 February 2021 a VCP award has been granted to the Executive Directors and one senior manager. The VCP award is linked to an exit event (as
defined in the rules of the scheme) and market value at the date of the exit event. No share-based payment expense will be recognised unless an exit
event becomes likely.
Restricted stock grant
On 29 April 2021 and 7 July 2020 restricted stock grants (RSGs) were awarded to eligible colleagues. The options will vest subject to the colleagues
satisfying a two-year service condition. To the extent it vests, each award will, ordinarily, be released to the participant at the end of a further two-year
holding period. The awards were valued as the grant-date share price, adjusted for anticipated dividends payable.
118
HSS Hire Group plc
Annual Report and Financial Statements 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 1 JANUARY 2022
26. Share-based payments continued
Long-Term Incentive Plan
On 4 June 2019 share awards under the Long-Term Incentive Plan (LTIP) were issued to eligible colleagues in the form of nil-cost options over ordinary
shares. The LTIP options will vest subject to performance conditions based on earnings per share and return on capital employed measured over the
three-year period ending with the Group’s 2021 financial year. To the extent it vests, each award will, ordinarily, be released to the participant at the end
of a further two-year holding period. The awards were valued at the grant-date share price, adjusted for anticipated dividends payable. The 2019 LTIP
options will partially vest on the return on capital employed target being reached at the end of the 2021 performance period.
During 2018, share awards under the LTIP were issued to eligible colleagues in the form of nil-cost options over ordinary shares. The LTIP options will
vest subject to share price performance measured over the three-month period ending with the Company’s 2021 financial year. The threshold share
price target was not achieved and therefore the awards have lapsed in full.
On the same dates as the LTIP awards, tax-qualifying share options were granted as part of the LTIP awards (CSOP options) via a Company Share
Option Plan approved by HMRC. Each CSOP is subject to the same performance targets as apply to the nil-cost options part of the LTIP and will vest
and be released at the same time as the nil-cost options. If a CSOP option is exercised as a gain, the number of shares that may be delivered under the
associated LTIP award will be reduced at exercise by the same value to ensure that the total pre-tax value of the original LTIP award delivered to the
participant is not increased by the grant of the CSOP option.
As such, the LTIP comprises a bundled HMRC-approved option in respect of the first £30,000 worth of an award, and an unapproved LTIP award for
amounts in excess of this HMRC limit. Therefore, the fair value of the award in aggregate is determined by reference to the market value of the original
LTIP share awards at the date of grant.
Market value options
During 2018, share awards (the 2018 Awards) were granted to eligible colleagues in the form of market value options over ordinary shares. The market
value options vested subject to performance conditions based on HSS’s share price measured over the three-month period ending with 31 December
2021. The threshold share price target was not achieved and therefore the awards have lapsed in full.
During 2017, share awards (the 2017 Awards) were granted to eligible colleagues in the form of market value options over ordinary shares. The vesting of
the market value options was subject to performance conditions based on earnings per share and return on capital employed measured over the period
ending with the Company’s 2020 financial year. The 2017 awards lapsed on 31 December 2020 with no options vesting. If the 2017 Awards had vested,
the 2018 Awards would have lapsed.
On the same dates for the 2018 and 2017 Awards, tax-qualifying share options were granted as part of the market value option awards (CSOP options)
via a Company Share Option Plan approved by HM Revenue & Customs (HMRC). Each CSOP is subject to the same performance targets as are
applied to the market value options and they will vest and be released at the same time as them. As such the total award to each individual comprises a
bundled HMRC-approved option in respect of the first £30,000 worth of an award, and an unapproved market value option award for amounts in excess
of this HMRC limit. The CSOP options issued with the 2018 Market value options have also lapsed as at 31 December 2021.
Deferred Bonus Plan
On 16 April 2019 shares were issued to Directors under the Group’s Deferred Bonus Plan (DBP). The awards are not subject to any performance
conditions and will ordinarily vest after a two-year holding period. The awards were valued as the grant-date share price, adjusted for anticipated
dividends payable. The Deferred Bonus Plan was cash settled in April 2021.
2016 Three-year Sharesave Scheme (SAYE Plan)
During 2016, the Group offered all colleagues the opportunity to participate in the 2016 Sharesave Scheme, a SAYE plan. The Sharesave Scheme
enabled participating employees to save anything from £5 to £250 per month over three years. At the end of the three years, the employee could use the
amount saved to purchase HSS Hire Group plc shares at a discounted price (compared with the price on the date of issue) of 57.7p per share.
Alternatively, the employee could, at their request, withdraw their savings and leave the SAYE Plan at any time. Participants were eligible to exercise their
awards during the six month period from 1 January 2020. No options were exercised and the options lapsed at the end of that period.
No awards have been made under the SAYE Plan since 2016.
The table below reconciles the options outstanding during the year ended 1 January 2022:
Outstanding at 27 December 2020
Granted
Lapsed or cancelled
Cash settled
Outstanding at 1 January 2022
Weighted average remaining contractual life, years
Weighted average fair value of options granted, pence
MVO
Number
LTIP
Number
20,969,077
8,675,422
–
–
RSG
Number
5,442,813
5,857,338
CSOP
Number
1,964,201
–
(20,969,077)
(3,179,834)
(532,019)
(1,880,868)
DBP
Number
350,715
–
–
–
–
–
–
–
–
–
(350,715)
5,495,588
10,768,132
83,333
7.4
35.9
8.9
23.6
7.4
–
–
–
–
Financial Statements
HSS Hire Group plc
Annual Report and Financial Statements 2021
119
The table below reconciles the options outstanding during the year ended 26 December 2020:
MVO
Number
LTIP
Number
RSG
Number
CSOP
Number
DBP
Number
SAYE
Number
Outstanding at 29 December 2019
21,892,935
10,093,227
–
2,209,833
350,715
841,894
Granted
Lapsed or cancelled
–
–
5,704,351
–
(923,858)
(1,417,805)
(261,538)
(245,632)
–
–
–
(841,894)
Outstanding at 26 December 2020
20,969,077
8,675,422
5,442,813
1,964,201
350,715
Weighted average exercise price, pence
Weighted average remaining contractual life, years
Weighted average fair value of options
granted, pence
39.0
7.3
7.6
–
8.2
26.0
27.3
9.5
26.6
26.0
7.5
5.6
–
0.3
37.3
–
–
–
–
The total charge for the year relating to employee share-based payment plans during the year ended 1 January 2022 was £1,373,736 (2020: £453,000),
all of which related to equity-settled share-based payment transactions.
27. Financial instruments
Financial risk management
The Group holds and uses financial instruments to finance its operations and to manage its interest rate and liquidity risks. The Group primarily finances
its operations using share capital, revenue and borrowings.
The Group’s activities expose it to a variety of financial risks. Risk management is carried out under policies approved by the Board of Directors.
Financial risk management is carried out by the Chief Financial Officer under a policy approved by the Board. The Board approves written principles for
overall risk management, as well as written policies covering specific areas, such as interest rate risk, credit risk and liquidity risk, and receives regular
reports on such matters. The Group does not engage in trading or speculative activities using derivative financial instruments.
Market risk
Market risk is the risk of a change in market prices, such as foreign exchange rates and interest rates. They will affect the Group’s income or the value of
its holdings of financial instruments.
Interest rate risk
Interest rate risk is the risk of a change in the Group’s cash flows due to a change in interest rates.
The Group is only exposed to interest rate risk on its leases in respect of hire stock assets and its variable interest borrowings, such as the Senior finance
facility, RCF and other short-term borrowings. During the year ended 1 January 2022, the Group has significantly reduced its borrowings and interest
rate on the loans. The Directors continue to monitor developments in market interest rates on a regular basis. The effect of a 1% increase in interest rates
on the Group’s variable loans would lead to an increase in the interest charge of £0.9m (2020: £1.9m).
Interest rate sensitivity
The table below demonstrates the sensitivity to reasonably possible changes in interest rates on income and equity for the year when this movement is
applied to the carrying value of financial assets and liabilities present at 1 January 2022:
Effect of:
100 basis points increase
200 basis points increase
Profit before tax
Equity
1 January
2022
£m
26 December
2020
£m
1 January
2022
£m
26 December
2020
£m
0.9
1.7
1.9
3.9
0.9
1.7
1.9
3.9
Refinancing risk
The Group manages its refinancing risk by not letting its borrowings run to their maturity. The Group has successfully refinanced in November 2021 with
the new Senior finance facility and RCF due to expire on 8 November 2026.
Foreign exchange risk
Foreign exchange risk is the risk of a change in the Group’s cash flows due to a change in foreign currency exchange rate. The Group is exposed to
foreign currency exchange rate risk on the cash flows and carrying values of its Republic of Ireland branch. Given the relatively small size of the Republic
of Ireland operations compared to the Group, the Directors do not consider this to be a significant risk to the Group.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counter party to a financial instrument fails to meet its contractual obligations and
arises principally from the Group’s receivables from customers.
The Directors consider the Group’s credit risk from cash, cash equivalents and deposits to be low as the Group only enters transactions with banks
or financial institutions with a credit rating of A or above. The carrying amount of each financial asset represents the maximum exposure to credit loss.
120
HSS Hire Group plc
Annual Report and Financial Statements 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 1 JANUARY 2022
27. Financial instruments continued
The Group has policies in place to manage potential credit risk from trade receivables. Customer credit terms are determined using independent ratings
agency data and regularly updated to reflect any changes in customer circumstances or trading conditions. If no independent rating is available an
internal assessment is made of the credit quality of the customer, taking into account their financial position and past trading history with the Group.
The Directors do not expect any significant losses of receivables that have not been provided for as shown in note 18.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group Finance department regularly monitors
forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its
undrawn committed borrowing facilities (note 21) at all times so that borrowing limits or covenants on borrowing facilities are not breached.
The financial covenant in place on the Group’s senior finance and revolving credit facilities at 1 January 2022 is to maintain leverage (calculated as net
debt divided by Adjusted EBITDA as calculated each month on a cumulative last 12-month basis) at less than 3.0 times (2020: 3.9 times) and interest
cover (calculated as Adjusted EBITDA divided by net finance charges as calculated each month on a cumulative last 12-months basis) at more than 4
times (2020: No interest cover requirement).
Asset risk
Asset risk is the risk of loss or damage to an asset adding to financial loss to the Group. Customers may damage hire equipment if they do not have the
appropriate skills to use the equipment or lack a duty of care while using it. The cost of repairing or replacing the equipment can be substantial
depending on the type of asset and in turn can lead to a loss of revenue until the asset is again available to be hired.
Capital management
The Group relies on capital for organic and acquisitive growth, the purchase of rental equipment to replace equipment that has reached the end of its
useful economic life.
The Group defines capital as equity, as shown in the statement of financial position, plus net debt (total borrowings less cash) and seeks to achieve an
acceptable return on gross capital.
The Group manages its capital structure using a number of measures and taking into account its future strategic plans. Such measures include ensuring
the Group maintains sufficient liquidity and compliance with a bank covenant. In addition to the cash that the Group has generated from its operations
and sale of businesses, over recent years it has so renegotiated its debt structure including the issue of a fixed interest rate bond, fixed-term loan notes,
Senior finance facilities and secured shorter-term bank borrowing through a revolving credit facilities. In December 2020 the Group completed a Capital
Raise (see note 24).
Fair value
Financial assets at the balance sheet date comprise trade receivables, other receivables and cash and cash equivalents. All financial assets are
classified as financial assets at amortised cost.
All financial liabilities which comprise trade and other payables, lease liabilities and borrowings are classified as financial liabilities at amortised cost.
The fair value of financial assets and liabilities is not materially different from the carrying amount.
28. Commitments and contingencies
The Group’s future minimum sub-lease rental income expected to be received under non-cancellable operating leases is as follows:
Sub-lease rental income
Within one year
Between two and five years
1 January
2022
£000s
26 December
2020
£000s
53
69
122
25
–
25
The Group has issued a guarantee for £1.8m (2020: £1.8m) under the RCF (see note 21) to secure its card-acquiring arrangements.
The Group has contracted to purchase items of property, plant and equipment that it has not received at the reporting date to the value of £12.7m
(2020: £4.1m).
29. Business disposals
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 Limited
Laois Hire 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.
Financial Statements
HSS Hire Group plc
Annual Report and Financial Statements 2021
121
The table below shows the assets and liabilities disposed of:
Description of assets and liabilities
Intangible assets (including goodwill)
Property, plant and equipment
ROU assets
Current assets (excluding cash)
Cash
Debt – leases
Current liabilities, excluding debt
Deferred tax liabilities
Provisions
Foreign exchange reserves
Net assets disposed of
Proceeds of disposal less transaction costs
Profit on asset sale
Total profit from disposal
The table below shows the result of discontinued operations:
Result of discontinued operations
Revenue
Expenses other than finance costs, amortisation and depreciation
Amortisation
Depreciation
Finance costs
Taxation
Profit from discontinued operations, net of tax
Profit on disposal of discontinued operations
Profit for the period
Laois Hire
Limited
£000s
All Seasons
Hire Limited
£000s
1,691
5,200
686
2,509
504
(714)
(2,545)
–
(212)
(49)
8,173
7,385
1,345
1,400
1,035
(1,397)
(1,296)
(218)
(149)
–
Total
£000s
9,864
12,585
2,031
3,909
1,539
(2,111)
(3,841)
(218)
(361)
(49)
7,070
16,278
23,348
9,982
283
3,195
54,325
64,307
–
283
38,047
41,242
1 January
2022
£000s
26 December
2020
£000s
8,405
(1,100)
(135)
(1,836)
(72)
(83)
5,179
41,242
46,421
19,870
(10,128)
(175)
(3,397)
(97)
27
6,100
–
6,100
The revenue relating to Laois Hire Limited is £3.0m (2020: £12.8m) with a loss after tax of £0.2m (2020: profit after tax of £0.2m). The revenue relating to
All Seasons Hire Limited is £5.4m (2020: £7.1m) with a profit after tax of £5.4m (2020: £5.9m).
The following table shows a summary of the cashflows relating to discontinued operations:
Operating cash (outflow)/inflow
Cash outflow from investing activities
Cash outflow from financing activities
30. Related party transactions
1 January
2022
£000s
26 December
2020
£000s
(644)
(15)
(397)
2,195
(177)
(689)
Ultimate parent entity
Until December 2020, by virtue of its majority shareholding, the Group’s immediate and ultimate parent entity was Exponent Private Equity LLP.
Following the capital raise in December 2020, whilst continuing to be a significant shareholder, Exponent Private Equity LLP ceased to have a majority
shareholding. During the year, entities managed by Exponent Private Equity LLP charged the Group fees of £40,000 (2020: £31,187) and £40,000 was
outstanding at 1 January 2022 (2020: £nil). Additionally, Exponent Private Equity invests in businesses that the Group trades with. All transactions are
carried out on an arm’s length basis and are immaterial to both parties.
Key management personnel
Related party transactions with key management personnel are disclosed in note 10.
122
HSS Hire Group plc
Annual Report and Financial Statements 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 1 JANUARY 2022
31. Dividends
The Directors do not recommend the payment of dividends for the year ended 1 January 2022 (2020: nil).
No interim dividends were paid or proposed during the year (2020: nil).
32. Note supporting the Consolidated statement of cash flows
Cash
Current borrowings
Non-current borrowings1
Lease liabilities, including interest2
Total
Accrued interest on borrowings
Debt issue costs3
Net debt2
Cash
Current borrowings
Non-current borrowings1
Finance lease liabilities
Lease liabilities, including interest2
Total
Accrued interest on borrowings
Debt issue costs3
Net debt2
At
27 December
2020
£000s
97,573
(15,000)
(179,099)
(89,572)
(186,098)
Cash
flows
£000s
Discontinued
operations
£000s
(53,765)
(1,539)
15,000
116,128
27,638
105,001
–
–
2,111
572
–
–
Other
non-cash
movements
£000s
–
–
(5,195)
(16,742)
(21,937)
(12,711)
5,195
At
1 January
2022
£000s
42,269
–
(68,166)
(76,565)
(102,462)
(271)
(1,834)
(3,442)
(5,083)
15,882
(1,946)
(194,623)
118,937
572
(29,453)
(104,567)
At
29 December
2019
£000s
Cash
flows
£000s
Implementation
of IFRS 16
£000s
Other
non-cash
movements
£000s
At
26 December
2020
£000s
22,658
74,915
–
(174,501)
(16,583)
–
(168,426)
(3,608)
(7,481)
–
(17,200)
–
28,395
86,110
17,020
–
–
–
–
16,583
(99,309)
(82,726)
–
–
(179,515)
103,130
(82,726)
–
(15,000)
12,602
(18,658)
(21,056)
(16,854)
2,398
(35,512)
97,573
(15,000)
(179,099)
(89,572)
(186,098)
(3,442)
(5,083)
(194,623)
1 Non-current borrowings are stated net of debt issue costs.
2 Cash flows include interest payments of £4.1m (2020: £5.1m).
3 HSS calculation of net debt includes accrued interest on borrowings and excludes deduction for debt issue costs.
33. Adjusted EBITDA, Adjusted EBITA and Adjusted profit before tax
Non-IFRS financial measures
Earnings before interest, tax, depreciation and amortisation (EBITDA) and Adjusted EBITDA, earnings before interest, tax and amortisation (EBITA) and
Adjusted EBITA are 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.
The Group discloses Adjusted EBITDA and Adjusted EBITA 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 and
Adjusted EBITA 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 and Adjusted EBITA 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.
Financial Statements
HSS Hire Group plc
Annual Report and Financial Statements 2021
123
Adjusted EBITDA is calculated as follows:
Operating profit/(loss)
Add: Depreciation of property, plant and equipment (note 9)
Add: Amortisation of intangible assets (note 9)
EBITDA
Add: Exceptional items (note 7)
Adjusted EBITDA
Adjusted EBITA is calculated as follows:
Operating profit/(loss)
Add: Amortisation of intangible assets (note 9)
EBITA
Add: Exceptional items (note 7)
Adjusted EBITA
Adjusted profit/(loss) is calculated as follows:
Profit/(loss) before tax
Add: Amortisation of intangible assets (note 9)
Profit/(loss) before tax and amortisation
Add: Exceptional items (finance and non-finance) (note 7)
Adjusted profit/(loss) before tax
34. Post balance sheet events
Year ended
1 January 2022
Year ended
26 December 2020
Continuing
operations
£000s
34,521
38,120
5,175
77,816
(8,039)
69,777
Total
£000s
39,855
39,956
5,310
85,121
(8,039)
77,082
Continuing
operations
£000s
(4,671)
46,193
5,022
46,544
13,016
59,560
Year ended
1 January 2022
Year ended
26 December 2020
Continuing
operations
£000s
34,521
5,175
39,696
(8,039)
31,657
Total
£000s
39,855
5,310
45,165
(8,039)
37,126
Continuing
operations
£000s
(4,671)
5,022
351
13,016
13,367
Year ended
1 January 2022
Year ended
26 December 2020
Continuing
operations
£000s
6,066
5,175
11,241
1,906
13,147
Total
£000s
52,570
5,310
57,880
(39,336)
18,544
Continuing
operations
£000s
(29,639)
5,022
(24,617)
13,389
(11,228)
Total
£000s
1,499
49,590
5,197
56,286
13,076
69,362
Total
£000s
1,499
5,197
6,696
13,076
19,772
Total
£000s
(23,566)
5,197
(18,369)
13,449
(4,920)
War in Ukraine
Following the balance sheet date, the tragic eruption of conflict in Ukraine has occurred. The war has had a significant impact on macroeconomic
factors and a high degree of uncertainty persists. The Group does not have operations or direct dependencies in Russia or Ukraine but is exposed to
the impact of inflation and supply chain disruption.
124
HSS Hire Group plc
Annual Report and Financial Statements 2021
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 1 JANUARY 2022
COMPANY REGISTRATION NUMBER: 9378067
ASSETS
Non-current assets
Investments
Other receivables
Current assets
Other receivables
Cash
Total assets
LIABILITIES
Current liabilities
Other payables
Total liabilities
Net assets
EQUITY
Share capital
Share premium
Warrant reserve
Merger reserve
Retained surplus
Total surplus attributable to owners of the Company
1 January
2022
£000s
26 December
2020
£000s
Note
3
4
4
5
6
6
6
7
283,841
–
283,841
304
14,841
15,145
90,359
203,536
293,895
309
17,294
17,603
298,986
311,498
(160)
(160)
(13,956)
(13,956)
(160)
(13,956)
298,826
297,542
7,050
45,552
–
97,716
148,508
298,826
6,965
45,580
2,694
97,716
144,587
297,542
As permitted by Section 408(3) of the Companies Act 2006, the Company’s income statement and statement of comprehensive income and related
notes have not been presented.
The Company made a post-tax loss for the year of £15,000 (2020: profit £973,000).
The notes on pages 126 to 128 form part of these Financial Statements.
The Financial Statements were approved and authorised for issue by the Board of Directors on 27 April 2022 and were signed on its behalf by:
P Quested
Director
27 April 2022
Financial Statements
HSS Hire Group plc
Annual Report and Financial Statements 2021
125
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 1 JANUARY 2022
At 27 December 2020
Loss for the year
Warrants exercised
2020 Share issue costs
Share-based payments
Deferred bonus options cash settled
Share
capital
£000s
6,965
–
85
–
–
–
Share
premium
£000s
45,580
–
–
(28)
–
–
At 1 January 2022
7,050
45,552
At 29 December 2019
Profit for the year
Share issue
Share-based payments
At 26 December 2020
Share
capital
£000s
1,702
–
5,263
–
6,965
Share
premium
£000s
–
–
45,580
–
45,580
The notes on pages 126 to 128 form part of these Financial Statements.
Warrant
reserve
£000s
2,694
–
(2,694)
–
–
–
–
Warrant
reserve
£000s
2,694
–
–
–
Merger
reserve
£000s
97,716
Retained
earnings
£000s
Total
equity
£000s
144,587
297,542
–
–
–
–
–
(15)
2,694
–
1,374
(132)
(15)
85
(28)
1,374
(132)
97,716
148,508
298,826
Merger
reserve
£000s
97,716
–
–
–
Retained
earnings
£000s
Total
equity
£000s
143,161
245,273
973
–
453
973
50,843
453
2,694
97,716
144,587
297,542
126
HSS Hire Group plc
Annual Report and Financial Statements 2021
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 1 JANUARY 2022
1. Accounting policies
HSS Hire Group plc (the Company) is a company incorporated and domiciled in the United Kingdom. The Company’s registered office is Building 2,
Think Park, Mosley Road, Manchester, M17 1FQ.
a) Reporting entity
HSS Hire Group Plc Limited was incorporated on 7 January 2015 as a private company limited by shares in the United Kingdom and re-registered as a
public limited company on 19 January 2015. The Company listed its shares on the London Stock Exchange on 9 February 2015. On 14 January 2021,
HSS moved its share trading from the Main Market on the London Stock Exchange to AIM.
The Company’s principal activity is to act as ultimate holding company for a group of companies whose principal activities are the supply and hire of
equipment and associated services.
b) Statement of compliance
The Company Financial Statements have been prepared in accordance with Financial Reporting Standard 100 Application of Financial Reporting
Requirements (FRS 100) and Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101).
Disclosure exemptions adopted
In preparing these Financial Statements the Company has taken advantage of all disclosure exemptions conferred by FRS 101. Therefore these Financial
Statements do not include:
– certain comparative information as otherwise required by UK endorsed IFRS;
– certain disclosures regarding the Company’s capital;
– a statement of cash flows;
– the effect of future accounting standards not yet adopted;
– the disclosure of the remuneration of key management personnel; or
– disclosure of related party transactions with other wholly owned members of the HSS Hire Group plc group of companies.
In addition, and in accordance with FRS 101, further disclosure exemptions have been adopted because equivalent disclosures are included in the
Group’s Consolidated Financial Statements. These Financial Statements do not include certain disclosures in respect of:
– share-based payments;
– financial instruments (other than certain disclosures required as a result of recording financial Instruments at fair value); or
– fair value measurement other than certain disclosures required as a result of recording financial instruments at fair value).
The Directors have taken advantage of the option within Section 390 of the Companies Act 2006 to prepare their Financial Statements up to a date
seven days either side of the Company’s accounting reference date of 31 December, and these accounts therefore cover the period from 27 December
2020 to 1 January 2022 (2020: 29 December 2019 to 26 December 2020).
The Company complies with the accounting policies defined in notes 1 to 4 to the Group Consolidated Financial Statements on pages 84 to 93 except
as noted below.
c) Merger reserve
The merger reserve is the amount arising on the difference between the nominal value of the shares issued on acquisition of the subsidiary companies
and the Company value of the interest in subsidiaries. The merger reserve arises where more than 90% of the shares in a subsidiary are acquired and
the consideration includes the issue of new shares by the Company, and therefore the Company adopts merger relief under the Companies Act 2006.
d) Investments
Investments in subsidiaries that arose from a reorganisation of the Group structure that satisfies the criteria set out in IAS 27 Separate Financial
Statements have been measured as the carrying amount of its share of the equity items shown in the separate Financial Statements of the original
parent at the date of reorganisation. Subsequent additions are included in the statement of financial position at cost. Impairments are recognised
if events or changes in circumstances indicate that the carrying value may not be recoverable.
2. Critical accounting estimates and judgements
a) Recoverability of investments and intercompany receivables
Judgements are required in assessing the recoverability and timing of investments and intercompany receivables and determining whether impairments
of those investments and receivables are required. Judgements are based on the historical performance as well as forecasts. The Company monitors
the recoverability of such investments and receivables and recognises impairments for amounts that may not be recoverable. Further details of the net
carrying value of investments and intercompany receivables are given in notes 3 and 4 respectively.
Financial Statements
HSS Hire Group plc
Annual Report and Financial Statements 2021
127
3. Investments
At 27 December 2020
Additions
Derecognition on cash settlement of employee share-based payments
At 1 January 2022
£000s
90,359
193,614
(132)
283,841
Additions comprise equity-settled share-based payment awards offered to employees in subsidiary companies of £1.4m and the purchase of a further
2,721 ordinary shares in Hampshire Topco Limited for a total consideration of £192.2m.
At 1 January 2022 the Company’s subsidiaries, including those held indirectly through direct subsidiaries, are:
Company
Hampshire Topco Limited
Hampshire Midco Limited
Hampshire Bidco Limited
Hero Acquisitions Limited
HSS Hire Service Holdings Limited
HSS Hire Service Finance Limited
ABird Superior Limited
HSS Hire Service Group Limited
A1 Hire & Sales Limited
ABird Limited
Apex Generators Limited
HSS Financing plc
HSS Training Limited
1st Collection Services Limited
HSS Hire Limited
HSS Proservice Limited (formerly: HSS Hire Trading
Limited)
Holding Country of incorporation
Principal activity
Ordinary
shares held
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Intermediate holding company
Intermediate holding company
Intermediate holding company
Intermediate holding company
Intermediate holding company
Intermediate holding company
Intermediate holding company
Hire and equipment services
Hire and equipment services
Hire and equipment services
Hire and equipment services
Financing
Training services
Administration of Group debtors
Intermediate holding company
Hire and equipment services
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
The registered office of the subsidiaries listed above is Building 2, Think Park, Mosley Road, Manchester, M17 1FQ, except for the following:
– Apex Generators Limited, 5th Floor Sutherland House, 149 St Vincent Street, Glasgow, Scotland, G2 5NW.
4. Other receivables
Non-current
Amounts due from Group undertakings
Current
Prepayments
Amounts due from Group undertakings
Other tax
1 January
2022
£000s
26 December
2020
£000s
–
203,536
39
265
–
304
32
–
277
309
Amounts due from Group undertakings are unsecured, interest free and repayable on demand (2020: unsecured, interest free and repayable on
demand, but not expected to be repaid within one year).
128
HSS Hire Group plc
Annual Report and Financial Statements 2021
NOTES TO THE COMPANY FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 1 JANUARY 2022
5. Other payables: amounts falling due within one year
Amounts owed to Group undertakings
Accruals and deferred income
Other creditors
6. Share capital
1 January
2022
£000s
26 December
2020
£000s
–
160
–
160
11,120
1,505
1,331
13,956
The details of the Company’s share capital are set out in note 24 to the Consolidated Financial Statements.
7. Profit and loss account
As permitted by Section 408 of the Companies Act 2006 the Company has elected not to present its own profit and loss account for the year.
The auditors’ remuneration for audit and other services is disclosed in note 9 to the Consolidated Financial Statements.
8. Related party transactions
The Company’s related party transactions are set out in note 30 to the Consolidated Financial Statements.
9. Financial instruments
Details of the Group’s financial instruments policies are set out in note 27 to the Consolidated Financial Statements.
10. Employee and Director costs
The Directors are the only employees of the Company. Their costs are borne by a subsidiary company, HSS Hire Service Group Limited.
Details of the Directors’ remuneration are set out in note 11 to the Consolidated Financial Statements.
Additional Information
HSS Hire Group plc
Annual Report and Financial Statements 2021
129
ADDITIONAL INFORMATION
SHAREHOLDER INFORMATION
Annual General Meeting
The Company’s Annual General Meeting will be held at 11.00am on 21 June 2022 at Hilton Garden Inn, Hatton Cross, TW6 2SQ. Details of the
Resolutions proposed and being voted on are provided in the Notice of AGM provided to shareholders and available for download at the Group website,
www.hsshiregroup.com. Shareholders are invited to attend in person. Should matters change and/or should any additional precautions around
COVID-19 be required, such updates will be provided via the ‘News & Resources’ section at www.hsshiregroup.com.
Share fraud and boiler room scams
Many companies have become aware that their shareholders have received unsolicited phone calls or correspondence concerning investment matters.
Share scams are often run from ‘boiler rooms’ where fraudsters cold-call investors offering them worthless, overpriced or even non-existent shares.
These operations are commonly known as ‘boiler room fraud’. The ‘brokers’ (callers) can be very persistent and extremely persuasive. They often have
websites to support their activities, their advice and the companies they purport to represent. It is not just novice investors that have been duped in this
way; many of the victims have been successfully investing for several years.
Shareholders are cautioned to be very wary of any unsolicited advice, offers to buy shares at a discount, sell your shares at a premium or offers of free
company reports.
If you are offered unsolicited investment advice, discounted shares, a premium price for shares you own, or free company or research reports, you
should take these steps before handing over any money:
– Record the name of the person and organisation contacting you.
– Check the Financial Conduct Authority (FCA) Register at www.fca.org.uk/register to ensure they are properly authorised.
– Use the details on the FCA Register to contact the firm.
– Call the FCA Consumer Helpline on 0800 111 6768 if there are no contact details on the Register or you are told they are out of date.
– If you receive telephone calls, emails, letters purporting to be from HSS Hire Group plc or from companies endorsed by HSS Hire Group plc and you
are unsure if they are legitimate, please contact our shareholder helpline for clarification (0371 384 2030 or +44 (0)121 415 7047 (overseas)).
– If the caller persists, hang up.
Please note that should you use an unauthorised firm to buy or sell shares or other investments, you will not have access to the Financial Ombudsman
Service or Financial Services Compensation Scheme (FSCS) if things go wrong.
If you are approached about a share scam you should tell the FCA using the online share fraud reporting form at www.fca.org.uk/consumers/report-
scam-unauthorised-firm where you can find out about the latest investment scams. You can also call the FCA Consumer Helpline on 0800 111 6768.
If you have already paid money to share fraudsters you should contact Action Fraud on 0300 123 2040 or online at: www.actionfraud.police.uk
Further information on this or similar activity can be found at www.cityoflondon.police.uk/citypolice within the Economic Crime section.
Forward-looking statements
This document contains certain forward-looking statements concerning the Group’s business, financial condition, results of operations and certain of
the Group’s plans, objectives, assumptions, projections, expectations or beliefs with respect to these items. Forward-looking statements are sometimes,
but not always, identified by their use of a date in the future or such words as ‘anticipates’, ‘aims’, ‘due’, ‘could’, ‘may’, ‘will’, ‘should’, ‘expects’, ‘believes’,
‘intends’, ‘plans’, ‘potential’, ‘targets’, ‘goal’ or ‘estimates’.
Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the Group’s actual financial condition,
performance and results to differ materially from the plans, goals, objectives and expectations set out in the forward-looking statements included in this
document. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements.
By their nature, forward-looking statements relate to events and depend on circumstances that will occur in the future and are inherently unpredictable.
Such forward-looking statements should, therefore, be considered in light of various important factors that could cause actual results and developments
to differ materially from those expressed or implied by these forward-looking statements. These factors include, among other things: changes in the
economies and markets within which the Group operates; changes in the regulatory regime within which the Group operates; changes in interest and, to
a lesser extent, exchange rates; the impact of competitor pricing behaviour; the occurrence of major operational problems; the loss of major customers;
contingent liabilities; and the impact of legal or other proceedings against, or which otherwise affect, the Group.
No assurance can be given that the forward-looking statements in this document will be realised; actual events or results may differ materially as a result
of risks and uncertainties facing the Group. Subject to compliance with applicable law and regulation, the Company does not intend to update the
forward-looking statements in this document to reflect events or circumstances after the date of this document, and does not undertake any obligation
to do so.
Financial Calendar
Annual General Meeting – 21 June 2022
130
HSS Hire Group plc
Annual Report and Financial Statements 2021
COMPANY INFORMATION
Registered Office
HSS Hire Group plc
Building 2, Think Park,
Mosley Road,
Manchester,
M17 1FQ 76
Email: investors@hss.com
Website: www.hsshiregroup.com
Registered number: England and Wales, No. 9378067
Company Secretary
Daniel Joll
Nominated Adviser & Broker
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
Legal Advisers
Freshfields Bruckhaus Deringer LLP
65 Fleet Street
London EC4Y 1HS
Independent Auditors
BDO LLP
55 Baker St
London W1U 7EU
Bankers
HSBC Bank plc
8 Canada Square
London E14 5HQ
National Westminster Bank plc
250 Bishopsgate
London EC2M 4AA
Financial Public Relations
Teneo
5th Floor
6 More London Place
London SE1 2DA
Registrars
Equiniti Limited
Aspect House
Spencer House
Lancing
West Sussex BN99 6DA
Contact Centre:
UK: 0371 384 2030
Intl: +44 (0)121 415 7047
Insurance Brokers
Marsh Limited
1 Tower Place West
Tower Place
London EC3R 5BU
Additional Information
HSS Hire Group plc
Annual Report and Financial Statements 2021
131
DEFINITIONS AND GLOSSARY
The following is a list of commonly used terms in the industry or the Annual Report and Accounts.
‘2016 Code’
‘2018 Code’
the Corporate Governance Code 2016
the Corporate Governance Code 2018
‘ABird’ or ‘ABird Power Solutions’
ABird Superior Limited and its wholly owned subsidiary, ABird Limited
‘Act’
‘Adjusted EBITA’
‘Adjusted EBITDA’
‘Adjusted EPS’
‘All Seasons Hire’
‘Apex’
‘Articles’
the Companies Act 2006, as amended
EBITA adjusted to add back exceptional items
EBITDA adjusted to add back exceptional items
EPS adjusted to exclude exceptional items and amortisation and after charging the prevailing rate of
corporation tax
All Seasons Hire Limited
Apex Generators Limited
the Articles of Association of the Company
‘Average revenue per account
customer’
calculated by dividing the total revenue from account customers only in a year by the simple average of
the opening and closing number of trading accounts
‘B2B’
‘bps’
‘BSI’
‘Carbon emissions in our
built environment’
‘CITB’
‘colleague’
‘Company’
business-to-business
basis points are a unit of measure used to describe the percentage change in the value or rate of a
financial instrument
British Standards Institute is the national standards body of the United Kingdom. BSI produces technical
standards on a wide range of products and services, and also supplies certification and standards-
related services to businesses
calculated as the total CO2 emissions from fuel combustion (a scope 1 emission) and purchased
electricity (scope 2 emissions) of the Group in kg CO2 divided by the total m2 of the Group’s freehold and
leasehold portfolio. Calculated for the period 1 April to 31 March in each period in accordance with the
reporting timeframe required for annual CRC submissions
the Construction Industry Training Board works with industry and Government in the UK to promote the
development and training of construction industry employees. CITB accredited training courses are the
recognised standard in UK safety training
Directors and employees of HSS
HSS Hire Group plc
‘Core Hire Rental Revenue’
revenue associated only with the rental of owned assets in the core HSS business. This excludes
revenues from specialist hire businesses (ABird, Apex, All Seasons and Laois), and sales ancillary to the
rental such as transport, resale etc.
‘COSHH’
Control of Substances Hazardous to Health
‘CRC Energy Efficiency Scheme’
or ‘CRC’
a mandatory carbon emissions reduction scheme in the UK that applies to large non-energy-intensive
organisations in the public and private sectors
‘CSOP’
Company Share Option Plan
‘Customer Distribution Centres’
or ‘CDCs’
locations across the UK from which we deliver items of our core hire equipment direct to customer sites,
manage the collection of equipment from customer sites at the end of the hire period and undertake
testing and repair of larger non-specialist equipment
‘EBITA’
‘EBITDA’
‘EMT’
‘ERP system’
‘EU’
‘Exponent’
earnings before interest, tax and amortisation
earnings before interest, tax, depreciation and amortisation
Executive Management Team
enterprise resource planning software used to manage the business and automate certain
day-to-day processes
European Union
the investment funds managed by Exponent Private Equity LLP or, when otherwise indicated or where
the context otherwise requires, Exponent Private Equity LLP in its own right
‘Exponent Shareholders’
Exponent Private Equity Partners GP II LP, Exponent Havana Co-Investment Partners GP Limited and
Exponent Private Equity Founder Partner GP II Limited
‘Group’
‘HAE’
‘HSS’
together, HSS Hire Group plc and its direct and indirect subsidiaries
Hire Association Europe – a trade body representing plant, tool and equipment hire companies
the group of companies within the HSS Hire Group
132
HSS Hire Group plc
Annual Report and Financial Statements 2021
DEFINITIONS AND GLOSSARY continued
‘HSS Hire Group plc’
HSS Hire Group plc (company number 9378067) whose registered office is at Oakland House, Talbot
Road, Manchester M16 0PQ
‘IFRS’
International Financial Reporting Standards, as adopted by the European Union
‘initial public offering’ or ‘IPO’
‘IPAF’
‘Ireland’
‘LED’
‘live account’
‘LTIP’
‘LTM utilisation – core’
‘LTM utilisation – specialist’
the initial public offering and admission of the ordinary share capital of HSS Hire Group plc to the
premium listing segment of the Official List of the UK Listing Authority and to trading on London Stock
Exchange’s Main Market for listed securities under the ticker ‘HSS’ on 9 February 2015
International Powered Access Federation. Promotes the safe and effective use of powered access
worldwide. IPAF-accredited training courses are the recognised standard in powered mobile access
the Republic of Ireland
light emitting diode, in this context referring to a type of lighting product which uses less energy than
traditional lighting options on the market
a customer that has transacted with the Group in the prior 12 months
long-term incentive plan. A reward system designed to reward colleagues’ long-term performance either
by the grant of awards which are subject to defined performance conditions, which include Adjusted EPS
and ROCE, or by the grant of Restricted Stock
core businesses utilisation is calculated as average value of the fleet on hire divided by the total fleet value
in a reporting month, averaged over the relevant 52-week period (referred to as the last 12 months or
‘LTM’) for HSS Hire Service Group Ltd
specialist businesses utilisation is calculated as average value of the fleet on hire divided by the total fleet
value in a reporting month, averaged over the relevant 52-week period (referred to as the last 12 months
or ‘LTM’) for ABird and Apex. This calculation does not currently include data for All Seasons Hire as full
LTM utilisation data is not available
‘MEWP’
‘MTS’
Mobile Elevating Work Platform
Mobile Traffic Solutions
‘National Distribution and Engineering
Centre’ or ‘NDEC’
‘Net debt’
‘non-IFRS 16’
‘Notes’
‘NPS’
‘Official List’
‘PASMA’
‘QCA’
‘Restricted Stock’
operation opened in Cowley, Oxfordshire in March 2016 to centralise and industrialise the testing,
maintenance and repair of our fast-moving core hire fleet upon return from customer use. Once deemed
fit-for-hire, equipment is moved back into the local branch and CDC network. Activity terminated in April
2018 with the move back to branch-led processes
the total indebtedness of the Group including senior finance facility, Revolving Credit Facility, senior
secured notes (excluding debt issue costs), finance leases, drawings on the Revolving Credit Facility, any
accrued interest on these items and any overdraft net of any cash in the Group
where measures are described as non-IFRS 16 this means they have been adjusted to reflect the position
that would have been reported had IFRS 16 not been adopted. Specifically this means excluding leases
previously treated as operating leases from the balance sheet and replacing associated depreciation and
interest with an estimate of operating lease cost
6.75% senior secured notes due 2019 issued by HSS Financing plc in February 2014, fully redeemed in
2018
Net Promoter Score, a measure of willingness of customers to recommend a Company’s products or
services to others
the Official List of the FCA
Prefabricated Access Suppliers’ and Manufacturers’ Association Ltd. The international not-for-profit
organisation for the mobile access industry which oversees the industry standard training scheme.
PASMA-accredited training courses are the recognised standard in non-powered mobile access
Quoted Companies Alliance
conditional awards of shares under the LTIP which vest subject to continued employment and the
Remuneration Committee’s assessment of overall business performance over the vesting period
‘return on assets’ or ‘ROA’
calculated as Adjusted EBITA divided by the total of average total assets (excluding intangible assets)
subtracted by average current liabilities
‘return on capital employed’ or ‘ROCE’
calculated as Adjusted EBITA divided by average capital employed. Capital employed is total assets
except intangible assets, derivatives, and cash less current liabilities except current debt items
‘revolving credit facility’ or ‘RCF’
‘RIDDOR(s)’
revolving credit facilities made available pursuant to either the Revolving Credit Facility Agreement
(£25.0m) dated 20 June 2018 that was concluded on 11 July 2018 and which expires in 2023 or the
Revolving Credit Facility Agreement (£80.0m) dated January 2014 that was repaid on 11 July 2018
the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 1995. Within our KPIs we
report our RIDDOR rate, which is calculated as: the number of RIDDOR incidents x 100,000, divided by
the number of hours worked
Additional Information
HSS Hire Group plc
Annual Report and Financial Statements 2021
133
‘RMI’
‘ROTL’
‘SHEQ’
‘Term facility’
services provided in the repair, maintain and improve markets, typically to the built environment
Release on Temporary Licence, a scheme that allows those serving prison sentences and near release to
leave prison during the day to go to work
safety, health, environment and quality
Senior finance facilities made available pursuant to the Senior Finance Facility Agreement entered into on
20 June 2018 that expires in 2023
‘Trading account’
a customer account which has been active in the last 12 months
‘Training days per colleague’
calculated as the total training days completed by Group colleagues within the year, divided by the
average number of colleagues in the Group
‘UK’
the United Kingdom of Great Britain and Northern Ireland
CBP012067
This report is printed on 100% recycled paper, which is
certified carbon balanced by World Land Trust Ltd.
Blackdog Digital is a carbon neutral company and
is committed to all round excellence and improved
environmental performance is an important part of our
Consultancy, design and production
‘Go Green’ strategy.
www.luminous.co.uk
Luminous are certified in using Carbon Balanced paper for the
HSS Hire Group plc Annual Report. This project has balanced
through World Land Trust the equivalent of 373kg of Carbon
Dioxide. This support will enable World Land Trust to protect
71m2 of critically threatened tropical forest.
Design and production
www.luminous.co.uk
Registered office
Building 2, Think Park,
Mosley Road,
Manchester,
M17 1FQ
www.hsshiregroup.com