Soft trading hurts HSS expectations

HSS reported losses before tax of £14.1m for the 26 week period ended June 27. It added that group revenue was up 12.1 per cent to £146.4m, from £130.6m the previous year, with organic growth of 10.6 per cent.

The firm blamed slower-than-expected housing and home improvement markets as it warned full-year results would fall short of expectations.

Earnings were weighed down by investment in its fleet and the £3m cost of the share float HSS said.

Chris Davies, chief executive officer at HSS, said: “Our results for the first half of 2015 are in line with our update at the end of June, with revenue growth of 12 per cent and further gains in market share.

“However, as others have reported, trading continues to be unpredictable, and after a reasonable July, we have seen softer market conditions in August. This is obviously disappointing. As a result we are cautious on the outlook for the balance of the year and now expect full year earnings to be below current market expectations.

“Notwithstanding this, we are confident that our strategy is continuing to underpin our market share progress. We are seeing strong growth in the specialist businesses as a result of our investment. We are building our key accounts pipeline and our roll-out of local branches is progressing to plan with 50 openings this year.”

HSS, which made its stock market debut earlier this year, said its plans to open a new National Distribution Centre in the first-half of next year providing local branch fulfilment are well developed.

The firm said that it will change its distribution network and drive further improvements in customer availability also allowing it to leverage its e-commerce platform more effectively.

Mr Davies said: “We are making good progress in our plans to open a new National Distribution Centre, which will further increase availability for customers.

“This will also enable us to fully exploit our market-leading online proposition. Furthermore, this development will allow our existing hub and spoke network to concentrate exclusively on customer deliveries and collections, enhancing service levels.

“It will also contribute to the rebasing of costs in the range of £8m and £12m in 2016 with between £1.5m and £3m being delivered in Q4 2015. Despite the softer August we remain confident in the medium and long term growth prospects for the business.”

Shares plunged by as much as 36 per cent after HSS said demand in recent weeks had been “more variable” than expected at this time of year and it now saw revenue and earnings for 2015 coming in below market forecasts.

HSS had said in June that its trading performance through the second quarter was “marginally below expectations”.

Today’s warning comes after builders’ merchant and DIY group Travis Perkins said it had been squeezed by the delayed effect of a mid-2014 housing market slowdown.

The Wickes owner said earlier this month that a fall in mortgage approvals last year had fed through to hit its RMI performance in the second quarter of 2015, but that it expected growth to pick up in the second half.