Hss Hire Regulatory News (HSS)

20 April 2015

HSS Hire Group plc

Audited Results for Hampshire Topco Limited for the year ended 27 December 2014

HSS Hire Group plc ("HSS" or the "Group") today announces results for the year ended 27 December 2014 for Hampshire Topco Limited, the holding company of the Group prior to the listing of new parent company HSS Hire Group plc on the London Stock Exchange in February 2015.

Financial Highlights

Trading and Operational Highlights

Successful IPO on the London Stock Exchange after the period end

Current Trading and Outlook

Explanatory Notes:

1) Adjusted EBITDA defined as Operating profit with depreciation, amortisation and exceptional costs added back

2) Return on Assets ("ROA") defined as Adjusted EBITA in the financial year / (average total assets (excluding intangible assets) less average current liabilities. Adjusted EBITA defined as Adjusted EBITDA less depreciation

Chris Davies, Chief Executive Officer of HSS, said:

"2014 was a year of excellent progress as we continued to deliver strong growth across both our Core and Specialist businesses. This performance reflects both our focus on the less cyclical and higher value-added 'maintain' and 'operate' segments of the market and a deliberate customer demand-led approach to investment in our hire fleet.

"We have made an encouraging start to 2015 and trading is in line with our expectations. The roll-out of our Local Branches is continuing to plan, with new branches opening at the rate of one a week, and the customer response continues to be positive.

"Our new equipment refurbishment facility, which opens in Q4 2015, will help us extend the life of our asset base and improve the service we provide to customers, and we are continuing to capitalise on the trend to outsourcing by further developing our larger Key Accounts. In addition, we continue to review a number of potential Specialist acquisition targets.

"Our growth aspirations are based on a disciplined approach, a clear strategy and solid financial foundations. 2015 will see us continue to strengthen the business and create new ways to exceed our customers' expectations. While the forthcoming UK general election creates an element of short term uncertainty for our customers, HSS is in good shape and we look to the future with confidence."

Results presentation

Management will be hosting a presentation for analysts at 9.00 a.m. BST today at Citigate Dewe Rogerson, 3 London Wall Buildings, London Wall, EC2M 5SY.

Analysts/investors unable to attend in person may join the meeting by conference call by dialling in on +44 (0) 20 3003 2666. Password: HSS Hire. A copy of the presentation will be available at www.hsshiregroup.com/investor-relations/financial-results/ from 9.00 a.m. BST today.

A separate conference call discussing the results of Hero Acquisitions Limited will be held for holders of Senior Secured Notes at 2.00 p.m. BST today. Details for this call will be available at www.hsshiregroup.com/investor-relations/senior-secured-notes/

For further information, please contact:

Note to editors

HSS Hire Group plc provides tool and equipment hire and related services in the UK and Ireland through a nationwide network of over 265 locations. Focusing primarily on the maintain and operate segments of the market, over 90% of its revenues come from business customers. HSS is listed on the Main Market of the London Stock Exchange, following its IPO in February 2015. For more information please see www.hsshiregroup.com.

Chairman's Statement

I am proud to announce our results for the year ended 27 December 2014, our first set of results since the successful IPO in February 2015.

Our results

I am delighted to report that we delivered a 25.5% growth in revenues in 2014, which helped us to an Adjusted EBITDA margin of 25.0% and return on assets of 26.6%. This is an excellent result, especially considering the significant investment we made in our hire fleet during the year. Our continuing focus on cost control also contributed to this good performance.

Our Board and management team

We are extremely fortunate to have appointed a strong team of high-calibre individuals to the Board of HSS Hire Group plc. Their complementary skills bring valuable fresh perspectives - both personal and professional - to our discussions. Their insight and expertise will continue to provide effective challenge, scrutiny and support of the HSS management team as we grow the business.

Our executive team, led by CEO Chris Davies, also has a wealth of experience. It is responsible for the day-to-day running of the business and implementation of our strategy. At HSS we've created an environment that nurtures talent and enables it to flourish. This is evident not only in the qualities of our existing senior management, but in those identified within the business as their potential successors.

Governance

Good corporate governance is integral to the effective operation of HSS, the security of its assets and the prudent execution of our strategy. Even prior to listing, our governance framework was more developed than might have been expected of a private company. However, as a newly listed group, we are establishing the necessary committees, policies and systems that will take us towards best practice in this area.

Our people

HSS is all about providing great service - and our employees are the driving force behind our success. The investment we make in our people is reflected in their professionalism and pride in the HSS uniform. It's the 'can do', problem-solving attitude of our colleagues that sets us apart in the industry.

Corporate responsibility

Health and Safety is part of everyday life within HSS. It is the first item on every Board agenda and all our colleagues undertake regular training to ensure safe working conditions for themselves and our customers. Likewise we pay close attention to the effect our business and operations have on the environment.

Looking ahead

Our Initial Public Offering opened a new and exciting chapter in our history. HSS is an innovative business and I regard our London listing as a springboard from which we will seize new opportunities and deliver further sustainable growth.

Alan Peterson

Chairman

Chief Executive Officer's Statement

Introduction

In a highly competitive market, HSS delivered another year of excellent growth. This result was driven by strong performances from all our product and service ranges as well as continued investment across our network and infrastructure.

After the period end, on 9 February 2015, the Group completed a successful IPO on the London Stock Exchange - a landmark event for the business which has put HSS on the best footing to maximise its potential and accelerate its growth.

The HSS difference

At HSS, our customers drive everything we do. They demand Safety, Value, Availability and Support from us - and these are the common threads that run right through the fabric of our business. By investing in our people, equipment and systems, we get the very best from our operations, maximising our returns through improved efficiency and availability of our products.

Performance

Last year, more customers than ever trusted HSS to fulfil their equipment rental requirements. Our Core businesses continued to grow faster than the market and the contributions of our Specialist operations generated a robust Group result. We experienced a strong increase in operating cash flow during the year, which was reinvested to support further growth. Customer-led demand continued to drive our increased capital expenditure, which principally focused on the roll-out of new Local Branches and the development of our Specialist businesses.

The Group's financial performance is reviewed in detail in the following Financial Review.

Our markets

The UK market for equipment hire was estimated by the European Rental Association at around £5.9bn in 2014 - with an expected CAGR of 4.3% p.a. between 2014 and 2016. The market is highly fragmented, with almost half served by independent operators.

At HSS, we focus on the more resilient 'fit-out', 'maintain' and 'operate' segments of the tool and equipment hire market, which provide higher asset returns than heavy construction. These segments are generally less cyclical in nature, with a greater value-added element and a higher recurring spend by a more diverse range of customers. We complement this offer with a range of value-added, specialist services developed in response to customer demand.

While we naturally benefit from additional sales during periods of economic growth - when the new-build market is thriving - our businesses also prosper in more challenging times, when refurbishment of existing properties - both commercial and residential - tends to dominate. Over 90 per cent of our revenues are generated from business to business customers.

HSS provides tools, equipment and related services in the UK and Ireland and aims to be number one or two in its chosen markets. The breadth of our offer helps us secure a greater share of customers' budgets - and our superior service levels, coupled with our unique offerings, is leading to sustainable market share growth.

Our strategy for growth

Our strategy is based around fulfilling our customers' needs and ensuring we sustain the key competitive advantages that arise from the way we operate. We continue to invest across the business, as well as in our people, to support our future growth.

The HSS growth strategy is built around three elements:

Local Branches

To build and leverage our existing market position, we are accelerating the roll-out of our successful Local Branch format. This proven low-cost model is designed to penetrate the c. 50% share of the market currently held by independent operators. The strength of HSS Local Branches lies in the fact that they operate like independents but are backed by our sophisticated, retail-like distribution network, which delivers levels of product choice and availability that independent operators cannot match. In the first quarter of 2015 we opened 13 new Local Branches.

Key Accounts

We are also developing and growing our Key Accounts. We manage all the equipment requirements for some of these larger customers, building strong, enduring relationships and providing a comprehensive 'one-stop shop' service. This Total Equipment Management approach enables us to win a greater share of these customers' budgets.

Acquisitions

We have a proven track record of acquiring and swiftly integrating complementary Specialist businesses into HSS. Our strategy is to buy scalable businesses - at the right price - that exhibit clear synergy and growth potential and to which we can add tangible value. We retain their specialisms and integrate their back office functions into our own.

Positioned for growth

Easy availability of equipment is critical to the customer and we operate a sophisticated distribution network, similar to those used by leading retailers. This integrated one-fleet network maximises the availability of our equipment - whilst achieving the highest possible levels of utilisation. It is also supporting the expansion of our Local Branch network, which is helping to grow our market share.

Safety and the environment

The fundamental focus of our business is one of sustainability, so we naturally seek to embed a responsible approach into the way we operate. Our status as a growing UK-wide organisation means we are always mindful of the impact our activities have on our customers, colleagues, communities and the wider environment. We therefore make every effort to ensure our operations do no harm - and wherever possible make a positive contribution.

The safety of our people and our customers remains paramount. This year we continued to improve our safety record across the business. I am pleased to report that after almost halving our RIDDOR rate in 2013, we continued to reduce it in 2014. 

Our people

Our people are the heart of our company. The fact that we achieve consistently high customer satisfaction and retention ratings - as well as a market-leading Net Promoter score - speaks volumes about the service we provide. We therefore consider investment in training and development to be critical to our future success.

HSS operates its own dedicated training academy. In 2014 over 378 new sales colleagues benefited from our five-week residential training programme, with a further 137 colleagues participating in other schemes including our 'Stretch' programme, designed to identify and develop potential branch managers.

I never fail to be inspired and impressed by the efforts of our 'HSSers' wherever they work in the business; I thank them wholeheartedly for their individual contributions to our Group's success.

Outlook

We have made an encouraging start to 2015, experiencing good growth across both our Core and Specialist businesses, and trading is in line with our expectations. The roll-out of our Local Branches is continuing to plan, with new branches opening at the rate of one a week, and the customer response continues to be positive.

Our new equipment refurbishment facility, which opens in Q4 2015, will help us extend the life of our asset base and improve the service we provide to customers, and we are continuing to capitalise on the trend to outsourcing by further developing our larger Key Accounts. In addition, we continue to review a number of potential Specialist acquisition targets, with the aim of identifying scalable businesses with synergy potential and clear cross-selling opportunities.

Our growth aspirations are based on a disciplined approach, a clear strategy and solid financial foundations. 2015 will see us continue to strengthen the business and create new ways to exceed our customers' expectations. While the forthcoming UK general election creates an element of short term uncertainty for our customers, HSS is in good shape and we look to the future with confidence.

Chris Davies

Chief Executive Officer

FINANCIAL REVIEW

Overview

The results for the year ended 27 December 2014 are for Hampshire Topco Limited, the previous holding company of the Group, prior to the listing of new parent company HSS Hire Group plc on the London Stock Exchange in February 2015. Subsequent to the year-end the Group underwent a pre-IPO reorganisation and new parent company HSS Hire Group plc was incorporated ahead of its Admission to the Official List on 9 February 2015.

In 2014 we put in place our platform for future profitable growth. Following the Senior Secured Notes issue in February, we invested throughout the year in our equipment, people and processes - and in the final quarter of the year we began working towards our initial public offering (IPO).

The Senior Secured Notes issued in early 2014, alongside the new Revolving Credit Facility, enabled us to accelerate the pace of investment; a direct result of strong growth in customer demand.

During the year we both grew our hire fleet and increased utilisation in our Core and Specialist businesses to 47% and 70% respectively. This strong demand, combined with our targeted hire fleet investment, enabled us to deliver 25.5% growth in revenue (18.7% of which was organic). Combined with careful cost control this enabled us to improve our Adjusted EBITDA margin to 25.0% (2013: 24.8%) and deliver a return on assets (ROA). ROA calculated as Adjusted EBITA in the financial year / (average total assets (excluding intangible assets) less average current liabilities of 26.6% alongside the significant fleet expansion during the year (2013: 30.2%).

The directors consider the key performance indicators of the business to be turnover, operating profit before Interest, Tax, Depreciation and Amortisation and exceptional items ('adjusted EBITDA'), and capital expenditure.

Financial performance

Revenue

Revenue for the 52 week period ended 27 December 2014 increased by £57.9m, or 25.5%, to £284.6 m (2013: £226.7m). This uplift was primarily due to growth in organic revenue, reflecting increasing demand from both new and existing customers. Key and regional account customers accounted for a large element of this growth. Revenues in our HSS OneCall and HSS Training businesses grew 64.4% and 22.1% respectively and revenue from our hire business increased by 18.2%. We also benefited from the acquisition of Apex Generators in March 2014 and the inclusion of a full year of trading from UK Platforms which we acquired in June 2013.

Cost of sales

Our cost of sales for the 52 week period ended 27 December 2014 increased by £29.5m, or 40.1%, to £103.0m (2013: £73.5m). This increase was mainly due to the strong growth in our HSS OneCall (rehire) revenue, with the associated third-party supplier costs accounting for £14.3m of the increase. Stock maintenance costs during the period also increased due in part to the increased size of our hire fleet through ongoing hire fleet investment and also due to the acquisition of Apex Generators.

Gross profit

Our gross profit for the 52 week period ended 27 December 2014 increased by £28.4m, or 18.5%, to £181.5m (2013: £153.2m).

Distribution costs

Our distribution costs for the 52 week period ended 27 December 2014 increased by £8.5m, or 29.6%, to £37.2m (2013: £28.7m). This reflects the full year impact of the UK Platforms acquisition, the acquisition of Apex Generators and the growth in volume of our core business.

Administrative expenses

Our administrative expenses increased by £17.7m, or 17.0%, to £121.9m in the 52 week period ended 27 December 2014 from £104.2m in the 52 week period ended 28 December 2013. This was principally due to increased administrative expenses relating to the inclusion of a full year of trading for UK Platforms, the costs associated with Apex and the extra sales colleagues employed to support our expanding local branch network. Administrative expenses also grew due to increased business activity and inflationary pressures on our salary costs and one-off costs of £2.4m relating to the IPO.

Operating profit

Our operating profit for the 52 week period ended 27 December 2014 increased by £2.2m, to £23.6m (2013: £21.4m).

Finance income

As in the 52 week period ended 28 December 2013, we received negligible interest income on our cash balances in the 52 week period ended 27 December 2014.

Finance expense

Our finance expense for the 52 week period ended 27 December 2014 increased by £10.7m, or 52.7%, to £31.0m (2013: £20.3m). This increase was primarily due to the issue of £200m of Senior Secured Notes in February 2014 to refinance our existing borrowings. In addition to increasing our weighted average interest rate on borrowings from 7.02% to 7.19%, this also includes accelerated write off of debt issuance costs.

(Loss)/profit before tax

We reported a loss before tax of £8.5m for the 52 week period ended 27 December 2014 compared to a profit before tax of £2.6m for the 52 week period ended 28 December 2013.

Income tax credit/(expense)

We reported a net tax credit of £3.0m for the 52 week period ended 27 December 2014, compared to a tax expense of £2.2m in the 52 week period ended 28 December 2013, primarily due to our loss before tax and deferred tax recognised on prior year losses.

Profit for the year

We reported a loss of £5.5m for the 52 week period ended 27 December 2014 compared to a profit of £0.4m for the 52 week period ended 28 December 2013.

Capital expenditure

Fixed asset additions during the period (excluding assets acquired on acquisition) were £83.6m, a £46.8m increase over the prior year (2013: £36.8m). Of this total, £71.9m represented additions of materials and equipment held for hire (2013: £30.9m) and £11.7m represented additions to non-hire equipment (land and buildings and plant and machinery) (2013: £5.9m). This increase was in response to customer demand through the year and reflected our investment in both our hire fleet and our operating network during the year.

Cash generated from operations

Cash generated from operations was £16.4m for the 52 week period ended 27 December 2014, a £3.0m decrease from the prior period. This reduction in cash generated from operations reflects the growth in EBITDA between the periods offset by an increase in the cash payments for hire equipment during the period, and an investment in working capital as a result of strong revenue growth in the period.

Leverage

Net debt grew £40.7m to £317.0m as at 27 December 2014 compared to £276.3m as at 28 December 2013. This increase reflects the refinance of our former senior term loans with £200.0m of Senior Secured Notes in February 2014, the associated repayment of £29.0m of loan notes held by Exponent Private Equity LLP and increased finance leases and drawings on our revolving credit facility. Our leverage, calculated as Net debt divided by Adjusted EBITDA decreased from 4.9x Adjusted EBITDA as at 28 December 2013 to 4.5x Adjusted EBITDA at 27 December 2014.

Net third party debt, calculated as net debt excluding loan notes and any associated accrued interest on loan notes held by Exponent Private Equity LLP, grew £61.5m to £231.6m as at 27 December 2014 compared to £170.2m as at 28 December 2013. This increase reflects the refinance of our former senior term loans with £200m of Senior Secured Notes in February 2014 and increased finance leases and drawings on our revolving credit facility. Our third party leverage, calculated as net third party debt divided by Adjusted EBITDA increased from 3.0x Adjusted EBITDA as at 28 December 2013 to 3.3x Adjusted EBITDA at 27 December 2014.

Operations

We continued to invest in the roll-out of our local branches, opening 23 new locations during the year. Critical to this expansion was the successful training and development of new and existing colleagues to help drive profitable sales in these branches. Our HSS Training Academy in Reading played a key role in this and continues to support our Local Branch opening programme. We also strengthened our Head Office teams to underpin this activity and our future growth. These central teams are frequently involved in the development of systems and services for our larger Key Accounts, another central tenet of our growth strategy.

In June 2014 we established a partnership with Unipart Group. This investment has given us access to additional valuable expertise, which will drive greater productivity and efficiency in our engineering services and logistics operations.

Towards the year end we started work on our Initial Public Offering (IPO). This culminated in the admission of the shares of our new holding company, HSS Hire Group plc, to the premium listing of the Official List of the UK Listing Authority - and to trading on the London Stock Exchange's main market under the ticker 'HSS' in February 2015. Proceeds from the flotation have been applied to reduce the Group's leverage, providing greater capacity for additional capital expenditure to drive future growth in the business.

Acquisitions

In March 2014 we acquired Apex Generators, a specialist generator hire business. Operating primarily across Scotland, it has a wide range of customers across the construction, housebuilding, event, industrial, marine and offshore sectors. Apex is a complementary fit with our existing temporary power generation rental business ABird and we now offer a truly nationwide service to customers across the UK. Apex has performed well since acquisition, reflecting the strong cultural fit with HSS and the great team who joined us. We have also seen positive reaction from existing and new customers to our national coverage.

In October we bought the trade and assets of MTS UK's portable variable messaging sign (pVMS) hire business, which principally comprises pVMS assets. This acquisition has further expanded the range of products we offer to our event, traffic management and road maintenance customers.

Dividend

As a public company we intend to adopt a progressive dividend policy alongside earnings growth, with a medium-term target of three to 4.5 times normalised earnings cover. Normalised earnings cover calculated as the Group's net income before amortisation and exceptional items, after the deduction of a standard rate of tax as a multiple of aggregate dividends declared for the relevant period'.

Providing there are sufficient distributable reserves at the time, the Board intends to pay interim and final dividends in respect of each financial year. These will be split approximately one-third/two-thirds respectively of the annual total dividend. We may however revise our dividend policy from time to time. We expect the first payment to be the interim dividend in respect of the 2015 financial year.

Segmental performance

Core businesses

Results

The Group's Core businesses are HSS Hire (tool and equipment hire), HSS OneCall (third party equipment sourcing) and HSS Training (expert specialist training).

During 2014 the Core businesses delivered revenue of £247.4m (FY13: £208.0m) and Adjusted EBITDA of £51.2m (FY13: £46.6m) and together accounted for 87.0% of Group revenue and 72.0% of the Group's Adjusted EBITDA. Core utilisation during the year improved to 47% (FY13: 45%).

In 2014 we experienced strong growth in both revenue and EBITDA from HSS Hire operations across all regions. This was due partly to the continuing maturity of Local Branches opened in 2012 and 2013. We also saw continued revenue and EBITDA growth in our HSS OneCall and HSS Training businesses. Both of these operate at a lower EBITDA margin, however due to their low capital intensity, they have a positive effect on return on assets.

During the year we opened 23 new Local Branches and invested £41.9m in our Core hire fleet to meet increasing customer demand. The pVMS assets acquired from MTS UK were incorporated into the business following their acquisition in October.

We also began to reap the rewards from our investment in the HSS Training Academy. This dedicated facility provides the business with trained 'HSSers': colleagues equipped with the knowledge and skills to drive success across our expanding local branch network.

We are on track to open 50 new Local Branches in 2015. This will lead to increases in Core revenues from HSS Hire and will stimulate growth in both our HSS OneCall and HSS Training businesses.

Specialist businesses

Results

The Group's Specialist businesses are ABird and Apex (mobile generators), UK Platforms (powered access) and Reintec and TecServ (cleaning equipment services).

During 2014 the Specialist businesses delivered revenue of £37.1m (FY13: £18.6m) and Adjusted EBITDA of £19.9m (FY13: £9.6m) and together accounted for 13.0% of Group revenue and 28.0% of the Group's Adjusted EBITDA. Specialist utilisation during the year improved to 70% (FY13: 68%).

These businesses typically deliver higher EBITDA margins than our Core operations, although the Core businesses also carry all the central costs of the Group. Growth in 2014 was principally driven by investment in our sales teams, new depots and additions to our Specialist hire fleet, which enabled us to service identified customer demand.

Following its acquisition, Apex Generators was integrated swiftly into the business. We extended our UK coverage, opening a new ABird depot in Lingfield, a new UK Platforms depot in Newbridge and through installing dedicated Reintec/TecServ workspaces in nine of our local distribution centres. We also invested £30.0m to expand our Specialist hire fleet. Improved utilisation of 70% in these businesses reflects our ability to match capital expenditure to demand. We also continued to invest in our people, enlarging our Specialist sales force and engineering teams.

We will continue to drive organic growth in our Specialist businesses in 2015 through ongoing investment in our colleagues, hire fleet and depot network. We will also continue to evaluate 'bolt-on' acquisition opportunities that complement the activities of our Specialist businesses.

Post Balance Sheet Event

The successful IPO in February 2015, associated conversion of investor loans notes and accrued interest into equity -and subsequent repayment of £64.0m of our Senior Secured Notes and £20.5m of the drawn element of our revolving credit facility enabled us to de-gear the business. Immediately following the IPO our pro-forma leverage was approximately 2.2x Adjusted EBITDA.

We continue to target leverage of circa 2.0x Adjusted EBITDA at the end of FY15.

Consolidated income statement

For the year ended 27 December 2014

Consolidated statement of comprehensive income

For the year ended 27 December 2014

The accompanying notes form part of these financial statements.

Hampshire Topco Limited

Consolidated statement of financial position

At 27 December 2014

The accompanying notes form part of these financial statements.

Consolidated statement of changes in equity

For the year ended 27 December 2014

Consolidated statement of cash flows

For the year ended 27 December 2014 

The accompanying notes form part of these financial statements.

Notes to the consolidated financial statements

1. Accounting policies

a) Reporting entity

The Company is incorporated and domiciled in the United Kingdom.

These consolidated financial statements comprise the Company and its subsidiaries (the Group).

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

The financial information set out in this announcement does not constitute the Company's statutory accounts for the year ended 27 December 2014 or the year ended 28 December 2013. Statutory accounts for the year ended 27 December 2014 and the year ended 28 December 2013 have been reported on by the Independent Auditors. The Independent Auditors report on the Annual Report and Financial Statements for both years was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under S498 (2) or s498(3) of the Companies Act 2006. The Annual Report and Financial Statements for 2013 have been filed with the Registrar of Companies. The statutory accounts for the year ended 27 December 2014 will be delivered to the registrar in due course.

The Group and Company financial statements were approved by the Board of Directors on 20 April 2015.

b) Statement of compliance

The Group financial statements of Hampshire Topco Limited have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS) and the Companies Act 2006.

As permitted by Section 408(2) of the Companies Act 2006 information about the Company's employee numbers and costs have not been presented.

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 2014, and these accounts therefore cover the period from 29 December 2013 to 27 December 2014 (2013: 30 December 2012 to 28 December 2013).

As permitted by Section 408(3) of the Companies Act 2006, the Company's profit and loss account and statement of recognised gains and losses and related notes have not been presented as the Company's Group Accounts have been prepared in accordance with the Companies Act 2006. The Group has also taken advantage of the exemption under FRS1 (5) not to prepare a Company cash flow statement.

c) Functional and presentational currency

These financial statements are presented in pounds Sterling (£), which is the Group's functional and presentational currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.

d) Basis of preparation

The 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.

For all periods up to and including the year ended 28 December 2013, the Group and the Company have prepared financial statements in accordance with United Kingdom Generally Accepted Accounting Principles (UK GAAP). These financial statements for the year ended 27 December 2014 are the first the Group has prepared in accordance with IFRS.

The Group's deemed transition date to IFRS is 9 October 2012, being the date the parent company was incorporated. Details of how the transition from UK GAAP to IFRS has affected the Group's reported position and performance are given in note 26. The principles and requirements for first time adoption of IFRS are set out in IFRS 1 First-time adoption of International Financial Reporting Standards (IFRS 1). IFRS 1 allows certain exemptions in the application of particular standards to prior periods in order to assist companies with the transition process.

e) New accounting standards and accounting standards not yet effective

The following new standards, amendments to standards and interpretations issued by the International Accounting Standards Board (IASB) became effective during the year ended 27 December 2014. The accounting policies adopted in the presentation of the Group financial statements reflect the adoption of the following new standards, amendments to standards and interpretations as of 1 January 2014. These have not has any material impact on the financial statements.

Standards effective in future periods

Certain new standards, amendments and interpretations to existing standards have been published that are relevant to the Group's activities and are mandatory for the Group's accounting periods beginning after 1 January 2015 or later and which the Group has decided not to adopt early.

The impact of these standards is currently being assessed.

f) 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 information or further information. Such changes are recognised in the period 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.

Impairment of goodwill, intangible assets and property, plant and equipment

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. 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.

Onerous lease provision

When an onerous lease has been identified the costs of exiting the lease and leaving the leased property are estimated by management and provided for. The actual costs of exiting the lease could vary from the estimates.

Provisions for dilapidations

Management estimate and make provision for costs that will be incurred in returning a leased property to the condition that it was in at the inception of the lease. The actual costs of the work that needs to be completed could vary from the estimates.

Income taxes

Estimates may be required in determining the level of current and deferred income tax assets and liabilities, which the directors believe are reasonable and adequately recognise any income tax related uncertainties. Various factors may have favourable or adverse effects on the income tax assets or liabilities. These include changes in tax legislation, tax rates and allowances, future levels of spending, the Group's level of future earnings and estimated future taxable profits.

Useful economic life 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.

g) Going concern

Note 20 includes the Group's objectives, policies and processes for capital management and for financial risk management including market risk, credit risk and liquidity risk.

The directors have also considered the adequacy of the Group's debt facilities with specific regard to the following factors:

- there is no requirement to redeem any of the Senior Secured Notes until 1 August 2019

- the financial covenants relating to the revolving credit facility secured by the Group, and as detailed in note 16 and 20

The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, and senior debt and interest repayments falling due as detailed in note 16, show that the Group is expected to be able to operate within the level of its current facilities for the foreseeable future.

On 7 January 2015 HSS Hire Group Limited was incorporated, and on 19 January 2015 was re-registered as a public limited company, HSS Hire Group plc. HSS Hire Group plc subsequently acquired the entire share capital of the Company by way of a share for share exchange.

On 4 February 2015 the issued share capital of HSS Hire Group plc was admitted to the premium listing segment of the Official List of the Financial Conduct Authority. The initial public offering (IPO) was for 35% of the listed ordinary shares of HSS Hire Group plc on the London Stock Exchange and resulted in £103 million of gross proceeds to the Group. Note 24 contains further information regarding the IPO.

After reviewing the above, taking into account current and future developments and principal risks and uncertainties, and making appropriate enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly they continue to adopt the going concern basis in preparing these financial statements.

h) 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.

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, 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 remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of contingent consideration are recognised in profit or loss.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation.

i) 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 Operating Officer and Chief Finance Officer.

For management purposes, the Group is organised into segments based on services provided, and information is provided to the management team on these segments for the purposes of resource allocation and segment performance management and monitoring.

The management team considers there to be two reportable segments:

- HSS Core - the provision of tool and equipment hire and related services

- HSS Specialist - the provision of generator, powered access and cleaning hire equipment and the provision of cleaning maintenance services, under specialist brands

All trading activity and operations are in the United Kingdom and the Republic of Ireland.

j) Foreign currency translation

Foreign currency transactions are translated into Sterling, the Group's functional currency, using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. 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 functional 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 period, 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.

k) Property, plant and equipment

Land and buildings comprise leasehold and freehold retail outlets, 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:

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 ten percent of cost and nil. 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.

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.

l) 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.

Impairment of goodwill

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units (CGUs), or groups of CGUs that is 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.

Goodwill impairment reviews are undertaken. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed.

Intangible assets acquired on acquisition

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 1950's, and therefore given its longevity the directors consider the HSS brand to have an indefinite life and it is not therefore amortised, but instead subjected to annual impairment testing using the relief from royalty methodology to calculate the fair value of the brand.

All other brands and customer relationships are amortised over their useful economic life. The directors have assessed the brands of ABird, UK Platforms, TecServ 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, TecServ Cleaning Equipment Services Limited and Apex Generators Limited as having useful economic lives of 10 years.

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 and testing 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 does not exceed four years.

Other intangible assets

Other intangible assets that are acquired by the Group that 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.

Impairment of intangible assets (excluding goodwill)

Impairment reviews are undertaken whenever events or changes in circumstances indicate their carrying value may not be recoverable. If the fair value of an intangible asset is estimated to be less than its carrying amount, the carrying amount is reduced to its recoverable amount. 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.

m) Derivative financial instruments

Historically the Group has used a derivative financial instrument 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. The resulting gain or loss is recognised in profit or loss immediately. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the 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 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.

n) 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.

o) Trade receivables

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.

p) Cash

In the statement of cash flows, cash includes cash in hand, deposits held at call with banks and bank overdrafts. In the statement of financial position, bank overdrafts are shown within borrowings in current liabilities.

q) Share capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.

Share premium

The amount subscribed for share capital in excess of nominal value, less any costs directly attributable to the issue of new shares.

Retained earnings/accumulated deficit

Cumulative net gains and losses recognised in the income statement.

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.

r) 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.

s) 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 pre-payment for liquidity services and amortised over the period of the facility to which it relates.

t) 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 hire stock rehire, cost of reselling plant and equipment, maintenance, depreciation, amortisation and asset write off and disposals. Distribution expenses comprise vehicle costs and transport wages. Administrative expenses comprise principally staff and property costs and costs of acquisitions.

u) Earnings before interest, taxation, depreciation and amortisation (EBITDA) and Adjusted EBITDA

EBITDA and Adjusted EBITDA are non-IFRS and non-Generally Accepted Accounting Policy (GAAP) performance measures used by management to assess the operating performance of the Group. EBITDA is defined as operating profit before interest, tax, depreciation, amortisation and hire stock disposals and write offs. Exceptional items are excluded from EBITDA to calculate Adjusted EBITDA. The directors primarily use the Adjusted EBITDA measure when making decisions about the Group's activities. As these are non-GAAP 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.

v) Finance income and expense

Finance income comprises interest received on cash balances.

Finance expense comprises interest payable on borrowings, interest payable on finance leases, 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 interest expense component of finance lease payments is recognised in the income statement using the lease's implicit interest rate.

w) 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 statement of financial position 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 statement of financial position date and

are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

w) Current and deferred income tax (continued)

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.

x) 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. Both employee and employers are required to make contributions with the employers' contributions for each employee determined by the level of contribution made by the employee and the employee's 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 that is within the scope of IAS 37 Provisions, contingent liabilities and contingent assets (IAS 37) 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 1 year after the end of the reporting period are discounted to their present value.

y) Provisions

Provisions for onerous leases, 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

Provisions for dilapidation are recognised in full when the related facilities are installed. A corresponding amount equivalent to the provision is also recognised as part of the cost of the related property. The amount recognised is the estimated cost of dilapidations, discounted to its net present value, and is reassessed each year in accordance with local conditions and requirements. 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.

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.

z) Revenue recognition

The Group's activities consist of supplying hire and equipment services within the UK and the Republic of Ireland. Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods and services supplied, including compensation for damaged or lost hire stock, stated net of discounts, rebates, returns and value added taxes.

The Group recognises revenue when the amount of revenue can be reliably measured when it is probable that future economic benefits will flow to the entity. Revenue is recognised as follows:

aa) Leases

Assets held under finance leases, which are leases where substantially all the risks and rewards of ownership of

the asset have transferred to the Group, and hire purchase contracts are capitalised in the balance sheet and are

depreciated over the shorter of useful life and lease term with any impairment being recognised in accumulated

depreciation. Leased assets are recorded at an amount equal to the lower of its fair value and the present value of

the minimum lease payments at the inception of finance leases. The capital elements of future obligations under

leases and hire purchase contracts are included in liabilities in the statement of financial position and analysed between current and non-current amounts. The interest elements of the obligations are charged to the income statement over the periods of the leases and hire purchase contracts so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating leases. Operating lease rentals are charged to the income statement on a straight-line basis over the lease term.

Lease incentives are recorded as a liability and then recognised over the lease term on straight line basis in the income statement as a reduction of rental expense.

bb) 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:

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 value of interest rate swap contracts are calculated by management based on external valuations received from the Group's bankers and is based on anticipated future interest yields.

cc) Exceptional items

Exceptional items are disclosed separately in the income statement where it is necessary to do so to provide further understanding of the 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 and include acquisition costs, fair value movements on derivative financial instruments, restructuring costs and accelerated debt issuance costs.

dd) Listing costs

As disclosed in note 1g, the Ultimate parent company was admitted to the premium listing segment of the Official List of the Financial Conduct Authority on 4 February 2015. As part of the IPO, the Group incurred certain costs. These costs have been allocated between those relating to the issue of new shares, those related to the issue of existing shares, and those costs related to other activities associated with the IPO. Costs incurred as at 27 December 2014 that relate to the issue of new shares have been carried forward and will be set against the Ultimate parent company's share premium account in accordance with IAS32 (Financial Instruments: Presentation). All other IPO related costs are charged to profit or loss.

ee) Credit note provision

The Group makes provision for credit notes raised after the end of the reporting period that relate to customer invoices raised before the end of the period, net of any impairment charges relating to the customer invoices.

2. Segment reporting

As explained in note 1i, the management team considers the reportable segments to be HSS Core and HSS Specialist. 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 the United Kingdom and the Republic of Ireland. The Group has no single external customers that provide more that 10% of the Group's turnover.

3. Other operating income

4. Exceptional items

Items of income or expense have been shown as exceptional either because of their size or nature or because they are non-recurring. An analysis of the amount presented as exceptional items in the consolidated income statement is given below.

Restructuring costs

During the financial years presented in these financial statements the Group has incurred costs in relation to the restructuring of the business and its operations. Principally these costs relate to redundancies and the costs associated with non-trading stores (including onerous leases and dilapidations) and IPO costs incurred and not available to offset against the Ultimate parent company's share premium account (see note 1 dd).

The tax effect of these items in the year ended 27 December 2014 was to reduce the tax charge by £0.6 million (2013: £0.5 million).

Acquisition costs

During the financial years presented in these financial statements, costs have been incurred relating to acquisitions. Principally these costs have related to legal and professional fees associated with the acquisitions. In accordance with IFRS these have been expensed as incurred.

The tax effect of these items in the year ended 27 December 2014 was to reduce the tax charge by £0.1 million (2013: £nil).

Refinancing costs

In the year ended 27 December 2014 the Group incurred costs associated with restructuring its debt. These costs include £6.6 million in relation to the acceleration of the write off of previous debt issuance costs, net of a receipt £0.5m for the early termination of a swap agreement.

The tax effect of this was to reduce the tax charge by £1.3 million.

Fair value movement on derivative financial instruments

The Group took out an interest rate swap in 2012 to fix LIBOR interest at 0.959% in respect of £120 million of the senior debt which was due to expire on 26 November 2016. The movements in the fair value of the interest rate swap have been taken to profit and loss and presented as exceptional items.

The tax effect of these items in the year ended 27 December 2014 was to reduce the tax charge by £0.2 million (2013: increase of £0.4 million).

5. Finance income and expense

The debt issue costs charged to profit and loss in 2014 arose as a result of the bond issue and refinancing undertaken, and includes £6.6 million of accelerated write off of previous debt issuance costs and net of a receipt of £0.5m for the early termination of a swap agreement.

6. Operating profit

Operating profit is stated after charging/(crediting):

7. Employees

The average number of people employed by the Group (including directors) during the year was as follows:

The aggregate remuneration costs of these employees were as follows:

IAS 24 Related party transactions (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 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:

At 27 December 2014 there were no amounts due to key management personnel (28 December 2013: £nil)

8. Directors' remuneration

The remuneration costs of the Company's directors were:

The remuneration of the highest paid director was:

9. Income tax expense

(a) Analysis of (credit)/expense in the year

(b) Factors affecting the tax expense in the year

The tax assessed on the loss for the year differs from the standard UK corporation rate of tax. The differences are explained below: