Hss Hire Regulatory News (HSS)

HSS Hire Group Plc

2017 strategic plan complete; business positioned for next phase of accelerated growth

HSS Hire Group plc ("HSS" or the "Group") today announces results for the 27 week period ended 3 July 2021

· Strong trading performance with new operating model driving significantly improved profitability above 2019 levels

o H1 2021 like-for-like6 revenues at 99% of H1 2019, with Q2 2021 at 102%

o Capital-light Services segment 17% ahead of FY19 on a like-for-like6 basis

o EBITDA7 and EBITA7 comfortably ahead of 2019, up 13% and 99% respectively

o Digitally-led, lower-cost operating model underpinning Group profitability with EBITDA margin up 2.3pp on H1 2020 and ROCE8 increasing to 24.0%, up 13.3pp since December 2020

· Further strengthening of balance sheet with leverage reduced to 1.7x7

o Net debt7 reduced further to £97.6m (FY 2020: £120.4m)

o Leverage at a record low and significantly ahead of previous FY 2021 target

o Sale of Laois completed April 2021 for €11.2m

o Efficient working capital management maintained, overdue debt remains at low levels

· Delivered 2017 strategic plan, focus now on leveraging digital offering to drive accelerated growth

o Transition to new digital platform, HSS Pro POS, largely complete; improving the customer experience by providing single point-of-sale access to full range of HSS products and services

o Restructured organisation into two divisions, already delivering improved sales conversion and customer service

o "Sales Acquisition", focused on customer conversion and the leveraging of digital assets; and

o "Make it Happen", focused on customer fulfilment and service.

o Low cost builders merchant network expanded to 50 locations (June 2020: 10), now representing 13% of customer orders in England & Wales

o Continued technology investment including enhancements to HSS.com, with online revenue up 75% compared to prior year representing 24% of transactions in H1 2021

· Current trading and outlook

o Revenue, EBITDA7 and EBITA7 all above management expectations in Q3 2021 to date.

o Management now expect full year EBITDA, on a non-IFRS16, continuing operations basis, to be ahead of market expectations and EBITA7 to be materially ahead

o Sale of All Seasons Hire completed 29 September 2021 for gross consideration of £55m, with proceeds to be used to further reduce debt. Leverage7 as at 3 July 2021 on a LTM pro-forma basis will reduce to c1.0x post this transaction, delivering on one of the three strategic objectives announced in 2017 - "Delever the Group".

o Group revised target is for leverage7 to remain between 1.0x and 1.5x

o Refinancing process underway, well placed for material reduction in Group interest cost

o Strategy delivering, well positioned to capitalise on market opportunities

o HSS will host a series of events, starting later in the year, to demonstrate the Group's technology platforms and provide an update on the Group's financial performance framework

Steve Ashmore, Chief Executive Officer, said:

"The first half of 2021 has been one of significant progress and I am very pleased with what we have accomplished. We started the year with strong momentum and trading continued to improve over the period, with Q2 21 revenues at 102% of 2019 levels, EBITDA and EBITA margins up and ROCE at a record level. This strong performance, combined with the post balance sheet date sale of All Seasons Hire, has allowed us to reduce leverage to around 1.0x, well below our 2.0x target, completing the final element of the strategic plan set out in 2017: to Delever the Group, Transform the Tool Hire business and Strengthen our Commercial proposition.

The Group has made strong progress over the last four years so that HSS today is unrecognisable from the HSS of 2017. Our unrivalled digital capabilities allow us to offer our customer what they need, when they need it, servicing demand through our 500+ partner supply chain. Leveraging our differentiated customer offering, highly-evolved technology platform, and scalable structure built around two key divisions, we are uniquely positioned to capitalise on market opportunities as we begin the next exciting phase of our growth."

Notes

1) Results for H1 21 and H1 20 are for continuing operations on an IFRS16 basis (unless otherwise stated) and exclude the Laois Hire Limited business which was sold in April 2021

2) Revenue variance excludes the impact of additional week's trading in H1 FY21

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

4) Adjusted EBITA defined as Adjusted EBITDA less depreciation

5) Net debt leverage is calculated as closing net debt divided by adjusted Last Twelve Months (LTM) EBITDA

6) Like-for-like excludes impact of loss of Services volume associated with FY19 announced change to one managed service contract and impact of additional week's trading in Q1 FY21

7) Pre-IFRS16 basis

8) ROCE is calculated as Adjusted EBITA for the 12 months to 3 July 2021 divided by the average of total assets less current liabilities (excluding intangible assets, cash and debt items) over the same period

-Ends-

Disclaimer:

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

Notes to editors

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

For further information, please contact:

Chief Executive Officer's Report

The first six months of 2021 saw our new operating model deliver well, with revenue returning to pre-COVID-19 levels despite further related government restrictions, and profitability increasing significantly above 2019 levels. Performance has been driven by the rollout of new technology (HSS Pro POS) to our salesforce, expansion of the builders merchant model and a resilient construction market. The changes made to our network in Q4 2020 have proved successful, delivering strong customer service, while reducing costs and our carbon footprint. Following on from that we have reorganised our business into two divisions, Sales Acquisition and Make it Happen, which is bringing separate focus to how we acquire customers and then fulfil their requirements.

HSS Pro POS Technology Rollout

We have continued to invest in the Brenda platform since its launch for the OneCall business in 2018. During Q1 2021 we rolled out the latest application, HSS Pro POS, to our entire salesforce. This allows them direct access to our full range of products and services, whether sourced directly from owned fleet or via our large supply chain of rehire suppliers. The platform has landed well with colleagues, being simple, quick and intuitive, and most important of all, allowing them to say "Yes!" to customers quickly for all hire enquiries.

We are already seeing HSS Pro POS deliver great results with rehire enquiries up 18%, conversion rates improved by 17ppts and a resultant 17% improvement in like-for-like Services revenue. We are also seeing better decision-making, reducing the number of high cost-to-serve and high-carbon, long-distance jobs in favour of using our rehire supply chain to offer a more efficient response to customers. This is likely to drive continued outperformance of Services revenue against Rental.

Builders Merchants Network Expansion

In H1 2021 we increased the number of builders merchant locations from 24 to 43, and at mid-September have 50 open, all of which have significantly higher footfall than a typical standalone hire location. These builders merchants are proving to be a convenient location for our customers to order and collect hire equipment, with 13% of our contracts raised in England & Wales now being done at these locations. Our network is approaching optimum size with a national footprint now in place with 14 partners. The pace of rollout will slow in H2 as we focus instead on maturing open locations and working with our partners to improve penetration with their larger customers.

Market Resilience

While some important end-user markets like retail, hospitality and airports continued to be adversely impacted by COVID-19 in H1, the lack of volume there has been replaced by strong demand in areas like housebuilding, home improvement, repair & maintenance and infrastructure. It is testament to our diversified customer base and exposure to so many end-user markets that our revenue performance remains strong. As more COVID-19 restrictions are removed we see further opportunities for growth in H2. The outlook for the market is positive with the Construction Products Association forecasting 6.3% growth in construction output for 2022 and the ONS publishing forecasts for GDP growth in 2022 averaging 5.4%.

Operating Network Changes

The changes to our operating network in October 2020 have delivered ahead of our operational and financial expectations and we are now better placed than ever to fulfil customer requirements. We believe that we have the leading national fulfilment network, offering both depth of coverage and breadth of offering across the UK and Ireland. Our directly employed operations teams have new-found focus on operating 40 well established distribution hubs, into which we consolidated the vast majority of our owned fleet. This strategically located network is fit for the future and we do not foresee any major changes, providing an opportunity for our teams to focus on delivering exceptional customer service using the new routing and scheduling technologies that we are introducing in H2.

Our network also includes fulfilment from a further 2000+ locations operated by over 500 supply partners, ranging from large multi-site generalists to small single-site specialists. Our technology platform allows these suppliers to access our enquiries and fulfil those suited to them. This gives customers access to an unrivalled level of availability in addition to lowering the cost to serve and reducing duplicated carbon footprint.

Finally, the combination of our distribution centres, local sales branches and builders merchants locations means that we now have 135 click-and-collect locations nationwide. I am pleased to report that 21% of customer orders were fulfilled this way in H1, a reflection of customer demand for this technology-driven fulfilment channel

Business Reorganisation

Following the changes made to our operating network in Q4 2020 and the rollout of HSS Pro POS in Q1 2021, we have now reorganised our business around two divisions in order to drive superior customer service and to create clarity around performance management.

Our Sales Acquisition division comprises our directly employed field sales teams, 45 local sales branches, 50 HSS builders merchant hire counters and over 100 ProService managers. Its role is to drive revenue growth through generating enquiry volume and maximising conversion rates, while maintaining gross margins and improving digital penetration. The rollout of HSS Pro POS has enhanced cross-selling and is driving a quicker response for customers.

Our Make It Happen division comprises our directly employed operations teams in 40 distribution centres, plus the operations teams of the 500 supplier partners which operate from over 2000 locations. This division is focused on fulfilment rates, customer service measures, utilisation, cost-to-serve and returns. We now have an operating model well suited to minimise the Group's carbon footprint going forward.

These two divisions offer customers what we believe is an unrivalled speed of response, the deepest and broadest product offering and by far the best availability in the market. It certainly appears to be working with like-for-like Services revenue up 17% in H1 (versus 2019) and Trustpilot scores of 4.3 stars. 

Strategy update

We are approaching the four year anniversary of our strategy reset launched in December 2017, where we set out to: 1. Delever the Group; 2. Repair the Tool Hire business; and 3. Strengthen our Commercial Proposition. I am pleased to report that these three strategic priorities have been fulfilled and our business turnaround is complete. The business is now in great shape, delivering superior profitability and return on capital, and has a strong balance sheet. I believe we are uniquely positioned to target market share gains through outstanding service, driven by unparalleled technology and a focused organisational structure.

1. Delever the Group

Since we announced our strategy reset we have reduced our leverage (pre-IFRS16) from 4.8x to 1.7x. This is an outstanding achievement and testament to both the hard work of colleagues and the support from our Board and shareholders on key strategic decisions. The divestments of UKP, Laois and ASH have provided proceeds to reduce debt, while retaining capability and customer service through long-term commercial partnerships. Significantly improved profitability has also reduced our leverage, both through improved trading and cost reduction. In particular, the decisions taken to remove the NDEC and reduce central costs in 2018 removing circa £14m in operating costs per annum, to implement a builders merchant model starting from 2019 and to close 134 branches in October 2020 resulting in £15m annualised cost savings have all led to a leaner, more agile operating network and record returns.

2. Repair the Tool Hire business (more latterly 'Transform')

The original priority of improving profitability in key areas of products, branches and customers in 2018 allowed us to repair the tool hire business and then focus on transforming it into the great business we have today. The customer segmentation study in 2018 led to a new vision to become the market-leading digitally-led brand for equipment services. Our journey to make the customer proposition 'easy' started with the launch of our customer App in 2018, the first fully transactional App in our sector, and has more recently involved the launch of HSS Pro POS. Our employee proposition has improved too with continued improvements in engagement scores over four years and significantly improved safety performance.

Strengthen our Commercial Proposition

Significant progress has been made here in the last 12 months as we accelerated our strategy and created a more scalable organisation model. Our national network of Customer Distribution Centres, click-and-collect locations and supply chain partners offers superior customer choice and availability. Our successful builders merchant network rollout is built on convenience for customers and gives us access to new customers. Our technology provides colleagues with a platform that is easy to operate, allowing them to convert enquiries across the full range of hire products. We now have a scalable, agile, technology-driven proposition in place which has the opportunity to target ambitious market share gains in the next chapter of our development. We are already seeing 24% of orders transacted online.

In conclusion, our turnaround phase is complete and the business is in great shape both financially and operationally. I look forward to sharing our ambitions for the next exciting phase of business growth later in H2.

Group Financial Performance

Results and commentary are presented on a continuing operations basis unless otherwise noted, reflecting the impact of the strategic disposal of Laois in April 2021.

Revenue and segmental contribution

The H1 21 results are based on 27 weeks of trading whereas H1 20 is 26 weeks. Revenue growth metrics versus FY20 have been adjusted to exclude the impact of this additional week (with the adjusted metric shown in brackets). We have made comparisons to FY19 because, given COVID-19, FY20 is not a typical period for trading. All comparisons to FY19 are on a like-for-like basis, taking into account this adjustment as well as the impact of a loss of Services volume associated with the FY19 announced change to one managed service contract.

Revenue in H1 21 was £150.5m, 25% (22%) higher than the previous period (H1 20: £120.7m), which was heavily impacted by the COVID-19 pandemic and associated lockdowns in the UK and Ireland from March 2020. Since then, revenue has recovered to pre-COVID-19 levels through effective strategy implementation in an improving market as government restrictions relax. In H1 21 the Group's revenue, on a like for like basis, was 99% of the comparable FY19 period with an improving trend over the six months.

Turning to segmental performance, Rental and related revenues were £101.7m in H1 21 (H1 20: £82.3m), 24% (21%) higher than in H1 20, and recovered to 94% of FY19 levels on a comparable basis. Contribution is up 27% at £72.0m (H1 20: £56.6m). Margin increased to 70.8% (H1 20: 68.8%) with good cost control as volume recovered and reflecting the benefit of the new operating model. H1 20 contribution benefited from around £1.6m of government furlough income, and after adjusting for the impact of this the improvement in margin rises to 3.8pp.

Services revenue has increased by 27% (24%) to £48.7m (H1 20: £38.4m). Against FY19, on a like for like basis, revenue has grown 17%, reflecting a very strong performance from the business segment with customers continuing to value the one stop shop offer through the Group's evolving technology platforms; making it easy for customers to access all of their hire needs in one simple transaction. Contribution increased to £7.2m (H1 20: £4.9m). Margins are increased by 2.1pp at 14.9% (H1 20: 12.8%), reflecting the mix benefit of recovering Training revenue and the increased OneCall volume. H1 20 contribution benefited from around £0.6m of government furlough income, and after adjusting for the impact of this the improvement in margin rises to 3.6pp.

Costs

In October 2020 the Group implemented a new digitally-led operating model, reducing the fixed cost base by £15m. The benefit of this change is borne out by the year on year reduction in costs set out below.

Cost of sales increased to £68.3m during the period (H1 20: £60.1m) primarily as a result of the recovery in revenue following a COVID-19 related decline in our Services business during 2020. Distribution costs increased only slightly by £0.2m versus the prior year to £13.1m (H1 20: £12.9m). Costs have been tightly managed despite the increase in activity.

Administrative expenses decreased by £7.2m to £48.0m (H1 20: £55.2m) with the reduction mainly driven by the move to a digitally-led operating model noted above and the associated property and headcount related savingsAn exceptional credit of £7.5m was recognised in H1 21 largely as a result of the Group's efforts to negotiate and complete early surrenders on stores closed as part of the changes to the Group's operating model referenced above. The figure includes £0.9m of associated professional fees. In H1 20 an exceptional credit of £0.8m was recognised reflecting a release from onerous lease provision on adoption of IFRS16.

Net finance expenses have reduced reflecting the reduction in discount unwind following lease surrenders and the reduced interest and debt issue cost amortisation following repayments of senior finance facility debt in January and May.

Other operating income

Other operating income at £1.6m (H1 20: £6.7m) relates to £1.2m received under a COVID-19 business interruption insurance claim, a £0.2m release of provision held against Irish Temporary Wage Subsidy Scheme 2020 receipts (now that eligibility to participate in the scheme has been confirmed) and £0.1m of sublease rental income. Government support has not been taken in FY21 given the recovery of trading and strengthened balance sheet. Prior year income comprises the receipt of £6.2m in grant income as a result of participation in the UK Job Retention Scheme and a similar scheme operated in the Republic of Ireland, alongside rates grants of £0.3m and sublease rental income of £0.2m.

Profitability

Adjusted EBITDA of £38.3m in H1 21 is significantly higher than the prior period (H1 20: £27.9m); improving revenue performance delivered through the Group's lower cost operating model being the principal driver. This has resulted in a corresponding increase in adjusted EBITDA margin of 2.3pp to 25.4% (H1 20: 23.1%).

Adjusted EBITA increased from £1.1m in H1 20 to £17.7m in H1 21 with margin increasing 10.9pp to 11.8% (H1 20: 0.9%). In addition to the drivers of EBITDA performance, depreciation of right-of-use assets materially reduced with the implementation of the new operating model.

The result of the drivers noted above is that the Group recognised a profit before tax of £11.2m versus a loss of £12.9m in the prior period.

The basic earnings per share were 1.61p in H1 21 versus a basic loss per share of 7.55p in H1 20 reflecting the large improvement in profit before tax but reduced by the significant increase in average shares in issue following the Group's highly successful capital raise in December 2020. The diluted earnings per share were 1.55p, versus a loss of 7.55p in the prior period (when all potentially dilutive instruments were anti-dilutive).

Sale of Laois Hire Limited

To enable the Group to focus on its strategic priority to Transform the Tool Hire Business, the disposal of Laois Hire Limited, the Irish large plant hire business, to Briggs Equipment Ireland Limited ("Briggs") completed on 7 April 2021. Proceeds of the disposal, net of transaction costs, were £10.0m generating a profit on disposal of £3.2m. As part of the transaction, HSS entered into a commercial agreement with Briggs for the cross hire of equipment to ensure the broadest possible distribution of, and customer access to, each party's existing fleet. Accordingly, Laois has been treated as a discontinued operation. The loss from the discontinued operation was £0.3m (H1 20: loss of £21k)

The profit on disposal of Laois, net of the loss in the period, increased the profit from total operations for the financial period to £14.1m compared to a loss of £12.9m in the prior period.

Return on Capital Employed

ROCE was 24.0% reflecting the significant improvement in EBITA driven by the improvements in revenue noted above. ROCE is calculated as Adjusted EBITA divided by average capital employed, where capital employed is total assets except intangibles, derivatives and cash, less current liabilities excluding debt items.

Net debt

Net debt at 3 July 2021 was £97.6m, a reduction of £22.8m from the year end. This has been driven by improved EBITDA, strong working capital management, proceeds from the disposal of Laois and a reduction in lease liabilities following the successful surrender of closed branches. Leverage has reduced to 1.7x (pre-IFRS16 basis), ahead of the Group's target of below 2x by the end of 2021. Leverage post-IFRS16 is 2.0x.

The debt facilities consist of a £160.8m senior finance facility, maturing in June 2023, and an undrawn revolving credit and overdraft facility of £23.2m maturing in January 2023. Including net cash balances the Group had access to £119.2m of combined liquidity at 3 July 2021.

Dividend

The Group has made great progress in reducing leverage by executing against its strategy. Reducing net debt and continuing to invest in the technology to drive better returns remain the focus for the Board. As such, it believes that the interests of the shareholders of the Group are best served by not paying a dividend at this time, a position which will be reviewed in the next twelve months.

Going concern

While encouraged by the resilience of the Group during a period of unprecedented disruption, the Directors continue to model via a number of scenarios the potential impact of COVID-19 on results. At the 26 December 2020 year end the Group had sufficient liquidity to operate within banking covenants for the next 12 months even under its reasonable worst case scenario. Actual events and trading since then have been favourable compared to the assumptions made and as a result the more recent models predict only increased liquidity from that position.

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 over a period of at least twelve months from the date of approval of these financial statements. Accordingly they continue to adopt the going concern basis in preparing these unaudited condensed consolidated financial statements.

Risks and uncertainties

The principal risks and uncertainties that could have a material impact upon the Group's performance over the remaining 26 weeks of the 2021 financial year have not changed significantly from those described in the Group's 2020 Annual Report and are summarised in note 19 of this interim report.

The main risk expected to affect the Group in the remaining 26 weeks of the 2021 financial year is macro-economic conditions, which includes the impact that COVID-19 and Brexit related developments could have on the business.

By order of the Board

Steve Ashmore

Director

29 September 2021

HSS Hire Group plc

Unaudited condensed consolidated income statement

The notes form part of these condensed consolidated financial statements.

HSS Hire Group plc

Unaudited condensed consolidated statement of comprehensive income

The notes form part of these condensed consolidated financial statements.

Unaudited condensed consolidated statement of financial position

The notes form part of these condensed consolidated financial statements.

Unaudited condensed consolidated statement of changes in equity

The notes form part of these condensed consolidated financial statements.

Unaudited condensed consolidated statement of cash flows

The notes form part of these condensed consolidated financial statements.

Notes forming part of the unaudited condensed consolidated financial statements

1. General information

The Company is a public limited company which is listed on the London Stock Exchange and is incorporated and domiciled in the United Kingdom. The address of the registered office is Oakland House, 76 Talbot Road, Manchester, M16 0PQ. These condensed consolidated financial statements comprise the Company and its subsidiaries (the 'Group') and cover the 27 week period ended 3 July 2021.

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

The condensed consolidated financial statements were approved for issue by the Board on 29 September 2021.

The condensed consolidated financial statements do not constitute the Statutory Accounts within the meaning of Section 434 of the Companies Act 2006 and have not been subject to audit by the Group's auditor. Statutory Accounts for the year ended 26 December 2020 were approved by the Board on 28 April 2021 and delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

2. Basis of preparation and significant accounting policies

The condensed consolidated financial statements for the 27 weeks ended 3 July 2021 have been prepared in accordance with IAS 34 Interim Financial Reporting. The condensed consolidated financial statements should be read in conjunction with the Group's Annual Report and Accounts for the year ended 26 December 2020, which were prepared in accordance with IFRS as adopted by the European Union.

Accounting policies are consistent with those in the Statutory Accounts for the year ended 26 December 2020.

Going concern

At 3 July 2021, the Group's financing arrangements consisted of a drawn senior finance facility of £160.8m, undrawn overdraft facilities of £6.0m, undrawn revolving credit facilities of £17.2m and finance lease lines to fund hire fleet capital expenditure, of which £14.7m had not been utilised. Both the senior finance facility and revolving credit facility are subject to a net debt leverage financial covenant test every quarter. At the balance sheet date the Group had 51% headroom against this covenant.

While encouraged by the resilience of the Group during a period of unprecedented disruption, the Directors continue to model via a number of scenarios the potential impact of COVID-19 on results. At the 26 December 2020 year end the Group had sufficient liquidity to operate within banking covenants for the next 12 months even under its reasonable worst case scenario. Actual events and trading since then have been favourable compared to the assumptions made and as a result the more recent models only predict increased liquidity from that position.

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 over a period of at least twelve months from the date of approval of these financial statements. Accordingly they continue to adopt the going concern basis in preparing these unaudited condensed consolidated financial statements.

3. Restatement of interim results for 26 weeks ending 27 June 2020

During the preparation of the 26 December 2020 annual financial statements, a lease validation exercise was performed that identified the following restatements relating to the transition date. The restatement of property, plant and equipment of £4.5m represents hire stock assets held under finance lease that had not been included in the transfer to right of use assets. The remaining restatement of right of use assets relates to contractual rent escalations, rolling leases and lease term amendments.

The impact of these entries on the consolidated statement of financial position as at the date of initial application (DIA) 29 December 2019 is reflected below:

The impact of these entries on the consolidated statement of financial position as at 27 June 2020 is reflected below:

There was no impact on the income statement or the statement of cash flow as a result of this restatement and no change is required to the financial statements for the year ending 26 December 2020.

4. Segmental reporting

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

- Rental and related revenue; and

- Services.

Rental and related revenue comprises the rental income earned from owned tools and equipment, including powered access, power generation and HVAC assets, together with directly related revenue such as resale (fuel and other consumables), transport and other ancillary revenues.

Services comprise the Group's HSS OneCall rehire business and HSS Training. HSS OneCall provides customers with a single point of contact for the hire of products that are not typically held within HSS' fleet and are obtained from approved third party partners; HSS Training provides customers with specialist safety training across a wide range of products and sectors.

Contribution is defined as segment operating profit before branch and selling costs, central costs, depreciation, amortisation and exceptional items. In the 27 weeks ending 3 July 2021 the Group recognised £0.2m of income received in 2020, the result of participation in Republic of Ireland's COVID-19 Wage Subsidy Scheme, recognition of which had been deferred pending confirmation of entitlement (26 weeks ended 27 June 2020: £6.2m recognised from participation in UK and Republic of Ireland schemes). Income has been allocated to segments based on where the underlying costs were incurred. This resulted in £0.1m being allocated to Rental and related contribution (26 weeks ending 27 June 2020: £1.6m), £nil to Services contribution (26 weeks ending 27 June 2020: £0.6m), £0.1m to Branch and Selling Costs (26 weeks ending 27 June 2020: £3.8m) and £nil to Central costs (26 weeks ending 27 June 2020: £0.2m). £0.3m of grant income related to property rates was allocated to Branch and Selling Costs for the 26 weeks ending 27 June 2020.

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. Revenue from one customer was 10% or more of Group Revenue in the period ending 3 July 2021 (26 weeks ending 27 June 2020: one customer was 10% or more of Group Revenue).

5. Other operating income

During the 27 weeks ended 3 July 2021 the Group recognised £0.2m of income received in 2020, the result of participation in Republic of Ireland's COVID-19 Wage Subsidy Scheme, recognition of which had been deferred pending confirmation of entitlement (26 weeks ended 27 June 2020: £6.2m recognised from participation in UK and Republic of Ireland schemes), and £1.2m from a COVID-19 business interruption insurance claim.

Sub-let rental income £0.1m (26 weeks ended 27 June 2020: £0.2m) was received on vacant properties that were not treated as exceptional and which have been assessed as operating sub-leases under IFRS 16.

6. Exceptional items

Items of income or expense have been shown as exceptional because of their size and nature or because they are outside the normal course of business. As a result, during the period ended 3 July 2021 the Group has recognised exceptional items as follows:

During the period ended 27 June 2020, the Group recognised exceptional costs analysed as follows:

Costs related to onerous properties: branch and office closures (incurred in 2021 and 2020)

An exceptional credit of £7.4m (26 weeks ended 27 June 2020 exceptional credit of £0.8m) has been recognised in the 27 weeks ended 3 July 2021. This relates mainly to the release of lease liabilities, onerous property cost and dilapidations provisions on surrender of properties following the branch closures as part of the Group's acceleration of its digital and network strategy announced in October 2020. The figure includes £0.9m of associated professional fees. Lease liability discount unwind on closed stores totalling £0.1m was recognised as an exceptional finance expense.

In H1 20 an exceptional credit of £0.8m was recognised reflecting a release from onerous lease provision on adoption of IFRS16.

Business divesture (incurred in 2021 only)

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

Cost reduction programme (incurred in 2020 only)

In the 26 weeks ended 27 June 2020 the Group recognised final costs related to a cost reduction programme which included internal restructuring that was announced and largely completed during 2019.

7. Depreciation and amortisation expense

Amounts charged in respect of depreciation:

Amounts charged in respect of amortisation

8. Finance income and expense

9. Earnings per share

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 period.

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

All of the Group's potentially dilutive equity derivative securities were dilutive (26 weeks ending 27 June 2020: anti-dilutive) for the purpose of diluted basic earnings per share for the period except for market value options and their related CSOP's which were anti-dilutive.

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

10. Intangible assets

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

11. Property, plant and equipment