HSS Hire's tough experience proves timing is crucial

Indeed, the share price has only briefly been above water since admission, and the group's latest full-year earnings loss of £14.2m, although broadly in line with City expectations, highlights that competition remains as intense as ever. Admittedly, if you discount one-off costs linked to the listing, together with the sharp increase in depreciation, then adjusted operating profit was actually flat on last year - probably scant consolation for any investors who got in at the time of the IPO. The main takeaway from these figures is that it may be some time before the full benefits of management's rejigged strategy to generate shareholder returns become apparent.

Central to that medium-term plan is a renewed focus on capital and operating efficiencies, as the group moves to tailor its cost base to take account of squeezed end-markets. Another plank of the strategy, according to HSS chairman Alan Peterson, centres on "winning new, and deepening existing customer relationships", although it hardly seems a novel objective. Nonetheless, organic revenue was on the rise throughout 2015, encouraging enough, but a slight uptick in UK market share needs to be set against an anaemic core utilisation rate of just 48 per cent - cost discipline can only get you so far.

To prove that timing is crucial, the highly cyclical equipment hire market moved into a downtrend within a few months of the group's London debut. Unfortunately, HSS was already committed to an expansion programme, funded in part by the issue of £200m in senior secured loan notes, so the group was exposed to a fall-away in industry activity at a point when it was cranking up operational gearing - a classic risk factor associated with the sector.

Analysts at Numis have trimmed their forecasts, and now look forward to adjusted pre-tax profit for the year to December 2016 of £12.6m and EPS of 6.5p, compared with £3.6m and 1.8p in FY2015.