HSS Hire Group said last week that it was on the cusp of a major strategic shift and, in that regard, it has not disappointed.
HSS ProService, the group's online service, has signed a five-year commercial supply agreement with Speedy Hire.
Speedy will replace HSS’s own hire business as the inventory supplier for HSS online customers.
At the same time, the 39 physical branches and 65 builders merchants that make up the HSS Hire network are being transferred to a private equity investor – Endless LLP, a London firm whose portfolio ranges from Crown Paints to Hovis.
Endless is being given £26m to take the HSS Hire estate and inventory off their hands. But it is not getting the distribution centres that operate under HSS ProService.
HSS is exiting its asset-heavy hire shop division, creating what it describes as “a capital-light, scalable platform business across the UK”.
HSS is going all in on ProService to the extent that it is proposed that, subject to approval by shareholders, HSS will be renamed ProService Building Services Marketplace plc. Speedy has agreed to put up £35m for a 9.99% stake in it.
Speedy Hire will become the principal equipment provider to ProService for an initial five years with a unilateral option for Speedy to extend for a further three years. This is expected to be worth around £50m to £55m of revenue per year for Speedy.
ProService will also act as fulfilment provider for Speedy customers.
HSS ProService Limited’s latest accounts show turnover of £290m in 2023 out of total group revenue of £349m. The 2024 accounts, expected last week but delayed while this deal was being finalised, are expected to show an even greater proportion of group revenue coming from ProService. HSS has been moving in this direction for several years.
Subject to consultation, the plans is for approximately 100 employees to transfer from Speedy to ProService and 300 to transfer from HSS Hire Service to Speedy.
Steve Ashmore, chief executive of HSS Hire Group and executive chairman of ProService, said: "This transformational agreement with Speedy Hire marks a major milestone in scaling our marketplace business. The commercial agreement enables ProService to focus solely on its growing, asset-light marketplace model, unlocking significant value for our shareholders and customers. With increased scale and breadth, the business is now well positioned for profitable growth."
Speedy chief executive Dan Evans said: "This is a transformational agreement for Speedy, made possible by the progress of the group under our Velocity growth strategy. It will provide Speedy customers with greater choice and an enhanced service, while providing ProService customers the ability to indirectly access our national network, larger equipment fleet and faster delivery capability. The agreement is expected to be significantly accretive to earnings and operating margin in the first full year post agreement, and gives Speedy a material opportunity for growth in the medium and longer term."
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