Investors in HSS have lost more than half their money in less than seven months after the struggling equipment hire company shocked the City with its second profit warning since making its stock market debut in February.
Shares in HSS fell nearly 40 per cent yesterday after it admitted profits would miss expectations, pushing the stock more than 60 per cent below the price at which they were sold in its IPO.
Kames Capital, Old Mutual and Standard Life, which together hold nearly a fifth of HSS’s shares, are all sitting on bigger paper losses.
Standard Life’s loss is likely to be the biggest as the Edinburgh-based asset manager had 17.3 million shares in HSS at the time of its IPO, which would at the time have been worth £36 million, but at yesterday’s closing price had shrunk to £13.8 million.
The actual loss to the insurer is harder to calculate, as Standard Life was one of two backers before its stock market listing and sold some of its shares through the IPO, which means the insurer had more than likely already locked in a profit on its investment.
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Kames Capital may be facing the biggest loss after buying 7 million shares at the flotation, giving the former Scottish Equitable Life Assurance Society a paper loss to date of a little over £9 million.
By contrast, Old Mutual had already moved to cut its holding in HSS. After buying 10.3 million shares in February, the South African fund manager more than halved its stake last month to 4.85 million shares just weeks after the company announced its first profits warning.
Chris Davies, the chief executive of HSS, warned yesterday that the business’s trading was “unpredictable” and admitted that after a “reasonable” July the company had been hit by “softer market conditions” this month.
“This is obviously disappointing. As a result we are cautious on the outlook for the balance of the year and now expect full-year earnings to be below current market expectations,” Mr Davies said.
HSS said that it had lost £14.1 million in the six months to June 27, up from a loss in the same period on 2014 of £11.1 million, which the company blamed on the cost of new investments and higher depreciation of its assets.
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At yesterday’s closing price of 80p, HSS has a market capitalisation of just over £200 million.
Analysts at JP Morgan Cazenove maintained their “overweight” recommendation on HSS despite the poor results and the collapse in the share price, and forecast that the stock would rise to 180p by the end of next year.
Numis cut its rating on HSS from “buy” to “add”, with the broker lowering its price target to 140p from its previous forecast of 200p.
“We recognise there is little chance of the shares outperforming or closing the gap to our price target until management can demonstrate a track record of meeting or exceeding forecasts,” Julian Cater, a Numis analyst, wrote in a note to clients.