15.05.2010

Ahern posts further losses

Ahern Rentals of Las Vegas has reported a $20 million loss as it continues to reduce its dependence on the Las Vegas market.

Total revenues fell just over 14 percent to $60.6 million largely due to lower rentals which fell 19 percent to $51.5 million. Same branch revenues were down 25 percent, however the 19 new locations boosted sales by over $4 million.

Sales of used equipment more than doubled to $4.2 million, while sales of new equipment improved on the same time last year but was held back lower sales of consumables. In total new sales were down seven percent.

Revenues from the Las Vegas region fell from 29 percent to 19 percent, the company says that it does not expect the market to return to previous levels anytime soon and thus the need to expand its market coverage outside of the region.

The rental business saw physical utilisation fall from 56 percent to 49 percent, while financial utilisation dropped from 31 percent to 25 percent as rates dropped 12 percent compared to the same quarter last year.

The company says that it is significantly reducing its capital expenditure, in 2009 it spent a total of $42 million for the whole year - $30 million net of equipment sold from the fleet. In the first quarter it purchased just $4.2 million - $1.3 million net of disposals.

Average net debt decreased slightly to $607 million, but interest expense jumped by 40 percent due the debt restructuring that it completed last year.

Vertikal Comment

Ahern has a major challenge adapting a business that was highly dependent on the massive construction growth that has occurred in Las Vegas during the past 20 years or so, at a time when the economy is as bad as it has ever been.

Don Ahern is a savvy operator though and highly entrepreneurial, he is both prepared and able to take the risks required to make big gains. While the next 12 months or so will be a real challenge for the company, one that few managers would want to face, Ahern is more than capable of coming out of the other side in better shape than when he went in.

The company’s success will depend on how well the new locations perform and their ability to take market share away from others. He is likely to be targeting the national operators such as Hertz with a more entrepreneurial/people based
rental service. Watch this space.