26.01.2012

RSC finishes with a flourish

RSC, North America’s second largest rental company, has reported a strong finish to the year, pushing it back into profit for the quarter.

Looking at the full year first, overall revenues were up 23 percent to $1.23 billion, with rental revenues climbing by the 24 percent to $1.3 billion. In spite of the strong improvement the company still reported a pre-tax loss of $40.4 million, but significantly better than last year’s loss of $117.2 million. The losses include $49 million cost of refinancing earlier in the year and $11 million in the fourth quarter related to the company’s proposed merger with Untied Rentals. Without these one off costs the business would have generated a pre-tax profit of around $20 million.

The fourth quarter was though far more positive, overall revenues were up 24 percent to $420.8 million, with rental revenues jumping 27 percent to $364.5 percent, which helped turn last year’s loss of $11.04 million into a pre-tax profit of $12.9 million. Fleet utilisation for the quarter also continued to rise, going from 67.7 percent last year to 70.8 percent this year. Rental rates were up 6.5 percent compared to the fourth quarter of 2010 and up 4.5 percent on the previous quarter of 2011.

At the end of December the fleet has an original purchase value of $2.66 billion, compared to $2.35 billion last year. At the same time the average age of the fleet improved to 42 months form 44 months at the end of 2010.

Chief executive Erik Olsson said: “The fourth quarter was another very strong quarter. Our business strategy and industry-leading execution produced an impressive 21 percent volume growth, while at the same time generating positive year-over-year pricing of 6.5 percent, driven by positive sequential pricing over the third quarter of 4.5 percent.”

“This growth, in combination with strong cost management, resulted in a 41 percent year-over-year increase in Adjusted EBITDA. Furthermore, improved results were widespread with all regions delivering double-digit revenue growth and significant increases in utilisation and profitability. I am very pleased with this strong finish to a great 2011, which supports our view of a strong 2012.”

Vertikal Comment

This is a good set of results from RSC, it’s just a shame that the company was obliged to go through such a costly debt rescheduling at the start of the year. This strong end to the year, possibly helped a little by favourable weather conditions compared to 2010, will help convince United shareholders that the merger deal is good value. Whether any RSC shareholders now have second thoughts is another thing.

This aside it is exceptionally encouraging to see the RSC as well as United leading the market with solid and systematic rental rate improvements. It flags up a maturing rental industry that is putting some science and intelligent thinking into rates, that promises to take the entire industry up a notch.

RSC is also seeing, along with many other rental companies, a significant expansion in the rental market, driven not by economic growth, but by more users deciding to rent rather than buy. With equipment becoming ever more sophisticated this trend is likely to grow in the years ahead.

When the economy comes back as well, we could see a golden age for the rental industry.