16.03.2015

Profits slip at NEFF

US rental company NEFF which has been a public company since November, has reported higher revenues but lower profits.

Total revenue for 2014 increased almost 14 percent to $372 million, pre-tax profits though dropped almost 85 percent – from $41 million in 2013 to $10.4 million last year. The dramatic fall was due charges of around $36 million for paying off its debt earlier than planned following the IPO and a $20 million increase in interest charges, along with a transaction bonus of £24.5 million.

Looking at the fourth quarter, revenues improved over 15 percent to $014.1 million, while pre-tax profits slipped six percent to $13.2 million, due mostly to a six million hike in interest costs. Rental rates in the period improved by 6.6 percent, while physical utilisation slipped nearly three percent - compared to the fourth quarter of 2013- to 67.7 percent.

Chief executive Graham Hood said: “2014 proved to be an exciting year for the Neff team that included our successful Initial Public Offering in November 2014. We built solid momentum throughout the year, and expect positive trends to continue in 2015. We remain focused on executing our strategy and leveraging the growing demand from our customers as demonstrated by our results in the fourth quarter that included 13 percent rental revenue growth."

"We have made significant investments in our business over the past couple of years as we strive to build a world-class equipment rental company and create shareholder value. We continue to believe we are in the early stages of a multi-year expansion for our industry and we are especially encouraged by the opportunity for our earthmoving fleet to gain share as more customers are making the decision to rent versus own. While we expect to see some slow-down in the 13 percent of our business that is directly focused on oil and gas activities, we believe that our diverse end-markets and focus on high growth geographies will offset the oil and gas slow down and enable us to execute and deliver another year of solid growth in 2015."

Vertikal Comment

While the full year results look gloomy, in terms of the bottom line, the fact is that in a year of a stock market costs and restructuring can depress an otherwise good result.

Neff would have pushed hard in the drive towards its IPO and then made sure that as much of the cost of doing it was cleared in out in the final result for the year. It now goes into a new year with lower debt and higher revenues, with utilisation at a sustainable level with some upside potential.

A better indication of how the business is likely to perform over the longer term will become clear half way through 2015.