24.01.2019

Profit jump at United

US based United Rentals has published its full year accounts, showing a sharp rise in revenues and an even steeper jump in profits.

Full year revenues at the company were $8.05 billion, 21 percent higher than for 2017, roughly half of it due to acquisitions – pro-forma revenues were up 10.52 percent. Pre-tax profits increased 41 percent to $1.48 billion. Utilisation slipped to 68 percent, due entirely to lower utilisation from some of the acquisitions made during the year. Organic growth came from having 6.9 percent more equipment on rent and a 2.6 percent hike in rental rates.

Looking at the fourth quarter revenues were $2.31 billion up 20 percent on last year, with pre-tax profits of $425 million 27 percent higher than in the same quarter of 2017.

Capital expenditure for the year was up 21 percent on last year at $2.29 billion, while the total fleet at replacement value is $14.1 billion with an average age of 47.9 months.

The company expects revenues to rise to 9.1 to 9.55 billion in 2019 so roughly in the region of 15 percent – while capital expenditure will be roughly the same as in 2018 at between $2.15 and $2.3 billion.

Chief executive Michael Kneeland said: "We delivered strong fourth quarter results, including broad volume growth and rental rate improvement, in a year that leveraged our numerous competitive advantages. Our integration of major acquisitions expanded our service offering, and we gained traction from investments in fleet and technology. For the full year, we grew pro forma rental revenue by 10.5 percent, improved our adjusted EBITDA margin, and increased ROIC to a record 11 percent."

"Our momentum in the quarter gave us a strong start to 2019, when we expect to once again outpace the industry. By reaffirming our guidance, we are underscoring our confidence in the cycle and our differentiation in the marketplace. Customer feedback, as well as key internal and external indicators, continue to point to healthy end market activity. We remain focused on balancing growth, margins, returns and free cash flow to maximize shareholder value."

Vertikal Comment

There is no getting away form the fact that this is a first class set of numbers from United. To have integrated several substantial acquisitions into what is already a ‘mega’ corporation and post such strong growth is exceptional. However claims that the company is outpacing the industry seem a little hollow, given that much of it came from acquisitions – while some major competitors have been posting similar revenue growth which has been mostly organic.
United has done well to improve rates by more than two percent, given that others have posted more modest or flat rates.

The capital expenditure figure while mind boggling by any measure, is insufficient given the company's current fleet size and could see the average age of the fleet approach five years in 2019, and while good maintenance can make this perfectly acceptable, new technology has added a good deal of practical features to new machines over the past year or two, that an increasing number of contractors are really begining to appreciate. Under invest and pressure rises for a bigger 'catch up' spend further down the road, often when the market conditions make this more challenging.

Having said all that, this is a good result to kick off our 2018 full year results reporting season.