06.03.2019

Herc moves into the black

US based rental company Herc –previously Hertz Equipment – has published its full year results.

Total revenues for the 12 months were $1.98 billion up 12.7 percent on the year, while last year’s pre-tax loss of €64.4 million was converted into a profit this year of €68.8 million. The company says that during the year it managed to increase rental rates by 2.9 percent. Capital expenditure for the year was $771.4 million, while the company sold $272.3 million if used rental equipment.
The average age of the fleet at the end of December was 46 months.

Fourth quarter revenues were 10.5 percent higher at $543.7 million, while pre-tax profits came in at $38.3 million an 81 percent improvement over the same quarter last year.

Chief executive Larry Silber said: “We are pleased with the double-digit year over year growth in equipment rental revenue and adjusted EBITDA we achieved in 2018. During the year, we raised our adjusted EBITDA guidance twice, and our 2018 results came in at the high end of the updated range we provided in November. Dollar utilisation of 39.7 percent for the fourth quarter was the highest recorded since we became a stand alone public company. Solid market demand supported the uplift in pricing of 2.9 percent in the quarter, our 11th consecutive quarter of year over year pricing improvement. We intend to continue to drive rental revenue growth through our urban market strategy, fleet and customer diversification initiatives, and the strong market environment. We expect to enhance adjusted EBITDA margin with a steady focus on flow through in 2019, which in turn should strengthen our free cash flow and continue to improve our balance sheet.”

"The continued robust market demand along with our improved operating efficiencies support our expectation for year over year growth in adjusted EBITDA of approximately seven to 11 percent in fiscal 2019. Our 2019 net capital spending is expected to be lower than 2018 as we continue to improve the quality and age of the fleet by disposing of non preferred brands and older equipment. By staying focused on disciplined capital management, we intend to continue to lower our net leverage by the end of the year."

Vertikal Comment

A decent set of results from Herc, although surprising to hear that it plans to reduce capital expenditure next year when it could do with brining the average age of the fleet down a little further.

The company is in a curious place in that it is too big to qualify as a local or even regional player, and yet not large enough to claim to be national in comparison to companies such as United or Sunbelt. The company must surely be a prime candidate for acquisition?