Higher revenues lower losses at Herc
US based rental company Herc – previously Hertz Equipment Rental -has reported higher first quarter revenues, while reducing its losses.
Total revenues in the quarter were 10.3 percent higher at $475 million, with rental improving 2.3 percent to $377.6 million, while sales of used equipment almost doubled to $85.1 million. Pre-tax losses were reduced from $15.2 million to $9.8 million. Rental rates improved 3.8 percent on the quarter, while utilisation was marginally higher. Capital expenditure in the quarter was $82.6 million, the same as last year, with sales of equipment from the rental fleet totalling $69.6 million. The average age of the fleet at the end of March was 46 months compared to 49 months at the end of March 2018.
Chief executive Larry Silber said: “Our strategic initiatives continued to drive profitability in the first quarter. We improved year over year pricing by 3.8 percent in the quarter, our 12th consecutive quarter of year over year improvement. Dollar utilisation increased to 35.5 percent. Reductions in both direct operating expense and selling, general and administrative expense contributed to strong flow-through and free cash flow in the first quarter.”
"We are seeing improvement in demand for rental equipment in the second quarter consistent with the seasonal ramp up in the spring. Current levels of demand combined with positive industry metrics and our continued execution of revenue and cost initiatives reinforce our confidence for another strong year."
It is hard to say that this is a particularly good set of numbers, Herc remains a major player in the US rental market with annual revenues likely to be in the region of $2 million. However it is still losing money, and not investing anything like enough in its fleet, it is clearly allowing it to contract a little, as it cuts sales and operating costs.
The problem is that it is carrying a substantial pile of long term debt, it is reducing, trimming $110 million off during the quarter, reducing it to just over $2 billion. It looks a little like a company that is waiting for something to come along. Perhaps a takeover bid? At least it continues to make progress and will almost certainly end the year in significantly better shape than at the start.