05.08.2019

Strong first half for H&E

US equipment sales and rental company H&E Equipment Services has reported strong first half results.

Total revenues for the company which sells, and rents cranes, aerial work platforms and other equipment, were $647.2 million up 13.5 percent on the same period last year. All sectors except sales of new equipment were higher. Pre-tax profits came in 23 percent higher at $50.2 million.

In the second quarter revenues improved by a more modest 7.5 percent to $333.6 million, with all but new equipment sales growing strongly. Rental utilisation slipped from 72 to 71.23 percent but was more than compensated by a year on year increase in rental rates of 2.2 percent. Pre-tax profit for the quarter was 11 percent higher at $30.9 million.

Capital expenditure on the rental fleet was reduced by 20 percent to $174.7 million, while sales of used machines from the rental fleet was stepped up by 18 percent to $61.7 million, leaving a net capital expenditure of $113 million – 31 percent lower than last year. The average age of the fleet at the end of June was 34.6 months – compared with 34.2 months this time last year, The average age of the aerial lift fleet was around 38 months, while cranes were more than 58 months.

Chief executive Brad Barber said: “We believe our performance is consistent with the ongoing strength in the non-residential construction markets. Our customers remain optimistic with solid visibility into their project pipelines for the remainder of this year and into 2020. As a result of strong demand during the second quarter, combined with solid operational execution, we achieved a 2.2 percent improvement in rates compared to a year ago and high physical utilisation of 71.2 percent. Rental revenues increased 20.9 percent from the second quarter of 2018.”

“Our outlook remains positive as we continue to see broad-based demand across our entire footprint encompassing all product types. The Gulf Coast remains strong and a new wave of large projects are being announced as anticipated. We believe the secular shift toward equipment rentals will continue. We remain focused on improving all areas of our business with an emphasis on growth in rental. We plan to execute this growth through same-store market share improvement, acquisitions and warm-start branch openings.”

Vertikal Comment

Another excellent set of numbers from H&E, although there are some possibly telling indicators here with sales of new equipment falling quite sharply, which is also reflected in the company’s own purchasing, as it reduces investment in the fleet. However the fleet was substantial expanded last year with two significant acquisitions.

It will be interesting to see if the sales decline is temporary or a longer term trend due to increased uncertainty. As the average age of the fleet, is remains lower than the industry average and still relatively young.