18.10.2019

Record revenues for United

US based United Rentals has reported a record third quarter in terms of revenues while profits grew at a slower pace.

Total revenues for the nine months to the end of September were $6.89 billion up just over 20 percent on the year, largely thanks to the BakerCorp and Blueline acquisitions alongside some organic growth. Pre tax profit however was just three percent higher at $1.08 billion. The company has adopted a ‘Fleet Productivity’ number, the calculation method of which is not entirely clear, but which takes rates and utilisation into consideration. In the nine months productivity fell 1.3 percent, due entirely to acquisitions without the gain would have been a positive number of 1.4 percent. Additional costs included higher repair and refurbishment costs and higher interest costs.

In the third quarter revenues were just over 15 percent higher at $2.15 billion, with improvements in all sectors, while pre-tax profits were $510 million up 11 percent on the year.
The company has fine tuned its full year expectations and is forecasting total revenues of between $9.25 and $9.35 billion, in effect slightly higher lower values but lower top end expectations.
It expects to net capital expenditure to come in around $50 million lower than originally planned at $1.25 billion to 1.35 billion, but plans to maintain gross capital expenditure at around $2.05 to $2.15 billion.

Chief executive Matthew Flannery said: “In the third quarter, we delivered solid revenue growth driven primarily by strength across our core construction markets, partially offset by slower industrial growth. Operating costs were higher than expected as we repaired and repositioned fleet. Our updated guidance reflects these dynamics, as well as our expectation for higher free cash flow generation.”

“Looking ahead, our customers remain upbeat about their business prospects well into next year. At the same time, we know that lingering economic uncertainty could impact construction and industrial activity. As we complete our planning for 2020, we are focused on delivering returns in any operating environment, while balancing growth, margins and free cash flow.”

Vertikal Comment

This is a mixed bag from United, the improved revenues are largely due to the big acquisitions of late last year, which have added revenue but not so much profit. It is also possible that bringing the Blueline fleet up to spec has incurred higher repair costs as has the slightly higher average age of the overall company fleet.

In the follow on conference call some analysts appeared to be looking for the company to reduce capital expenditure given some apparent drop of in parts of the market, however chief executive Matt Flannery insisted that maintaining a relatively young fleet was important in that it provided the potential to age the fleet in the case of a severe economic downturn, without incurring punitive call out and repair costs, or customer dissatisfaction. With spending on new equipment running around $2 billion on a fleet with an original equipment value of $15 billion it could be argued that it is already under spending if it is to maintain a young fleet.

The third quarter numbers suggest however that the company is getting to grips with its latest acquisitions, both of which will drop out of the comparisons during the fourth quarter. So all in all perhaps not too bad.