25.10.2019

Lacklustre quarter for Herc

US rental company Herc – previously Hertz Equipment – has posted its nine month results.

Total revenues for the nine months to the end of September were $1.46 billion, 1.8 percent up on the same period last year, with rental growth leading the improvement growing 2.4 percent, thanks to a 4.5 percent improvement in rates. Pre-tax profits however plummeted to a third of that posted last year at $10.4 million.

Looking at the third quarter total sales were 1.5 percent lower at $508.1 million due to lower used equipment sales offsetting higher rental revenues. Pre-tax profits dropped from $45.2 million to $5.2 million, due to higher depreciation, and higher finance costs with a $53.6 million charge for early retirement of a debt facility due to refinancing. Capital expenditure was $506.7 million offset by $156.9 million of used machines sales from the fleet. The company is now forecasting a further $50 or so million of new machines purchases in the second quarter. The average age of the fleet was reduced during the period from 46 to 44 months.

Chief executive Larry Silber said: “The year over year improvement in our third quarter results reflect our continued focus on pricing and quality of earnings. We improved pricing 4.5% and improved adjusted EBITDA margin by 220 basis points compared to the prior year's third quarter.”

“We have been taking a cautious approach regarding rental equipment expenditures and our balance sheet this year. Our ongoing focus on dollar utilisation, along with strong end markets and positive expectations from national and local customers, support our eight to 10 percent adjusted EBITDA growth assumptions for 2019, and form a solid base for improvement in 2020."

Vertikal Comment

The is a very mixed bag for Herc, it does seem to be making some progress, and has taken key steps to help profitability going forward, when times are likely to be tougher.
It is though falling behind some of its major national competitors and has to be a potential target for acquisition?

It does look as the company is building a decent foundation for the future, but there is much to be done. It will be interesting to see what the fourth quarter looks like.