21.02.2020

Solid year for H&E

US based H&E Equipment Services, has reported a strong rental performance for 2019, while new equipment sales slipped back.

Total revenues for the year increased 8.8 percent to $1.35 billion, driven by a 17 percent increase in rental revenues, offset by a nine percent fall in new equipment sales, while used equipment sales were more than 11 percent higher. Pre-tax profits for the year were $115.9 million, an increase of 10.5 percent on 2018.

Looking at the fourth quarter total revenues were just 0.6 percent higher at $348 million, larger due to a 23 percent fall in new equipment sales, offset by a 7.8 percent rise in rental revenues and a 12 percent increase in used equipment sales. Pre-tax profits for the quarter declined 23 percent to $26.8 million. This due to a $12.2 million goodwill impairment, without this profits would have been 12 percent higher.

Utilisation in the quarter slipped back from almost 73 percent in 2018 to 69 percent last year, rental rates improved 1.7 percent on the year, but were slightly lower than in the previous quarter. Gross capital expenditure for the year was cut by more than 20 percent to $349.1 from the previous year’s record high, and yet sales from the fleet were substantially higher leaving net capital expenditure down around 33 percent. The average age of the rental fleet at the end of the year was 36.3 months, compared to 34.5 months a year earlier.

Chief executive Brad Barber said: “With seasonality, the balancing of supply and demand and a challenging comparable in the year ago quarter, the year finished as we expected during the fourth quarter. We produced solid results for the quarter despite these factors – growing revenues, gross profit and Adjusted EBITDA. The strength in our rental business continued with rental revenues increasing 8.2 percent from a year ago and we again achieved rate growth, which increased 1.7 percent. Our performance for the full year of 2019 was also positive as we delivered an 8.8 percent increase in revenues and a 16.7 percent increase in Adjusted EBITDA. The metrics for our rental business were impressive as rental revenues for the year increased 17.3 percent from 2018. Average physical utilisation for the year remained solid at 70.4 percent and average rates were 2.1 percent higher than in 2018. Overall, we are pleased with our execution and results for 2019.”

“Based on current industry indicators and customer sentiment, the non residential construction markets we serve are expected to be stable in 2020. Increasing the scale and scope of our rental business through selective acquisitions and organic expansion remains one of our highest priorities.”

Vertikal Comment

A very decent performance by H&E but there are underlying signs of a slowing market, in terms of fourth quarter utilisation and quarter to quarter rate progression. The company has allowed the fleet to age a little, and this may prove to be premature – although to be fair three years is not a bad fleet profile. It could do with maintaining this in case a slow down comes along, obligating it age the fleet for a year or two.

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