28.02.2020

Lacklustre year for Herc

US rental company Herc Rentals - previously Hertz Equipment Rentals - has reported its full year results with flat revenues and lower profits.

Total revenue for the year was a fraction under $2 billion up 1.5 percent on 2018, but pre-tax profit came in around 7.5 percent lower at $63.6 million. Capital expenditure for the year was $638.4 million, leaving the average age of the fleet down a month at 45 months.
In the fourth quarter revenues were roughly flat at €540 million, pre-tax profits however jumped more than 39 percent to $53.2 million.

Chief executive Larry Silber said: "We generated $172 million in free cash flow in 2019, a positive swing of nearly $180 million from last year. Our strategic initiatives continue to deliver strong year over year pricing, and we achieved major improvements in operating efficiency and dollar utilisation in the fourth quarter and full year. We focused on quality of earnings throughout the year, and fourth quarter adjusted EBITDA margin rose 320 basis points to 39.7 percent, the highest fourth quarter margin we have achieved since the spin off in 2016."

"Our disciplined capital management initiatives reduced our net leverage ratio significantly in three and a half years, to just 2.8x as of December 31, 2019. Targeted branch openings, controlled fleet additions, and self-help initiatives are expected to drive future profitability. Leading economic indicators continue to suggest positive momentum in our end markets and support our favourable outlook."

Vertikal Comment

While the results are not great for Herc, the company is making progress, but it is hard to see or understand the ultimate strategy apart from being another largish rental company.
It will be interesting to see how the year pans out.