Strong first half for Herc
US based rental company Herc Rentals has reported a strong first half in terms of both revenues and profit growth.
Revenues for the first six months to the end of June were $944.7 million, up 17.5 percent on the first half last year. The company reported a pre-tax profit of $102.9 million, compared to a loss last year of $2.5 million. The company has said that rates are up almost one percent on last year while utilisation has improved significantly.
Moving on to the second quarter, total revenues increased 33.4 percent to $490.9 million, the comparison is of course with the worst affected quarter in terms of Covid-19 impact. Pre-tax profits were $61.8 million compared to just $100,000 last year. Due to improved utilisation, lower interest costs and a 1.9 percent uplift in rental rates.
Capital expenditure was $239.3 million compared to $161.5 million leaving the average age of the fleet at 48 months compared to 47 months at this point last year. Net debt at the end of June was $1.6 billon. As a result of a strong second quarter Herc has increased its full year capital expenditure forecasts by $100 million, to $500 to $550 million.
Chief executive Larry Silber said: "Our second quarter performance provides momentum for the rest of 2021. Tight supply of new equipment and steady demand from a number of key markets have provided a positive operating environment. Second quarter total revenues were up 33 percent and adjusted EBITDA increased 39 percent compared with last year, reflecting solid overall performance and excellent growth in our specialty businesses. Our year to date performance along with the current favourable operating environment have prompted us to raise our adjusted EBITDA guidance for the second time this year. We intend to continue to expand our market share, particularly in our specialty businesses, and maximise our operating leverage to drive margins.”
"Our strong free cash flow supports our fleet expenditures, greenfield expansion and M&A activity. We are excited to carry our momentum from the second quarter into the balance of 2021 for what looks likely to be a record year for Herc Rentals revenues and net income. With net leverage now below our target range of 2x to 3x, we are also reviewing our capital allocation plan."
An excellent second quarter from Herc has built on its strong start to the year. The company appears to being doing a good job at converting increased demand/ utilisation into steady rate improvements. With new equipment supplies likely to remain tight, companies will need to increase rates to reflect almost certain price increases for new machines, while booking their orders for new equipment as soon as possible.
The next year or two could well be influenced by how rental companies worked with their equipment suppliers during the challenges of 2020.