01.03.2022

Better year for H&E

US-based H&E Equipment Services has reported a modest improvement in full year revenues, coupled with a stronger pick up in profits.

Having sold its crane business to Manitowoc in October, H&E is reporting the crane results as ‘Discontinued Operations’ and thus not included in either the 2020 or the 2021 numbers. Whilst full details of the discontinued operations are not fully disclosed in the results announcement, they do indicate that crane related revenues in 2020 were $164 million, and one imagines that it picked up a little in 2021?

This year the ongoing business - which includes the sales and rental of aerial work platforms and telehandlers - achieved revenues of $1.06 billion an increase of just over five percent on 2020. Pre-tax profits were $55.95 million compared to a loss of $59.8 million in 2020. But it has to be said that 2020 numbers included a $44.6 million charge for ending a larger credit line early and $55.66 goodwill write down.
Finally capital expenditure for the year more than tripled to $436.8 million leaving the average age of the fleet at 40.3 months

Chief executive Brad Barber said: “Strong customer demand for our rental fleet persisted well into the final quarter of 2021, resulting in higher average physical utilisation and rental rate appreciation. Fourth quarter average physical utilisation of 73.1 percent was exceptional. Accompanying the strong average utilisation was an improvement in rental rates of 4.7 percent when compared to the fourth quarter of 2020.”

“Favourable industry trends remain in place, providing abundant opportunities for growth in 2022. Of note, feedback from our customers suggests elevated equipment rental demand is likely to persist through 2022 with broadening activity in the non residential construction and industrial end markets. Strong performance in 2021 of key industry measures of future construction activity support the likelihood for further expansion in 2022 of these important end markets. In addition, the recently passed Bipartisan Infrastructure Bill is expected to supplement demand for our fleet as our customers outline growing needs in 2022 ahead of government appropriation. Finally, the planned growth of our equipment rental fleet in 2022 underscores our confidence in a fundamentally robust cycle. Following 2021 gross capital expenditures of $437 million, gross expenditures in 2022 are expected to range from $550 million to $600 million, representing the largest annual gross spend in the company’s history. The spending increase of near 40 percent year over year is expected to position H&E to meet intensified customer demand in 2022 and beyond.”

“During 2021, we took important strategic steps to advance the transformation of H&E to a pure play rental business. These steps included continued investment in our rental fleet, which grew 10 percent in 2021, and the steady expansion of our branch network, as we added 10 new locations in regions with promising growth prospects. At the same time, we significantly reduced our exposure to the distribution business, ending the year as a pure play rental operation in 23 of the 24 states where we currently operate. As we enter 2022, successful execution of strategic initiatives has improved H&E’s competitive position in the equipment rental industry. Our young and versatile fleet is growing, and in 2022 we should experience the largest gross investment in our company’s 60 year history. Also, we expect our geographic footprint to expand in 2022 with our branch count expected to grow by more than 10 locations, including two new branches expected to be added in the first quarter that will provide increased access to new customers in expanding markets. Finally, our consolidated focus on rental operations has positioned the Company for higher and increasingly more stable revenues through the cycle with margin appreciation. Meanwhile, our financial capacity, as evidenced by a conservative balance sheet and excellent liquidity position, provides a strong avenue for strategic growth.”

Vertikal Comment

It is hard to read much into these numbers apart from the fact that rental utilisation has picked up considerably as have rental rates. This whole tone of the results suggest that the management is much happier with the move towards being a pure rental company that sells a few new and used machines on the side, than trying to straddle the roles of full service distributor and full service rental company. A task that has become increasingly more challenging, especially in the crane and aerial lift businesses.
It will be very interesting to see how 2022 pans out, the signs are promising. And at the same time Manitowoc has picked up what might look a bargain in the years to come.
H&E’s move will in all likelihood turn out to have been a blessing for both itself and Manitowoc.