26.07.2022

Upbeat first half for Herc

US based Herc Rentals has reported a strong increase in second quarter and first half revenues, pricing and profit.

Total revenues for the six months to the end of June were $1.21 billion, up 28 percent on the same period in 2021. Rental revenues increased 33 percent to $1.13 billion, partially offset by a sharp drop in sales of used equipment from the rental fleet, plus slower growth levels in sales and services. Pre-tax profit for the period jumped 60 percent to $164.6 million with higher utilisation at the same time as rental rates improved 4.9 percent. The company opened 10 new greenfield locations during the first six months, while at the same time adding nine ‘bolt on‘ acquisitions with 12 locations.

Moving on to the second quarter, total revenues increased 30 percent to $640.4 million, while rental revenues increased 35 percent to $605 million. Pre-tax profit improved 58 percent to $97.5 million with rental rates up 5.5 percent on last year. The upward trend in rental rates continues, with rates up 5.5 percent on the same quarter last year.

Total capital expenditure more than doubled to $555.3 million and more than triple the $163 million spent in 2020. At the same time sales of used equipment from the fleet was almost halved to $46.8 million the net result was to push the average age of the fleet to 49 months compares to 48 months this time last year. Net debt at the end of June was $2.5 billion.

Chief executive Larry Silber said: "We continued to see strong demand for our equipment rental services across all of our geographic regions. Our rental revenue increased 35.1% over the prior year, while average fleet increased 32.1% to $4.9 billion. Dollar utilization increased to 42.5% in the second quarter as market demand supported strong sequential and year-over-year rate growth. Adjusted EBITDA increased 36.8% to $284.2 million and adjusted EBITDA margin expanded 210 basis points to 44.4% in the quarter.”

“Given the recent downturn in the stock price and our conviction that the company's valuation is discounted compared to our long term growth expectations, the company will begin utilising the remaining authorisation under the Share Repurchase Programme. Consistent with our capital allocation goals, we expect to remain within our targeted net leverage range of 2x to 3x while executing on our long term strategy of organic and M&A growth and allocating capital to our shareholders."

Vertikal Comment

Another ‘cracking’ quarter from Herc, which has gathered some real momentum, after a slow and challenging period that followed its separation from the Hertz car rental business in 2016. The company has shaped up well under Silber’s leadership. The company appears to be well on track for another record year.