04.08.2023

Mixed fortunes for Herc

US rental company Herc Rentals achieved strong first half revenue growth, while profits lagged behind.

First Half

Total revenues for the six months to the end of June were $1.54 billion, up 27 percent on the same period last year. Most of the growth came from rental and equipment sales. Pre-tax profits increased eight percent to $178 million. Capital expenditure on rental equipment was $703 million, 26 percent more than it spent last year. However, it sales of equipment from the fleet totalled $131 million compared to $47 million last year. As a result, the average age of the fleet declined from 49 months to 46 months. Net debt at the end of June was $3.5 billion. The company completed six acquisitions with a total of 10 locations during the period and opened nine greenfield locations.

Second Quarter

Total revenues came in at $802 million, a 25 percent increase on the same quarter last year, while pre-tax profit was five percent higher at $103 million.

Chief executive Larry Silber said: “We continue to generate strong, double digit growth as a result of sound strategies and an unmatched team of product and logistics experts that embody a customer-first mindset. Growth in national account revenue and local market expansion through acquisitions and greenfield locations drove rental revenue higher, while strong returns on fleet sales represented an incremental benefit to total revenue.”

“Our non-residential and industrial markets are healthy and growing with outsized opportunities coming from federally funded, large scale infrastructure and mega projects. The favourable market environment coupled with our expanding branch network, broad selection of premium equipment, leading customer experiences, comprehensive fleet management services and advanced technologies position us to continue to capture above market growth in 2023 and over the long-term.”

Vertikal Comment

In terms of revenues, especially rental revenues this is a strong performance from Herc, while the profitability has been hit by a steep rise in interest costs, as well as higher sales and general administration. The company also saw utilisation fall, mostly due to the virtual closure of film studios with the writers and other strikes in the sector. Herc has strong presence in this market and is almost certainly feeling its effects more than other US rental companies.
It has done well though to bring down the average age of its fleet to a decent level. It will be interesting to see how the second half goes.