11.03.2016

Steady year for NEFF

US rental company NEFF has reported a strong rebound in full year pre-tax profits on three percent revenue growth.

Full year revenues were $383.9 million, 3.2 percent higher than in 2014, with rental revenue growth slightly stronger. Pre-tax profits more than quadrupled to $43.8 million. Rental rates improved one percent over the year, while utilisation slipped three percent points from 69.7 percent in 2014 to 66.8 percent. Capital expenditure for the year was $147.5 million down from $149.2 million the year before.

Looking at the fourth quarter revenues increased 1.9 percent to $106.1 million, with rates falling 1.3 percent and utilisation dropping from 67.6 to 66.8 percent, with an eight percent larger fleet. The company says that it expects to spend between $100 and $110 million on new equipment in 2016. It expects utilisation to improve to 68 percent, and rental rates growth to range from zero to two percent.

Chief executive Graham Hood said: “We generated good results in 2015 with record rental revenues and adjusted EBITDA, despite the challenges from the decline in upstream oil and gas demand. We experienced solid growth in our core construction driven end-markets and anticipate further growth in these markets in 2016. Outside of our branches directly affected by oil and gas, our rental revenues were up by 12.7 percent and EBITDA up 11.4 percent, for the fourth quarter of 2015 compared to prior year”.

“Our approach for 2016 is to be cautious with our capital expenditure and to focus on rental demand in our construction end-markets. We have made significant investments in our business over the past couple of years as strive to create shareholder value. We believe the multiyear expansion for our industry will continue and we are especially encouraged by the opportunity for our earthmoving fleet to gain market share as more customers are making the decision to rent versus own. We expect to see a decreasing impact from the slowdown in our oil and gas markets and we believe that our diverse end-markets and our focus on high growth geographies will enable us to execute and deliver another year of solid growth in 2016."

Vertikal Comment

This a reasonable result from Neff although the profit number is not a impressive as it might at first seem, last year’s numbers included a charge or around $35 million for paying down debt early when it floated towards the end of 2014. This year’s profits are around seven percent higher than those of 2013.

The company has a more general fleet mix that most of the rental companies that we cover, although telehandlers and aerial lifts do still figure strongly in its product offering. The company only went through Chapter 11 bankruptcy in 2010 and has been public since November 2014.