21.07.2016

Flat half for United

US based United Rentals has reported a flat first half with almost identical revenues, but higher profits.

Total revenues for the six months to the end of June were $2.73 billon almost the same as last year with all aspects of the business roughly repeating last year’s levels. Rental rates fell 2.6 percent, but the company increased equipment out on rent by 2.8 percent- utilisation was 65.8 percent. Pre-tax profits however increased 10 percent to $364 million.

In the second quarter revenues were also close to that of last year at $1.42 billion, and as in the half year, marginally lower rental revenues were offsets by slight increases elsewhere. Rental rates improved slightly while utilisation also came in marginally higher at 67.5 percent. Pre-tax profits leapt almost 46 percent, thanks entirely to a substantial cut in interest and debt expense, having redeemed around $300 million of senior notes in May replacing them with around $700 million of lower cost longer term notes.

The company is maintaining its previous revenue forecasts, but has improved its rental rate forecasts from a fall of between three and four percent to a decline of two to three percent. Conversely it is anticipating utilisation to come in at 68 percent, rather than the 68.3 percent at the start of the year. It has also firmed up its capital expenditure plans to $1.2 billion from its previous range of 1.15 to 1.25 billion.

Chief executive Michael Kneeland said: "During our second quarter, we were pleased with the positive progression of monthly rental rates, which we attribute to the combined impact of our internal initiatives and solid growth in several of our core U.S. markets. While conditions remain challenging in Canada, we see solid customer activity on both the East and West Coasts of the U.S., at the same time that our emphasis on specialty rentals continues to pay dividends."

"Based on what we saw through the mid-year, and what we hear from the field, we continue to expect our business to improve both seasonally and cyclically. Consequently, we can reaffirm our 2016 revenue, EBITDA, capital spending and free cash flow guidance. While we remain mindful of the elevated uncertainty towards the direction of the global economy, we also know that we have considerable flexibility in operating our business to address changing market dynamics."

Vertikal Comment

While this is not the most exciting set of numbers from United it has a good deal of small positives within. The improvement in rates after more than a year of falls or stagnation is encouraging, as is the company’s plans for investment.

The most positive news of course is the substantial improvement in profits in the second quarter, due to the lower cost of servicing its debt. The company, was hell bent on acquisitions to fuel growth is making a success of consolidating and developing the business organically, while still taking advantage or acquisition opportunities.
Could the time also be right for United to make a major overseas investment?