01.08.2016

Profits take a hit at Neff

US based rental company NEFF has reported a solid increase in first half revenues, but profits were hit by charges.

Total revenues for the first six months were six percent higher at $189.2 million, boosted by an 8.6 percent increase in rental revenues. Utilisation was up 1.2 percent to 66.6 percent, while rates dipped 1.2 percent. Pre-tax profits dropped 45 percent due mostly to a combination of tax credits last year and a charge this year for a $6.5 million loss on an interest rate swap in the second quarter.

Revenues in the second quarter were 5.5 percent higher at $99.7, with rental revenues rising 5.8 percent. Pre-tax profits dropped 27 percent due to the interest rate swap mentioned above. Utilisation was one percent higher at 68 percent, while rates dropped 1.1 percent. The company is forecasting a capital expenditure this year of between $100 and $110 million.

Chief executive Graham Hood said: “The second quarter of 2016 was another solid quarter for Neff’s rental business as we generated record second quarter results for rental revenues, which increased by 7.8 percent year-over-year and for Adjusted EBITDA, which increased by 7.6 percent year-over-year. We also delivered impressive Adjusted EBITDA margins of 50.7 percent. Outside of our branches directly affected by oil and gas activities, our rental revenues were up 11.7 percent, and Adjusted EBITDA increased by 12.6 percent, reflecting the ongoing strength in the construction markets we serve. We expect this strength to continue for the remainder of 2016.”

Vertikal Comment

In spite of the headline profit numbers this a pretty good performance from Neff, which is doing well in a reasonable market, especially given that it is in a tough part of the market, being publicly quoted, but a great deal smaller than most of the other publicly quoted and many private rental companies, while being challenged from below by smaller privately owned and more maverick regional players.

It does though appear to be on a positive trend and creating a decent business for itself as it expands. The full year looks quite positive.