14.11.2018

Strong quarter for Herc

US based Herc Rentals (previously Hertz Equipment) has reported a strong improvement in revenues, and more significantly, profits.

Looking at the nine months to the end of September total revenues are up 13.5 percent on the year to $1.43 billion, with rental revenues up 11.6 percent. Rental rates have increased three percent over the period, while used equipment sales have been strong, all of which helped push the company back into the black, with a pre-tax profit of $30.5 million compared to a loss of $85.5 million for the same period last year. Year to date capital expenditure is $617.5 million, while sales of used equipment from the fleet totalled $189.1 million helping reduce the average age of the fleet from 49 to 46 months. The company has though slightly reduced the upper end of its full year net capital spending plans.

Moving on to the third quarter total revenues were $12.8 percent higher at $516.2 million, with rental rates rising 3.2 percent. Pre-tax profits more than doubled to $45.2 million from $18.2 million last year.

Chief executive Larry Silber said: “We achieved strong rental revenue and adjusted EBITDA growth in the third quarter with adjusted EBITDA margin of 39 percent, marking the highest quarterly level we have recorded since becoming a stand-alone public company. Strong market demand facilitated an acceleration in pricing of 3.2 percent in the quarter, our 10th consecutive quarter of year over year pricing improvement. Our initiatives to better manage costs also began to gain traction as indicated by the stabilisation of direct operating expenses and reduction in sales, general and administrative expenses. Our strategic plan continues to drive growth through fleet and customer diversification and we expect to steadily improve adjusted EBITDA margin with strong flow-through."

Vertikal Comment

An excellent result from Herc and the first time since its separation from the car rental business in mid 2016 that it has appeared to have a stable foundation from which to build on. It is very positive to see the solid rental rate improvements it has made and will be very interesting now to see how it progresses in 2019. It is of course a potential take over target for a company such as United but given that it is moving close to achieving full year revenues of $2 billion it is a very major player in its own right.

A very positive and encouraging result.