25.04.2025

Not a great start for Herc

Herc Rentals in the USA has reported higher revenues while turning last year’s profit into a loss.

Total revenues for the three months to the end of March, were 7.1 percent higher at $861 million, compared to the same quarter last year. Rental revenues improved 2.8 percent to $739 million.

Last year’s Pre-tax profit of $81 million was converted into an $8 million loss this year, due to a range of things, including higher operating costs, higher depreciation and higher sales costs, however it was the $74 million transaction costs associated with the H&E acquisition that had the biggest impact – including a $64 million termination fee paid to United Rentals. Without the additional transaction costs, the company would have posted a profit of around $63 million – or around 20 percent below the same quarter in 2024.

Capital expenditure on the rental fleet fell was up slightly from last year’s low at $187 million, compared to $332 million in the same quarter of 2023. The average age of the fleet remained at 47 months. The company is forecasting full year capex of $700 to $900 million.

Net debt at the end of March was around 10 percent higher than at the same point past year at $4 billion. During the quarter the company opened up three new greenfield locations.

Chief executive Larry Silber said: “As expected, the 2025 operating landscape continues to be a tale of two disparate economic trends. Our national account business is growing, fuelled by federal and private funding for large construction projects like data centres, manufacturing onshoring and LNG facilities. At the same time, while facility maintenance, municipal, and infrastructure projects are supporting the local markets, other more interest-rate sensitive projects continue to be on hold, restricting overall local account growth.”

“Against this uneven backdrop, Herc’s diversified business model helps drive resiliency. With growth in mega project activity and incremental revenue benefits from last year’s acquisitions, we delivered financial results that were in line with our expectations for the seasonally low first quarter. And we remain on pace to outperform the overall equipment rental market again this year as Team Herc continues to identify opportunities to deliver value for our customers, while managing our fleet and capital strategically and with discipline.”

“As it relates to the H&E acquisition, with the closing date targeted for mid-year, our operators and salesforce remain focused on running the day to day business, and our integration team is actively preparing for the migration of Herc systems and processes. We are excited to bring together two strong cultures that focus on growth and share priorities for customer service and safety.”

Vertikal Comment

This is not a great performance from Herc, as it moves towards the completion of the H&E acquisition. The company does not appear to be spending enough on fleet renewal, although surprisingly the average age remained the same. Perhaps the H&E fleet will help reduce the average age once it is integrated with that of Herc?

The second half will certainly be more interesting that the first.