Profit boost for Herc
US rental company Herc - previously Hertz Equipment - has reported a strong third quarter.
Total revenues for the nine months to the end of September were 13.6 percent lower at $1.26 billion. Rental revenues held up better than sales at $1.12 billion, a fall of around 10 percent, while pre-tax profits for the period were $49.1 million compared to $10.4 million in the same period of 2019. This was after a $9.5 million write off, however the boost came from a sharp reduction in interest costs that totalled around $76 million. Capital expenditure on the rental fleet totalled $273 million, down from $506.7 million last year. The average age of the fleet increased three months to 47 months.
Moving on to the third quarter total revenues were $456 million – roughly 10 percent down on the same period last year. While pre-tax profits were tenfold last year’s levels at $51.1 – mostly do the lower interest costs, but also lower overheads.
Chief executive Larry Silber said: "Volume improved sequentially throughout the third quarter as many of our markets steadily recovered from the impact of Covid-19 and normal seasonality returned to the business. We continued to improve adjusted EBITDA margin as our operating efficiency and cost control initiatives reduced third quarter costs compared to the prior year. Despite the challenging business environment, our customer and industry diversification strategy continued to demonstrate the resilience of our business model.”
"We continue to adhere to the Centre for Disease Control and Prevention's guidelines in our operations and interactions with customers and adapt to more stringent municipal and state mandates. Our highest priority is to ensure the health and safety of our team members and customers."
"Our improving efficiency in the third quarter reflects our ability to manage through challenging times," said Silber. "We currently estimate fourth quarter fleet on rent is likely to decline approximately four to six percent and rental revenue to decline approximately six to eight percent year over year. Adjusted EBITDA margin for the fourth quarter and full year should improve versus the comparable prior year periods. Our strong free cash flow position for the nine month period ending September 30, 2020, is already substantially higher than the amount we generated for the full year 2019 and should continue to improve during the remainder of the year. With reduced leverage and ample liquidity, we are well positioned for 2021.
"I'm proud of what our Herc team members have accomplished year to date. We know we have to prove ourselves every day and we are committed to helping our customers operate efficiently, effectively and safely," he added.
This is an excellent result from Herc, which has been struggling, but now that its debt levels have been reduced it has had a remarkable bounce back. Revenues too are very healthy given the pandemic. All in all, very encouraging.