Fitch update on European rental prospects
By Murray Pollok31 May 2023
Ratings agency Fitch said it expects the European equipment rental businesses that it covers to maintain their credit profiles and remain resilient in the face of reduced economic and construction activity in Europe.
The agency, which provides financial ratings for Boels Group, Renta Group, Modulaire and Ashtead Group, said the businesses were underpinned by adequate EBITDA margins, good diversification, and acceptable (although reduced) potential for reducing debt.
The new report follows a review of the four companies, with ratings for Ashtead Group (BBB/Stable), Boels (BB-/Positive), Renta (B+/Stable), and Modulaire (B/Stable).
Under Fitches’ system, BBB indicates that expectations of default risk are low; BB means vulnerability to default risk, but with flexibility to support financial commitments; while B indicates a risk of default and vulnerability to a deterioration in the business.
Fitch revised the outlook on Boels’ long-term issuer rating to Positive from Stable, “reflecting its consistent EBITDA generation over the past three years while addressing both the pandemic and the integration of Cramo. This has enabled meaningful deleveraging, and, if sustained, could lead to an upgrade.”
The ratings agency said reduced economic and construction activity in Europe and potential recession in some countries could impact demand for equipment, but large-scale infrastructure spending in western Europe may reduce the near-term impact.
Fitch added that rental companies are often exposed to rising interest costs, “which could pressure profitability alongside the inflation impact on other expenses.”