McGrath’s continued growth levelling off

By Thomas Allen26 February 2020

McGrath RentCorp continued to see growth, though at a slower pace, in the fourth quarter of 2019 and is expecting a levelling off in 2020 with capital expenditure forecast to be lower.

The US-based company reported an 11% rise in total revenues in the fourth quarter to $147.2 million, compared to the equivalent period in 2018, and an 11% year-on-year increase in EBITDA (earnings before interest, taxes, depreciation and amortization) to $63.7million.

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This compares to a full-year rise in total revenues of 14.4% to $570.2 million and a 14% increase in EBITDA to $203.1 million.

Within that, rental revenues rose by 8% year-on-year to $92.2 million in the fourth quarter, while rental revenues for the full year saw an increase of 11% to $353.9 million.

Joe Hanna, President and CEO of McGrath RentCorp, said, “We were pleased with our fourth quarter 2019 results as our teams delivered impressive revenue and operating profit growth over the strong fourth quarter results of 2018.

“The positive trends seen earlier in the year at Mobile Modular and TRS-RenTelco continued into the fourth quarter, more than offsetting weaker market demand conditions for Adler Tank Rentals.”

The Mobile Modular division saw its income from operations rise by 23% to $23.9 million, and its rental revenues increase by 14% to $48.6 million.

The TRS-RenTelco business achieved an 11% increase in its income from operations to $9.5 million and a 15% gain in rental revenues to $27.7 million.

Conversely, Adler Tanks suffered a 36% drop in its income from operations to $3.4 million, and a decrease in its rental revenues by 13% to $16 million.

Hanna continued, “Full year results reflected overall healthy demand for the markets we serve, coupled with continued focus on performance improvement and disciplined capital allocation.

“Our 20% growth in income from operations was driven by strong rental operations revenue growth of 13% and a notably strong year for equipment sales revenues, which grew by 19%.”

In its financial outlook for 2020, the company is expecting to see total revenues grow to between $575 million and $595 million, and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) to be between $240 million and $248 million, compared to $237 million in 2019.

Net capital expenditures for 2020 will be in the range of $110 million to $120 million, compared to $135 million in 2019.

Hanna said, “Looking ahead we expect overall business conditions to support further growth for the Company in 2020, despite softer demand conditions for Adler Tank Rentals.

“We will maintain our focus on performance improvement and execution, and I believe that we will continue to build upon 2019’s successes.”

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