Fitch Ratings has revised the outlooks on three European equipment rental companies to ‘stable’ from ‘negative’ as economies rebound.
UK-based Ashtead Group plc is rated ‘BBB-‘/Stable, Netherlands-based Boels Topholding BV ‘BB-‘/Stable and Luxembourg-based Modulaire Investments 2 S.a.r.l. ‘B’/Stable.
These companies experienced better-than-expected performance after the first wave of lockdowns in Q2 2020.
Financial performance, particularly leverage, is expected to remain broadly stable in 2021 in light of improving equipment demand and limited impairment charges, particularly in construction and the public sector.
Equipment rental companies’ exposure to the construction industry remains significant and the closure of construction sites during the first lockdown in many European countries negatively affected fleet-usage rates and overall revenue generation in the first half of 2020.
However, the decision in most countries to allow construction sites to remain open in subsequent lockdowns supported use rates and deferral requests were fairly moderate across the three companies and reduced towards the end of the year.
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While rated equipment rental companies are increasingly diversified by end-client, exposure to the construction industry remains significant and the closure of construction sites during the first lockdown in many European countries negatively affected fleet usage rates and overall revenue generation in 2Q 2020.
However, contractual arrangements (in the case of Modulaire, which has longer-term rental contracts in place) and logistical complexities with removing rental equipment for a short period of time (until construction resumes) have contained use-rate volatility.
In addition, the decision in most countries to allow construction sites to remain open in subsequent lockdowns supported use rates. Rent-deferral requests were fairly moderate across the three companies and reduced towards the end of the year.
Rated equipment rental companies benefitted from their strong presence in better-performing markets (notably Ashtead in North America) and/or sound revenue diversification across European markets (Boels, Modulaire), which limited the impact from individual under-performing markets on their overall revenue base.