GAM: an increasingly diversified and less capital-intensive business model | Companies

GAM, a group of Asturian origin founded in 2003, is specialized in the comprehensive machinery rental service for lifting, handling, maintenance and energy needs. In addition, it complements its activity by offering maintenance services, training, buying and selling, distribution of different brands of machinery, as well as other auxiliary services. EthiFinance Ratings raises the rating of General de Rental Maquinaria SA (GAM), going from “BB” to “BB+”, changing the trend from Positive to Stable.

The group is positioned as one of the leaders within the industry in Spain and a reference in the Iberian market, based on its strong experience and know-how, a wide capillarity of its delegations and a large machinery park (+40,000 machines), diverse, of quality and with an adequate average age (6.2 years). In addition, GAM continues to increase its international footprint (25.8% of total revenues in 2023 compared to 24.0% in 2022), with presence in Portugal, Chile, Colombia, Mexico, Peru, Dominican Republic, Morocco and Saudi Arabia .

The group stands out for an increasingly diversified and less capital-intensive business model at the level of business lines, showing progressively less dependence on the activity of machinery rental (56.8% in 2023 compared to 65.2% in 2019). The company has taken advantage of its structure and capillarity to develop business lines that do not require additional investment (sale of machinery, maintenance, repairs and spare parts, training, among others), already representing 43.2% of sales in 2023 compared to the 34.8% in 2019).

All this has consolidated a mix balanced in which long-term recurring activities and business are more prevalent no capex (57.1% of total sales in 2023) over the traditional short-term rental business (42.9% of total sales in 2023), providing greater solidity and cash recurrence to the business with a lower investment requirement .

In 2023, the group achieved a record sales figure of 280.9 million euros, highlighting the positive evolution in all businesses and geographies, especially in the long-term recurring business (+43.6% year-on-year), which already represents a 23.9% of the turnover. Recurring EBITDA reached 73.7 million euros (+26.3% year-on-year, with a stable EBITDA margin of 26.2%). Looking ahead to future years, GAM estimates an increase in turnover via organic growth and through the consolidation of acquisitions made in 2023, but which have not contributed to sales during the entire year, as well as an improvement in the margin. ebitda in the period 2024 -2028 (+1pp per year), which is subject to the increase in international business in markets with better profitability and opportunities, as well as the scope of greater synergies derived from M&A operations already carried out.

GAM maintained its leverage ratio relatively stable in 2023 (DFN/EBITDA of 4.04x), levels that we consider appropriate based on the industry in which it operates and the group’s inorganic growth. Looking ahead to fiscal year 2024, we estimate an improvement in this (estimated DFN/EBITDA of 3.7x) based on the reduction in investment levels, the consolidation of 12 months in results from the acquisitions completed in 2023 and the progress in the delivery of machinery. However, we estimate that interest coverage for EBITDA and financial autonomy measured as net worth/financial debt will remain at adjusted levels similar to those reported in 2023 (4.65x and 30.91%, respectively).

The improvement in the rating is based on the evolution of the GAM group during 2023 and favorable prospects for 2024-2026, based on profitability levels that present historically stable behavior, given the nature of the group’s main activity (rental of machinery), where a high volume of income maintains a relevant recurrence and assured returns, which reduces exposure to the cycle significantly.

Follow all the information Five days in Facebook, x and Linkedinor in our newsletter Five Day Agenda