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Executive Report: The strength of tool hire The
13th
annual
edition
of
the
Plant
Hire
Investment
Report
shows
tool
hire The 2005/06 Plant Hire Investment Report has expanded its coverage, increasing the companies included in its ‘core’ statistical section from 60 to 75. This brings in additional specialist and/or regional hirers. It is sad, but not surprising, that this expansion has not brought more specialist tool hire companies within scope; EHN readers will know there is a considerable disparity in size between the largest tool hire companies (such as Speedy, HSS and Brandon) and most of their competitors. Of course, the Report also includes those major companies such as Ashtead, Hewden, GAP and Vp, whose interests include tools (all four are ranked among the Top Ten tool hirers, see EHN January 2006. In all these cases, however, the statistics used are based on the group accounts to which tool hire activities make a ‘minority’ contribution. The Report does not include the tool hire operations of the leading builders’ merchants (Jewson, Travis Perkins and Wolseley) because they function as divisions and no accounts are publicly available. Figures for Brandon relate to the year ended 31 December 2005, prior to its acquisition by Wolseley. A number of ‘medium sized’ hirers are included, such as Charles Wilson, Nixon and Banner Plant, where tools form an important part of their hire businesses. The extension to 75 companies has brought in Parker Plant Hire, which offers a wide range of plant and tools, and William G Search which, in addition to its general plant and portable accommodation interests, has a significant event hire operation. Amongst the equipment companies are grounds care specialist SGM Hire, lifting gear hirer LGH and generator hirer LCH (acquired by Speedy in May). So
how
have
tool
hirers
and
the
specialist
companies
fared?
The
backbone
of
the
statistical
section
of
the
report
is
formed
by
the
‘Gross
Book
Value’
(i.e.
original
cost)
of
the
individual
plant
fleets;
this
is
the
criterion
for
inclusion
and
is
also
used
as
the
base
for
calculating
several
of
the
subsequent GBV Plant Company
GBV
Plant
(£m)
Position
2005/2006
Position
2004/2005 Comment Only one company (LGH, where there has been re-structuring) has seen its position decline (and only marginally) from the previous year. The strong advances of LCH and SGM Hire are noteworthy, suggesting well above average growth in fleet size. Speedy’s GBV rose to £340m at 31 March 2006, a substantial increase on the figure in the table but insufficient to change its position on the table in the Report. All six companies exceed the median figure for the 75, but only two exceed the average. A very high proportion of investment lies with the largest companies; the ten biggest account for 69% of the 75’s total investment. Of course, in order to be profitable, fleet investment must generate additional revenues. Below we show the annual turnover for each company. Turnover Company
Turnover
(£m)
Position
2005/2006
Position
2004/2005 Comment There has been very little movement in terms of positioning on this table. Speedy’s later figures would again leave it in fourth place, although a turnover of £254.3m brings it much closer to the third placed Hewden, which had a turnover of £284.8m last year. At current growth rates, Speedy looks set to challenge Hewden’s position as the largest hire company in the UK (both Ashtead and Aggreko are larger in terms of overall turnover, but each derives more than half its revenues from outside the UK). Turnover % GBV Plant Company
Turnover
%
GBV
Plant
2005/2006
2004/2005 Comment The above table represents a critical factor in the performance of hire companies. On the whole it will be seen that the tool hirers have done exceptionally well, with HSS and Brandon out-performing the rest. Of course companies like SGM Hire, which have rapidly expanded their fleets, are penalised by the fact that the figures are based on ‘year end’ values. It should also be remembered that tools have a shorter life span than most plant and other heavier equipment, so tool hirers need to generate higher levels of revenue in order to secure an adequate return. Change in Turnover Company
Change
in
Turnover
(%)
2005/2006
2004/2005 Comment All the above companies, with the exception of LGH, show growth in excess of the median figure for the table. SGM Hire’s second position, after leading the table last year is particularly noteworthy. Trading Profit Company
Trading
Profit
(£m)
2005/2006
2004/2005 Comment It will be noted that, in the above Trading Profit table, all six companies exceed the median figure. Gross Return on Plant Company
Gross
Return
(%)
2005/2006
2004/2005 Comment This table is one of the most important as it indicates the gross return being achieved by each company. Depreciation and interest charges have been added back to pre-tax profits to provide a genuine basis for comparison of performance as it is unaffected by differences in depreciation policies and financing methods. Some allowances must, however, be made for the size of the company (it is obviously easier to generate a high return from a low base); for the rate at which a company is expanding, and for the type of equipment. Speedy’s position on this table has been affected as it expands its specialist equipment operations. Both HSS and Brandon perform consistently well. It should be stressed that these figures are before interest payments and also any exceptional items are excluded. Conclusion The findings of the 2005/06 Report are that the hire market’s performance shows an improving trend overall. Tool hire companies continue to out-perform the majority of hirers in several key statistics. Since publication, interest rates have increased and the international situation has worsened, with the terrorist threat in the UK. The market, and its major customer, construction, continues to look robust, but its strength is likely to be tested. • • Copies of the Plant Hire Investment Report (www.phir.co.uk) are available from Heidi Fisher on 01249 700778, or e-mail heidi@executivehirenews.co.uk Executive Hire News › Archives › September 2006 › Executive Report › The strength of tool hire
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