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Tool Hire Top Ten: Consolidation gains momentum Catherine Stratton, author of the famous Plant Hire Investment Reports, compiles her exclusive New Year review of the UK’s Top Ten tool and equipment hirers. A year ago as we published our last Tool Hire Top Ten, it was becoming increasingly apparent that, after five years, the composition of this select band of hirers was about to change. We knew that two Brandon Directors were investigating a management buyout and our instinctive reaction was summed up in our City News ‘Brandon in play’ headline last January. So, of course, it proved with Wolseley making a £72m agreed cash offer in March. The subsequent merger of Brandon with Wolseley’s own Hire Center operation – two of the original Top Ten hirers - under the Brandon banner has created the third largest tool hire operation in the UK. Thus, at the outset of our compilation of this year’s Top Ten, we were faced with the simple question: ‘which company now comes in at No. 10?’ Readers may remember that in May 2005 we attempted to identify the ‘Next Tier’ - those hirers at Nos. 11-20 in the tool and equipment hire league. This proved to be a complex exercise where the results were, perhaps, not entirely satisfactory as the information available was not comprehensive. We re-visited this article when we began our current researches. With Speedy having purchased LGH, the original No.11 player that would have moved into the Top Ten, the most likely contender, initially, for the new No. 10 spot was specialist grounds care equipment hirer, SGM, which had a very fast growing fleet. We were, however, somewhat wary because the latest filed accounts were for the year ended 30 September 2004. Our wariness proved to be well founded when the company went in administration in November. We then examined the merits of some of the stronger regional players, narrowing the choice down to two candidates - the well established Scottish family enterprise of JG Martin Plant Hire and Richard Coffey’s fast developing Supply UK Hire Shops, based in Manchester. Readers will be aware that our aim is to portray the current positions of the individual hirers in terms of ‘pecking order’ rather than positions based on data from historic accounts - hence our sequence of statistical tables begins with Current Annual Turnover. Thus
we
had
to
decide
which
of
the
two
contenders
was
currently
generating
the
higher
turnover.
In
historic
terms,
there
is
no
doubt
that
Martin
is
the
larger;
its
most
recent
accounts
(year
ended
Other difficulties have confronted us this year. Rumours abound about the future of Hewden, the UK’s largest plant hire company. We now anticipate that its Canadian parent, Finning, may seek to dispose of its tool hire operations. The indications are that Finning will seek to align Hewden’s product offerings more closely to the Caterpillar range of equipment it distributes, in which case, tool hire may not be the sole candidate for sale. The uncertainty surrounding the business has meant that we have not been able to speak directly to the management, although MD Brian Sherlock has provided us with some general written comment, which is included later. As a result of the lack of direct communication, we have had to make estimates for both Hewden’s tool hire current and historic turnover figures as the move taken towards ‘one Hewden’ early in 2005 means that there are no trading accounts available for what was Hewden Hire Centres. We have made our estimates with reference to the overall Group performance of Hewden. HSS
has
also
posed
difficulties
with
regard
to
our
estimates
of
current
trading.
Paul
Nolan,
who
had
been
Chief
Executive
since
the
Management
Buy
In
three
years
ago,
left
the
company
in
August
and
was
replaced
by
Chris
Davies.
As
we
indicate
in
the
section
about
HSS,
he
was
unable
to
speak
to
us.
THE SIZE OF THE TOOL HIRE INDUSTRY Last year we drew attention to the disparity in size between what were then the Top Ten players and the rest. As we indicate above, this year there is a very wide gulf between the first nine and the companies we believe to be in line for the No.10 slot. Since 2004, it has been our practice to compile two turnover tables; Table I shows our estimates for annual turnover levels currently being achieved by the ten companies, while Table IA is based on the latest available company accounts or estimates provided by companies. Table I indicates the growth which we anticipate for the Top Ten companies. The aggregate value of this year’s table is £851.7m, which compares with our figure of £730m a year ago. If we exclude the £9.7m of turnover attributed to Martin, this would suggest an average growth rate of the leading companies of 15%. Much of this increase is attributable to Speedy’s expansion following its acquisition of LCH and LGH, as well as its organic growth. Speedy alone now accounts for 32% of the total Top Ten turnover. We turn again to the rather vexing question of the size of the UK tool and equipment hire market. Last year we suggested that the Top Ten companies probably accounted for approximately 50% of the total market to give a value of some £1.5 billion. This year, bearing in mind our own contention that overall the larger companies are taking an increased market share, we would suggest that the total value has risen to £1.6 billion, giving the Top Ten companies a 53% share, of which Speedy alone accounts for 17% of this total. As ever, we would emphasise that this estimate is based on a very restricted band of statistics. EHN continues to pursue its researches into the market with enthusiasm and looks to refine its knowledge of these matters in the course of 2007. There is little doubt that tool hire is set for another year of major changes for some leading players but, for most, it should also be a year of growth and sound progress. Table
I:
Current
Annual
Turnover
(based
on
interim
statements
and
results
where
applicable)
Table
III:
Gross
Book
Value
of
Hire
Equipment
(based
on
end
year
figure
in
most
recent
annual
accounts,
except
where
indicated) Table
IV:
Number
of
outlets
(as
at
December
2006) Table
V:
Number
of
employees
(based
on
the
most
recent
annual
accounts
available,
except
where
provided
by
the
company) Table
VI:
Remuneration
of
the
highest
paid
director
(based
on
the
most
recent
annual
accounts
available) Executive Hire News › Archives › Jan/Feb 2007 › Tool Hire Top Ten › Consolidation gains momentum
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