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International Profile: Coates Hire Aussie rules Coates Hire Ltd is market leader in the Australian hire market with over 200 outlets and a turnover of A$715m (£301.8m) in its financial year to June 2006. On a visit to Sydney, Robert Aplin talks with CEO Malcolm Jackman about the company’s growth. “Even
by
our
own
standards,
the
last
financial
year
has
been
a
great
year
for
Coates,”
is
the
first
delivery
from
Malcolm
Jackman,
Chief
Executive
Officer
of
Coates
Hire
Ltd,
Australia’s
largest
hirer.
Since my visit, Coates has announced its half year figures to December 2006 and has reported hire revenue from continuing operations up by 9.5% to A$380.5m (£160.6m). The Australian hire market in which Coates competes is estimated to generate approximately A$3.5bn (£1.48bn) in revenue annually. Coates, therefore, contends that it has a 20% market share. The company’s fleet comprises many product ranges that we in the UK would call ‘plant’, including compressors, compaction equipment, earthmoving machinery, access platforms, portable toilets and accommodation units, storage containers, generators and fork lift trucks, amongst others. In addition to all the market segments familiar to us, Coates serves the mining market, principally based in Western Australia, with a range of very large plant including dumptrucks, wheel loaders, dozers and graders – the sort of kit that we may see on large civil engineering projects like motorway construction sites. UK operation performing well Coates also operates a specialist power generation activity, together with a range of other equipment in the mining, oil, gas and civil construction markets in Indonesia. It also operates a UK operation, based in Aberdeen, providing specialist offshore rated and zoned compressed air, steam generators and other associated equipment to the offshore industry worldwide. Malcolm Jackman states, “Coates Offshore is performing well and has benefited in particular from high energy prices driving a strong oil and gas market.” In the half year to December 2006, Coates UK revenue increased 44% to A$10.4m (£4.39m). Back in August 2004, Coates had sold its specialist onshore air compressor and power generation business, trading as Coates Rentair and operating from eight depots, to Speedy for £6.65m. Coates came to international attention in February 2002 when it was transformed by the acquisition of Wreckair, the No.2 player in the Australian rental market, for A$85m (£35.89m). Appointed in January 2003, Malcolm Jackman states, “the Wreckair deal gave us significantly greater scale. We were ready for this step and started pursuing our strategy of growth and diversity.” Since his appointment, Coates has made 35 acquisitions. “We have pursued growth in three main forms. Firstly, we have invested heavily in developing and improving the existing asset management infrastructure, including our people, IT systems, training, branch and distribution network and logistics capability. We are making our business more efficient and expanding our ability to absorb growth in the future. Continuing growth “Secondly, we have grown our core hire fleet by expanding those items that continue to show growth potential, extending our fleet into new products that can easily be disseminated to our existing customer base and filling geographic holes in our network through our continuing process of ‘Sweep and Plug’ acquisitions. Thirdly, we are taking our business into new markets, such as large mining and resources markets, through acquisitions. Coates invests at least A$300m (£126.6m) each year in new equipment – this is more than twice our annual depreciation. At June 2006, the written down value of our fleet was A$848m (£358m).” With the vast majority of Coates’ revenue based in Australia, its growth strategy has helped to protect the company from ‘swings and roundabouts’ in individual state economies. Australia currently has a two-speed economy, led by the mining and resources markets in Western Australia (WA) and Queensland. Following record growth in 2005/06, WA and Queensland continue to drive construction activity in Australia with robust growth forecasts of 14% and 16% respectively for 06/07. Growth is expected to taper off in 07/08, and Malcolm Jackman believes that there is some evidence that the mining industry is starting to overheat. New South Wales and Victoria are expected to grow 6-8% over the next two years. In both states, Coates is now performing well, after a slow period in the middle of last year. South Australia and Tasmania are performing less well, with Coates’ overall performance down on previous years. Malcolm Jackman attributes this to “a not unexpected, post-Melbourne Commonwealth Games slowdown.” Melbourne Commonwealth Games Coates secured exclusive supply of equipment to the 2006 Commonwealth Games held in Melbourne last March, billing A$12.5m (£5.3m) for the items supplied. At the opening ceremony at the Melbourne Cricket Ground, Coates provided a number of 1,200kVA generators to power the entire stadium as no mains power was used. Other equipment supplied included 1,154 portable accommodation units, 120km of crowd control barriers, 6,500 road cones, 28km of temporary fencing, together with 112 message boards, 190 lighting towers and 40 rough terrain fork lift trucks. In addition, Coates also supplied all the toilets to the Games, as well as some more unusual items such as 450 torches, 4,500 safety vests, 334 ‘wheely’ bins and 250,000 cardboard security trays. Having also been heavily involved in the 2000 Sydney Olympics, Malcolm Jackman has some words of wisdom for UK hirers hoping to benefit from the 2012 London Olympics. “You can expect a big ramp-up of work as the infrastructure of the event develops, but this work will finish three months prior to the Games. There will be a huge rush to complete everything by the deadline, but it does leave a big hole when it has been completed. Construction volumes were 12% down across Australia in 2001 – the year after the Olympics – with many promised government initiatives in infrastructure not eventuating. “In both the Olympics and Melbourne events, our teams were working seven days a week, often up to 20 hours each day during the actual Games. One of the biggest issues was that of security, as we had to access the site to deliver additional plant, fuel the existing equipment and pump and clean the portable toilets regularly during the Games. The events were one of the world’s great marriage testers. My advice to everyone in the UK involved in the Olympics is to take a long holiday, both before and after the event. For some of our people, there was also a post-Games trauma. They were so focused for so long, that it took them time to get back to day-to-day operations.” 12th largest rental company in the world With Coates undoubtedly the largest equipment hire company in Australia and the No.1 player in most categories of equipment in which it operates, Malcolm Jackman is just as impressive towards the end of his spell as he was in the opening over. The pace of the delivery simply does not falter. “Coates is also the 12th largest rental company in the world, and operates the 17th largest access fleet globally. There is no reason that we can’t achieve A$1bn turnover by 2010. In this financial year to the end of June, we will achieve a turnover of A$800m (£337.7m). “Coates has a very capable management team and operates in a country with a strong economic outlook, which has helped us to achieve our outstanding financial performance with world standard margins. We have a diversified income stream and a broad geographical spread. No single fleet contributes more than 11% of turnover, our Top 5 customers contribute only 10% revenue and our average invoice value is circa A$700 (£295).” Thankfully for us, 97% of Coates’ income is generated in Australia and its UK activity is based offshore and serves a specialist market. Whilst Malcolm Jackman – who is definitely a true ‘grower of businesses’ – acknowledges the potential to look outside Australia, his focus is centred on the home market. Beware, however, if he does decide to tour the UK in the years ahead. • Executive Hire News › Archives › May 2007 › International Profile: Coates Hire › Aussie rules
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