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Executive Report: Prosperity and consolidation The 2006/07 Plant Hire Investment Report has been published at a time of considerable change for UK tool hire. Catherine Stratton discusses her findings. Last year, the Plant Hire Investment Report increased the number of companies in the core statistical section from 60 to 75, to introduce more specialist hirers, which are among the best performers in the sector. However, this did not lead to the inclusion of any more tool hire companies because, as EHN’s Top Ten Tool Hirers report each January has shown, there is a wide gulf between a handful of major companies (now down to eight) and their competitors. We are further restricted because, in the case of companies operating in both plant and tool hire (like Ashtead, GAP and, until very recently, Hewden), their full company accounts are included. In addition, we are not able to include the tool hire operations of the builders’ merchants, i.e., Travis Perkins, Jewson and Wolseley, as these are run as divisions and produce no publicly available accounts. Each year we attempt to monitor tool hire’s progress against plant/ equipment hire overall by examining individual tool hirers performances against industry averages and medians, based on statistics in the Report. Even last year it was difficult to find an adequate sample; there were three obvious choices: Speedy, HSS and Brandon. Three out of 75 is not a large sample, so we added three other specialist companies directly related to tool hire, viz. LCH Generators, LGH and SGM Hire. This year’s sample is sadly depleted. Brandon was, of course, acquired by Wolseley last year and the only accounts Brandon has since produced are for the seven month period ending July 2006, bringing it in line with its parent. These accounts were excluded from the Report’s statistical section because of the short period covered and the significant changes after the accounting period, as Brandon acquired the trade and assets of 115 Hire Center branches from Wolseley between September 2006 and February 2007. For the record, the accounts show that, in the seven month period, Brandon’s sales were £37.2m, indicating growth of 12% on a pro rata basis. It posted a loss of £5.5m after exceptional costs of £5m arising from the acquisition. Brandon’s immediate holding company is now Wolseley Bristol and it operates as part of the Group’s UK business within its European Distribution segment. It is hoped to re-instate Brandon in next year’s Report. We also hope that SGM UK will be included again: SGM Finance went into administration last November after fast growth. It emerged in January as SGM UK, operating from 12 depots, and forecasts turnover of £9m this year. LCH and Lifting Gear Hire were both aquired by Speedy last year. Inevitably, statistics in such a Report are quickly superseded. Even before the latest acquisition, Speedy had overtaken Hewden as the largest hirer in the UK, although Ashtead and Aggreko are bigger globally. Using the latest accounts available, the table below shows the top five hirers in UK turnover terms: Thus, the two major tool hirers are the largest and fourth largest companies in the wider hire market, and with the Hewden tool hire acquisition, Speedy looks likely to build a considerable lead over Hewden in the current year. HSS is well positioned to remain fourth. We
would
suggest
two
main
factors
in
the
strong
showings
of
Speedy
and
HSS.
One
is
that
tool
and
light
plant
hire
have
grown
faster
than
general
plant,
and
the
other
is
increasing
consolidation.
So what of the performances of the tool hire-related companies vis-à-vis the overall industry? Having a narrow sample to judge, we will confine our scrutiny to just two of the most important tables, looking at Speedy, HSS and GAP. HSS
is
the
long-standing
champion
of
this
table,
invariably
leading
it.
As
the
company
moves
towards
a
greater
mix
of
small
plant
and
tools,
it
will
be
interesting
to
see
whether
it
retains
supremacy
HSS again performs well and GAP’s performance is sound. As the Report stresses, because the basis for this table is the gross book value of plant at the end of the accounting period, companies expanding their fleets at an above average rate are somewhat penalised, and this applies to Speedy. Its fleet grew by 27.7%; comparable figures for HSS and GAP are 6.4% and 19.9% respectively. Overall the Report remains bullish about prospects for both plant and tool hire. The latter should continue to benefit from such drivers as Health & Safety legislation and the buoyancy of construction, with the Olympics playing an increasing part. Consolidation should strengthen not just the consolidators, but also their competitors, and the fundamentals of the market still look sound. • • The Plant Hire Investment Report 2006/2007 can be ordered from Mandy Rees on 01249 700778, or e-mail your request to mandy@executivehirenews.co.uk Executive Hire News › Archives › September 2007 › Executive Report › Prosperity and consolidation
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