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City News: “Best deal ever” Catherine Stratton assesses the significance of Speedy’s latest acquisition, and reports on the latest results from other hirers. Its competitors may have hoped that Speedy was still fully occupied with Hewden Tools but already in 2008, it has become clear that the acquisitive hirer is now confident that the integration process is so strongly established for it to take advantage of other opportunities. Speedy has now announced another significant acquisition: that of the in-house plant operation of AMEC for £12.5m cash; working capital, cash and debt are not being acquired. Completion is expected to take place on 1 February. In monetary value this appears to be of much less importance than the £115m Hewden Tools deal but Chief Executive Steve Corcoran thinks this could be Speedy’s “best deal ever”. The Hewden Tools acquisition consolidated Speedy’s market leadership in UK tool hire but that is clearly not the summit of the Group’s ambitions. Steve Corcoran has always been eager for Speedy to explore and exploit markets outside the traditional construction trades and this latest acquisition marks a major breakthrough in this strategy. In recent times AMEC has undertaken a series of disposals and acquisitions, transforming it from a traditional construction company into primarily an ‘oil services’ group. Speedy is buying the business and assets of the Darlington-based AMEC Logistics and Support Services (LSS), the net assets of which are worth £6m and relate to AMEC’s Industrial Services division. It brings ten depots to Speedy’s 500-plus network, and 250 employees, including the AMEC LSS Managing, Financial and Commercial Directors. Speedy will retain the general plant element of the business but with sale and leaseback provision with existing suppliers; as the assets become less viable, third party provision will be made. At the heart of this deal, however, are the supply agreements. AMEC has long been one of Speedy’s Top Ten customers and it will now be No.1. The hirer will have an exclusive four year service agreement with AMEC Industrial Services which is expected to have a value of approximately £13.5m a year and will cover Speedy’s full range of tools and equipment. The hirer will enjoy preferred supplier status with AMEC’s other divisions. In addition, the deal has enabled Speedy to extend its relationship with some of those businesses AMEC disposed of in the course of its re-organisation; for example there is a three year preferred supply agreement with AMEC Spie. In all, Steve Corcoran believes the deal will add £100m to Speedy’s revenues over the next four years. It also has the merit of taking Speedy into the rail sector for the first time and much further into other markets such as M&E. The potential of this latest transaction is such that Speedy is re-organising its divisional structure to incorporate a new Engineering Division. The operating divisions and their Managing Directors will be: Tool Hire (including Speedy Direct): Martin Knott; Power (power generation and compressed air): Andy Carter; Accommodation (portable accommodation hire, modular buildings and welfare): Gary Parkinson; and Engineering (AMEC acquisition plus lifting and surveying): David Harris. Hire exudes optimism Gloom now pervades Stock Markets across the world, but UK hire companies still exude optimism. The recent interim results detailed here all indicate robust health in the middle part of 2007 and the accompanying statements display continuing confidence. Unfortunately, investors are sceptical and are likely to remain so as the consequences of the ‘credit crunch’ become increasingly apparent. That aside, it should always be borne in mind that the construction market is ‘late cycle’ and, because of the high volumes of work in the pipeline, workloads should continue to be strong throughout this year. It is always difficult for the hire industry to look far ahead, but there appears to be a plethora of other significant infrastructure developments, including of course, the 2012 Olympics taking place in London. Both the Speedy and Vp half year results are record ones for the two companies. In a period of very significant acquisition activity, Speedy has also achieved double digit organic growth. The company reports that, following the integration of Hewden, 21 of the 188 depots have been closed because of branch overlaps. All the retained depots, hire assets and vehicles will be re-branded as Speedy by the end of this month and there will be a common IT platform and a single product catalogue. In reviewing the performance of Vp’s individual businesses, Chairman Jeremy Pilkington describes Hire Station’s half year as “remarkable”, with the tool hirer having achieved profits in excess of those recorded for the 12 months to March 2007. The specialist businesses within Hire Station, have performed well. MEP (Mechanical and Electrical Press Fittings), acquired in November 2006, has performed ahead of expectations and has extended its distribution through Hire Station’s national network. The lately established Climate Hire division, the development of which was enhanced by the acquisition of Cool Customers last April, has proved highly successful. Although the indifferent summer weather did not produce the customary demand for air conditioning, the business was heavily involved in flood remediation work. Moving on to Ashtead, Chief Executive Geoff Drabble referred to the significant improvement and increasing prominence in the UK market of A-Plant, following its repositioning. Looking to the Group as a whole, he concluded: “Notwithstanding current concerns over broader macro economic conditions, we continue to see strong demand for our equipment and services.” • Executive Hire News › Archives › January/February 2008 › City News › “Best deal ever”
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