Executive Hire News › Archives › October 2008 › Executive Report: Full of confidence
Executive Report : Full of confidence
Robert Aplin talks with Hire Station Managing Director, John Singleton, about the company's continued development of both its tool and specialist hire activities.
When you look back at its results in its financial year to March 2003, Hire Station, the tool hire division of specialist equipment hirer,
Vp plc, was performing poorly. At that point, Hire Station accounted for 48% of Group revenue, but only 10% of operating profits. Five years on, in its most recent financial year to March 08, the company achieved turnover of £57.1m – up 27% on the 07 figures – and recorded a 90% increase in operating profit to £5.9m. The hirer also invested £12m in its fleet, a 43% increase over last year.
The management team at Hire Station has quietly gone about the task of not only expanding its core tool hire operation into an 80 depot national network, but also developing and expanding a number of specialist activities. These are headed by ESS Safeforce, which now operates 12 outlets and is described as “the No.1 specialist safety hire, sales and training business in the UK.” Hire Station has also expanded two additional activities originally acquired within the last two years. MEP Hire is a mechanical and electrical pipefitting activity that now operates from five outlets, as does Climate Hire, which is its specialist heating, cooling and environmental activity.
Call centre established
Heading the Hire Station operation is Managing Director John Singleton, who joined Vibroplant, the original name for Vp, in December 1998. Having helped to re-organise Vibroplant from a general plant hirer into a group of specialist hire businesses – hence the name change - John took over the running of Hire Station in January 04. Vibroplant had established a call centre for its plant operations in the mid-1990s and one of John’s key contributions has been the development of Hire Station’s own call centre operation, based above its Trafford Park depot in Manchester. Originally trialled in the north west of England in 2004, the call centre operation was then rolled out across the entire company. Such has been its success that over £30m of Hire Station’s transactional activity now comes through this centre.
According to John Singleton, “we installed a ‘feature net’ system in the business that allowed for incoming calls to be diverted from branches into the call centre and, within three months, our turnover had grown. Our depots still have the option to answer their own phones, but, if they don’t within a couple of rings then the call is automatically forwarded to the call centre with the telephone software identifying not only the caller, but also indicating the branch they are trying to contact.”
Whilst, at first glance, it may seem that Hire Station is taking a set of skills away from its branches, John is adamant that “the call centre has, in fact, taken the risk out of our entire strategy. There was an overnight improvement in branches’ ability to respond to customers. They were able to focus more of their time on ensuring that the right quality equipment was despatched and collected from customers in a timely manner, as well as freeing up more time to manage and maintain the extensive range of fleet assets under their control. Improvements to administration processes were also experienced, meaning fewer invoice queries, which has been a positive plus for the customer. The call centre can now, with a lot of confidence,
say ‘yes’ to the customer knowing that we have excellent stock availability and a responsive branch network.”
Call Centre General Manager, Andy Coyle, says “we have 27 hire controllers answering phones. The team comprises a number of former depot managers and sales people with a wealth of tool hire experience. Each new member of the team will spend their first 12 months in our admin office learning about our systems. They then spend another 12 months taking off-hires and it will be two years before controllers join the front line by answering phones. We have ten people on the front line in the call centre and eight of these members of staff have over 20 years hire experience.”
95% of turnover from 300 products. Another key element of John Singleton’s strategy to turn Hire Station’s core tool hire operation around has been to focus its major investment on 300 product lines. “In order to build more momentum, we had to invest more. We rationalised our range and have invested in strategic areas. Hire Station now generates 95% of its turnover from these 300 products. Customers must have confidence that we have the depth of stock they need, so we have set a stock profile for each branch. If there is local demand for additional lines, then these are stocked at the discretion of the branch manager, as long as they meet the payback criteria set out.”
Four years ago, Hire Station operated 30 mini excavators. It now has a fleet of 200 machines, comprising 750kg micro and 1.5 tonne minis, the majority of which are JCB units, although the hirer also operates Terex and Kubota machines. In the last two years, Hire Station has also invested £3.5m in the new Pop-Up scissor lift, as well as Terex one tonne compact dumpers. “The Pop-Ups, in particular, have been an excellent investment, generating over £2m of annual revenue at good returns. We are now investing much more wisely and, even more importantly, we are robust in cleansing the slow moving and obsolete stock from our fleet.”
In similar fashion, Hire Station’s specialist activities have also received considerable investment. To ensure the continued growth at ESS Safeforce, nearly £2m has been invested in the last year. In addition to expanding its training activity “to offer the largest number of confined space training courses in the UK from seven locations”, ESS has recently invested in breathing air trailers after recognising that current products on the market were somewhat antiquated. “These products have proven to be an instant hit with our key petro-chemical customers.” In all, ESS has approaching 2,000 gas monitors available for hire as well as escape sets, full breathing apparatus, access equipment, hazardous area lighting and radios, and cable location equipment.
These investments support ESS’s ‘Shutdown Services’ operation that provides equipment and other services to large industrial sites during maintenance periods. The development of this specialist activity has enabled Hire Station to enter new industrial markets and introduce its core tools and equipment ranges. “Our aim is to serve a common customer base throughout our divisions. For example, we are now providing more general tool hire to MEP’s specialist customers,” says John Singleton.
Virtual hire
Hire Station has also developed a number of virtual hire partnerships. “For example, with one national garden centre chain, by placing point of sale material in selected stores, we have introduced retail customers to the concept of hire. When a customer picks up a leaflet and wishes to hire, they dial the free phone number and it diverts to our call centre. We answer in the name of that garden centre and raise an order, which is then delivered by one of our branches. This activity may be seasonal, but we have been busy from April to September, with turnover running at £20,000/month and it is all cash business.”
John Singleton and his team have certainly been busy in the last year. They have opened new greenfield tool hire outlets in Croydon, Norwich, Poole and Skipton, with MEP Hire opening in Manchester and ESS in Middlesbrough. Since April last year, Hire Station has also spent £4.2m on acquisitions. Earlier this year, it purchased DJ Tool Hire from administration and is in the process of re-locating both its Durham and Newcastle branches to new premises.
ESS Safeforce acquired Northern Site Supplies (NSS), which hires specialist hazardous lighting to the petro-chemical and offshore industries. John Singleton plans “to roll out this model, established in the north east, and make it into a national business.” In addition, it bought Arcotherm, which hires and sells heaters, air conditioners and dehumidifiers, and this has been integrated within Climate Hire. ‘We are now looking for more non-ambient applications to ensure an all-year-round income stream for this activity.”
Hire Station’s most recent deal is the purchase of the tools and telescopic handler fleet of UCS Plant, gaining a three year sole trading agreement in the process. “All these acquisitions are bedding in well and are being developed.”
“100 locations are more than plenty”
In his general comments on our industry, John argues, “I don’t believe that the model of 300 hire locations is the be-all and end-all. 100 locations are more than plenty for national distribution. Locations are full of cost. Rather than move to larger branches, we have invested heavily in adding mezzanine floors to our existing branches. We prefer to have six or seven vehicles running out of one location, rather than having two vehicles operating out of each of three locations. As the market tightens, our model will be best placed to meet the challenges.”
Having overseen a turnover increase of more than 50%, together with a profit turnaround of £8m, in the last four years, John Singleton is justifiably proud of the team’s performance at Hire Station. He also comments on the Hire Station’s excellent 07/08 results, contending, “our operating margin is now the best in the tool hire industry. In addition, 70% of our revenue growth in the last year has been organic.
“We have also had a good start to our 08/09 year. First quarter revenue has been strong and we remain optimistic. At the moment, Hire Station is not experiencing the problems of the wider market. Tool hire is still performing well and our contract count continues to grow. Our capital expenditure continues without restrictions and will be similar to the £12m we invested last year.” •
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