Executive Hire News › Archives › November 2009 › Forum: Long road to recovery
Forum: Long road to recovery
Hirers tell us why the Executive Hire Show ticks all the boxes.
Stock Markets are booming and banks are behaving as if last year’s crisis never happened. What a contrast to the state of much of the ‘real’ economy - in particular the construction industry and its suppliers, as they fight to overcome the catastrophe largely brought about by the profligacy of bankers. There seems no prospect of relief in the near future: The Construction Products Association does not anticipate a recovery until 2011 and that will be slow. The Federation of Master Builders warns that the fortunes of small builders are worsening.
The hire industry has experienced a devastating decline in revenues with major players reporting falls of between 25% and 30%. Not surprisingly depot networks, staffing and plant fleets have been axed. In its recent trading update, Speedy stated that it has implemented another wave of cost reduction measures that will result in £30m savings in the current year; this makes total savings of over £70m since August 2008. Speedy indicates that this is as far as the company can go without impairing customer service. The news from Speedy is by no means all negative. In particular its links with Carillion’s joint venture in the Middle East are gaining momentum and should provide a springboard for the hirer to secure other customers in a region where, for the most part, construction spending remains strong.
With traditional ‘hire’ diminishing, it is not surprising that Speedy is examining other avenues. As well as its overseas venture, it is looking to extend the services it provides by advising, initially, whether a client company should buy or hire plant, by training its staff and maintaining its plant; in short, taking charge of all of a company’s equipment requirements.
This resonates with some of the thinking at HSS, where Chief Executive Chris Davies sees his company as partnering its customers to enable them to get the best value out their hired equipment. More positive news comes from HSS, which, after a summer of speculation in a couple of national newspapers, has now been able to announce the completion of successful negotiations with its banks. HSS has opened 12 new stores over the past year and there are more in the pipeline. The company believes its market share is growing and Chris Davies reports that its performance is more robust than many. It has just secured a three year contract (with an option to extend to five years) with OCS, an international facilities services company with an annual turnover of £700m, for the provision of tools and equipment.
Speedy and HSS are undoubtedly national leaders in the UK tool and equipment hire market. As we welcome PHE readers to EHN, we have also taken the pulse of a well-established plant hirer. Talking with David Gallagher, MD of Charles Wilson Engineers, which operates a dozen depots across England, he agrees that the market remains challenging. He reports that his company has seen a falling away of revenues not dissimilar to that reported by the major hirers. However, it is still making a profit and has a strong cash position. Other positive indicators he cites include a continuing low level of bad debt and satisfactory prices in the second-hand plant market.
Charles Wilson is currently expanding and ‘re-launching’ its Bristol depot.
There is little doubt that the hire market - irrespective of whether you are in tools, equipment, plant or any other category - is experiencing its most testing time ever as it battles against steep falls in revenues caused by the unprecedented decline in building and civil engineering. With activity levels set to remain depressed in the foreseeable future, some profound changes in the construction market are almost inevitable. Hirers should always be close to their customers, but they will need to be extra aware of their needs and of their problems if, as looks almost inevitable, the construction industry is set to go through significant rationalisation and consolidation. |
