Plant Hire Not Much Upturn Yet

Pre-tax profits rose by 35% to £16.8 million at Speedy Hire, a major plant and tool rental company in the UK, by the middle of May, and revenue increased by 4.3% to £340.4 million.

That’s certainly impressive. For the first time in the company’s history, revenue derived from construction projects accounted for less than half of total revenue for the entire year. It still accounted for 49 percent , but other markets, including infrastructure, had now crossed that crucial Rubicon of 50 percent .

After 26 years at the helm, CEO Steve Corcoran is quick to deny any plans to move away from construction. When he joined the Merseyside-based company, it had 13 depots; it now has over 350. A day without serving the construction market is “unimaginable” to him. “If you look at our sales, construction revenue has actually only gone down by 2.2 percent , which is far less than the national downturn. “Other markets have grown more than that,” says the analyst.

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Even so, the construction market accounted for 65 percent of the group’s revenue in 2011. There has to be some shift if revenue share has dropped by 16% in just two years.

It’s particularly revealing as it comes at a time when the Government has been launching initiative after initiative to try to stimulate the construction market. In the Autumn Statement last year, for example, the Chancellor announced a capital investment boost of £4.69bn, and this was swiftly followed by a £5.5bn injection in December.

Building output fell by 5.9 percent year-on-year in the first quarter of this year according to ONS figures, despite a rise overall in the UK’s GDP, says Construction Products Association economist Noble Francis. Francis has been outspoken about his desire for the government to take a more proactive approach toward moving this money through the system.

But do leading figures in the plant hire sector, which a report by AMA Research estimated at being worth £2.2bn in 2011, agree?

A-director Plant’s of marketing and strategic accounts, Asif Latief, says he’s not yet convinced that things are getting better. “The market has not seen any particularly strong growth,” he says. A government cash infusion, such as this one, will take some time to reach the ground. Some projects are starting to pick up, such as Crossrail and the Commonwealth Games projects in Glasgow. However, the market as a whole continues to struggle. We also think the rest of the year is going to be challenging.”

Director of Brandon Hire, Tim Smith, says the construction market has been “badly hit,” and Corcoran himself has had enough of people promising things that never come to fruition.

There has been more talk than action when it comes to government initiatives, he asserts. Loan funding is working as planned. Peel Ports and the construction of a deepwater port in Liverpool are good examples of the private sector beginning to show signs of activity again. But there is still more rhetoric than action.”

So how are plant hire companies reacting to such a market – one which the AMA report reckons will only have grown to £2.4bn by 2016?
“If someone does not need to hire, then they are not going to,” says Latief of companies like his in terms of stimulating the market.

Nevertheless, many companies see possibilities in differentiating themselves from the competition.

Speedy Hire is concentrating its activity on higher volume customers – which usually means larger contractors. According to Corcoran, “the typical rule of thumb where 20 percent of our accounts make up 80 percent of our revenue” is “very close” to being true for his business.

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The volume is not always there, he says, and the price cost per sale is still there because many smaller SMEs will price ahead for each job rather than continue hiring.
Brandon Hire, on the other hand, is focusing on smaller contractors, as it has done since it was formed in a buyout from Wolseley in 2010.

Smith asserts that this has been a boon because, in a down economy, home and business owners have been left to “make do, mend and where necessary extend” rather than move. “This has kept smaller builders busy,” he says.

Others have tried to stand out from the competition by significantly expanding or renewing their product line of services.

Mark Rooney, managing director at Mabey Hire, says his company has brought 13 new products to market in the past two years, “all suited to the requirements of our customer”. “We have invested £500,000 on new technology last year,” he says.

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Latief claims that as A-Plant is part of the publicly quoted Adshead Group it can afford to invest in new product to a much greater extent that some of its competitors. Is has just bought over 800 new machines in a deal worth £27m. JCB’s British factories will produce the micro, mini, and midi excavators, as well as the Loadall telescopic.

However, improving customer service is a critical component of brand differentiation. All the new products in the world won’t make much of an impact if that isn’t in tip-top condition.

Mr. Schofield claims that Hewden Hire has recently moved to “take the hassle out of hire” by offering next-day delivery on a core fleet of 30 of the most frequently hired plant and access product lines.

“We were able to identify our 30 most popular plant and access product lines after analysing over 100,000 hire transactions,” he says. “Any orders on these placed before 12pm are guaranteed to be delivered in the morning on the following day, anywhere in the UK. Delivery will be made the following day before 5pm for orders placed between 12 and 5pm. If we fail to deliver within the guaranteed times, customers will automatically receive a £100 credit.”

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The company has plans to roll the service out to other items soon.
A-Plant has also been concentrating on improving its deliver times – within reason. We will do our best to meet our deadlines, but we won’t promise to have everything ready by 8 a.m., because that is unrealistic, says Latief.

The company has also been using mystery shopping services, in addition to recording all customer phone calls, to improve on its customer satisfaction rating. “We already have a customer satisfaction rating – among people who would recommend us to other people – of 98 percent ,” says Latief, “but we stick with the view that 2 percent is not enough.”

Mabey Hire, meanwhile is looking at extending its reach by offering equipment for sale as well as hire. Mabey Sales, a new division led by industry veteran Richard Hinkley, has now been established by the company to spearhead such a move. “We recognise that we deal in some commoditised projects that do not really suit the hiring model, particularly non-engineered items,” says Rooney.

He insists that the new venture will not be taking any business away from its existing hire business. “We have a business development team who are working out what products to sell, and what works best from a selling perspective, but we will be offering this in many different sectors,” he says.

Another key element to focus on when it comes to improving customer service is training. Rooney says offering free training wherever possible to customers “makes them more efficient, and means they can get the job done as quickly as possible, which is a key consideration for them”.

For the past 18 months Speedy Hire has been looking to expand its managed service contracts under a banner of test, repair, inspect and maintain (TRIM) (TRIM). For those who don’t want to spend money on things like training and repair, TRIM is a good option, according to Corcoran.

As with Mabey, it also allows the company to move outside the traditional hiring model, as the service can also apply to a customer’s own products. But Corcoran says training is a fundamental part of the offer. “The trouble with not having people properly trained is that at best they can damage the machinery, at worst cause injury or death,” he says.

As a further example of working with the customer, Speedy Hire has also been helping many of its customers with their sustainability reporting, to help with their PQQs.

All of this will undoubtedly lead to better relationships with clients. What about the more fundamental issue of fuel prices? Wouldn’t lowering them help the plant rental industry and the construction industry it serves get back on their feet?

After all, as Rooney points out, plant hire companies get hit by the cost of fuel at both ends – its expense puts customers off hiring in the first place, and increases the cost of delivering product to them when they do. According to Corcoran, his company’s operating costs rise by £80,000 for every 1p increase in fuel duty.

So do these men not think the Chancellor could boost in the industry by cutting fuel duty now?

Corcoran certainly does. He says a cut is necessary not just for the plant hire industry but for UK plc as a whole. “People have to realise that there has not been a global recession,” he says. “There has been a decline in Europe and the USA but there are other parts of the world that have been growing nicely. The consequences of not being able to keep up with them are certain. So I would like to see the Chancellor making fuel duty a bit less of a burden.”

Unlike Rooney, he even goes on to claim that such a cut would not necessarily lead to a cut-back in public sector funding for the kind of major construction and infrastructure projects his customers depend on. A lot of people make the assumption that these projects are subsidised by the federal or state governments, according to him. “That may be the case for roads, but improvements in energy and water are now largely privately funded,” says Dr. Smith. So if fuel duty were lowered there might be less coming into the Chancellor’s pocket, but there would be an upturn in activity.”

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Latief, however is much more circumspect. Even though he favours a decrease in taxes, he cautions that the industry should avoid jeopardising government investment in the process.

He says the high cost of fuel has in a roundabout way served to help his company improve customer service too, by improving its delivery drivers’ efficiency. Every driver who joins A-Plant has to join at the same time in the month, so that they can go through the company’s driver training programme that is designed to make them more aware of the best way to load and unload to maximise efficiency. Each vehicle also comes equipped with dashboard equipment that alerts them to how well they are driving. “We want to reduce accidents and to cause less wear on brakes and tyres,” says Latief.

The same IT can also be used on a wider scale to plan deliveries, so that, he says, “you are not going to have a huge HGV delivering just two drills”.

It’s yet another good example of a business that’s doing everything it can to improve gloomy conditions on its own while waiting for stimulation from customers and the government.

Last Updated on December 28, 2021

Indra-Gupta

Author: Indra Gupta

Indra is an in-house writer with a love of Newcastle United and all things sustainable.

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