TRENCH WARFARE FOR PLANT HIRERS

Plant hire proper really got underway during emergency airfield construction in World War II. Since then it has grown out of all recognition to its pioneers. It grew gradually at first with post-war reconstruction's demands on scarce construction equipment. But it speeded up dramatically once it was realised that the idea worked and was also very profitable!

By 1954, when Vibroplant was founded, it could perhaps be said to have 'come of age' although to be fair others like Eddison Plant and George Cohen 600 Group had been practicing the art somewhat longer.

Since the early 1960s it has continued to grow with multi-depot firms such as M&J Hire Centres, Scottish Land Development (later to be SLD Pumps), Selwood and Hewden Stuart. (Selwood in fact has just completed an mbo from parent group BTR. At the buyout the value of Selwood's operation was calculated at œ38 million.) At the same time literally hundreds of smaller more local hirers began to mushroom around larger towns. For most of the last 30 years it seems that to outsiders the plant hire industry has had an image of easy pickings.

The growth was speeded up even further by the arrival of the Hire Shop concept and now there are hirers which have a foot in each camp. One thinks immediately of, say, Sheriff, the Nottingham-based hirer which trades at every level. In that category, too, would come Hewden Stuart which runs cross-functional operations as well as having sales franchises to boot. Selwood would fit pretty well into the mould, too, as would the oft-hailed success story of the last few years - Ashtead Group or A-Plant as it's more commonly known.

In Ashtead we have a company which appears to have sprung fully formed from the mould. But in fact it had been around for years when Peter Lewis and George Burnett did a management buy-in from the Bridgewater Group in the mid-1980s. It is they who have stamped their own management style on the Ashtead Group and taken it to 60-plus A-Plant depots by both organic growth and careful acquisition. 'In Ashtead every employee signs the same Contract of Employment and every depot manager (Ashtead likes to call them profit centres) is profit responsible,' chairman Peter Lewis is fond of saying. But if that was all it took, then we'd all be doing it wouldn't we?

It takes much more than that is obvious. How about breadth of vision, great marketing skills and the bottle to keep investing in new kit when times are hard. But you do finish up with the industry's approbation - and a healthy bank balance too, it must be said. Ashtead is still expanding, using the money it collected from a œ20 million rights issue, but very judiciously. No leaps in the dark here.

But Ashtead isn't alone. There are smaller outfits which have persevered through the recession and come out smiling. HE Services comes to mind as a privately-owned company which has always pursued a policy of top class kit with aggressive marketing skills to get it out on hire and not languishing in the depot. Its depot network may not be yet in double figures but it has a high profile in the marketplace.

Sheriff of Nottingham (whoever thought up that title should get a prize!) has also achieved a high profile by aggressive marketing and carefully thought out acquisition. Who but Sheriff would have perceived the value of Abelson when the economic downturn was biting hard and biting muckshift-reliant companies hardest of all?

At a stroke it took Sheriff into a different league but that doesn't mean the core business of plant and tool hire was being neglected - far from it. There have been acquisitions here, too, strategically planned to extend the geographic dependence away from the East Midlands area. Sheriff now stretches south as far as Barking, Essex and North as far as North Shields. And profits are steadily rising!

But the one plant hire company which until recently overshadowed the rest so far as size is concerned is BET Plant Services. That position is now changed since BET sold Hireplant to Hewden Stuart. Now mainly composed of three large groupings, PTP (formerly Port Talbot Plant), Grayston White & Sparrow (the UK's largest crane hirer) and Rentair which specialises in air compressors, BET Plant Services has been taking a long hard look at itself over the past year or two. As a result it has sold all of its Hireplant (non-operated kit) business to Hewden Stuart and the former head office has been closed. GWS too has been trimming its depot network more recently. Industry speculation continues as to whether or not this is end of the restructuring process for BET.

Now ahead of BET Plant Services in terms of sheer size (since the Hireplant acquisition) but well ahead of it in terms of profitability is Scotland's jewel - Hewden Stuart. HS now operates out of a truly nationwide depot network although its crane hire business (second only to GWS) is still heavily biased towards Scotland. The balance of that fact has been redressed a little since it bought Agent Plant's crane hire business from Trafalgar House last year. Hewden Stuart's strict financial stewardship and reluctance to cut rates has stood it in good stead throughout its history. Despite spending more than œ11 million on acquisitions recently it's still got cash in hand.

All of the examples mentioned so far are companies which have no corresponding contractor group as a parent or associated company. In fact, contracting companies as a whole have been divesting themselves of plant subsidiaries throughout the recession. There are exceptions, of course. Tarmac has continued with its in-house plant company and has also expanded its stand-alone outfit Castle Plant. Trafalgar House too has shown aggression with its acquisitive Agent Plant Group - even though it sold its crane company to Hewden Stuart. The latest buy for Agent is Douglas Plant which gives it extra muscle in the Midlands.

Probably the biggest divestment in recent years has been Mowlem's sale of HSS Group to the Davis Service Group. HSS has getting on for 200 outlets and is far and away the UK's largest operator of hire shops. It has continued to expand but Lister Fielding, the ever ebullient - and shrewd - HSS md is on record as saying: 'We'd like to expand more but finding the right site gets ever more difficult. We still believe in waiting for it, however - the right position is very important.'

The divestment trend is continuing with Lovell's plant hire subsidiary LPH Equipment being 'fattened up for sale' according to Group chief executive Bob Sellier. It'll take some fattening because in the first half of last year it lost œ2 million. It's claimed to be back in the black now but at what level is not made public.

If our 'league table' is examined it can clearly be seen that there is a sudden fall-off in the size of turnover even in the top 10 companies.

When the 20th is reached there is a yawning gulf between that and the top 10 companies' figures. But the same isn't always true of profit margins. BET for example doesn't have nearly so high a return as Hewden Stuart which may reflect the fact that HS is acknowledged as being a 'tight ship' run on cautious but sound accounting principles. We've yet to see the effects of the purchase of Hireplant from BET filtering through into the accounts, but there's no doubt that the restructuring which has taken place will affect the bottom line in a positive manner.

Peter Stringer is managing director of Agent Plant, the Trafalgar House subsidiary which has been a mover and shaker in the industry recently. He told CJ: 'There is a definite mood of realism in the industry post-recession. It's very strong in those companies which are in the business long-term. They've realised a stark fact which some smaller companies haven't. It's no good just accepting the 'going rate' for your machines. There has to be some commonsense applied. If you can't get a rate which allows you to both maintain the machine properly and reinvest in the future - then you shouldn't be in that sector of the market.'

Stringer also has some strong views on the state of the market post-recession. 'I think that there will be a rash of company collapses as business begins to pick up. That may seem obtuse but the fact is that they'll tend to run short of cashflow rather than running short of business. If a plant hirer can't get his cash in efficiently, especially when business is booming, then it's just a matter of time before there'll be problems. And this industry has not had a very good record of managing the payments of its debtors. Neither has the civil engineering/construction business a very good record of actually paying its invoices anywhere near efficiently. Those companies that can get prompt payment will be the ones which face the future with somewhat more certainty. In other words the business of plant hire is going to get more professional. And that is no bad thing.'

Whether or not this process extends to those companies which tend to hire kit largely 'in-house' is a moot point. Of the list of top 20 hirers by turnover it can be seen that just one, Wyseplant, belongs to a major contractor. But if that table was extended out to show pre-tax profits then Wyseplant would be much further down than it is. This is true of most of the hire companies which are subsidiaries of contracting groups. This reflects deliberate accounting policies or is simply a fact of life that if you're on site and hiring in-house then it's OK to screw the rate down! We aren't sure which but most sites seem to operate on the basis that all the profits finish up in the same pocket!

If you believe what Stringer says then it would appear that we are in for an industry where the majors will be able to take more of the cake than they do already. Which will lead to even more economies of scale and so and so on!

Is there a possibility however faint where, as in the commercial vehicle industry, the manufacturers set up schemes to deal directly with end users? So that, say Joe Bloggs Contractors knows he has an ongoing requirement for N pieces of kit, why involve a middle man? Why not just have a long-term hire and service agreement with Joe Soap Machine Manufacturer plc? The possibility is not so alien as may be thought. Some manufacturers are already running schemes perilously close to that scenario. The foot is already in the door, as it were.

But we're a long way from that yet. Plant hire has been around for some 50 years and it's still full of antiquated and out of date methodology. Perhaps it's the freewheeling nature of our industry that it will always have room for the odd maverick. If it doesn't then we'll all be the poorer for it, even if not in the financial sense! But the stage does seem set for the men in grey suits, the accountants, to take over more of the decision making process, leaving the traditional plant manager simply to do as he's told. Which would be a pity because so far plant managers have shown a remarkable resilience in survival in an industry where rates are little better now than 10 years ago.