Full service ahead

The world of plant hire has been busy over the past year. It has been busy in the conventional sense, namely the act of providing plant and tools to customers is good. It has also been busy in the sense that a significant number of companies have failed, merged, been bought or have been the subject of management buy-outs.
The most high-profile development was the demise of crane hirer Baldwins late last year. This led the company into receivership and resulted in the break up of its fleet of mobile, crawler and tower cranes.
Apart from the shock waves this sent through the industry, perhaps the most interesting aspect of the auction of Baldwins was that all three of its sectors were purchased by the residual market leaders: Ainscough, Weldex and Select Tower Cranes respectively.
The result was some much-needed consolidation and price stability.
Despite this fundamental change in crane hire, general plant has never seen such a seismic shift in the balance of power. A number of companies have withdrawn from certain sectors - Vp from general plant hire, GE from heavy plant - or withdrawn completely, such as Maxxiom. But others have sought to expand to replace them. The Gap group is continuing southwards; Cox Plant is aspiring to national coverage; and Hydrex has been expanding over the past year. This expansion appears to have extended the industry trade bodies.
The Construction Plant-hire Association (CPA) reports that membership is up 7% year-on-year and up 15% over the past two years.
This does little to suggest that the consolidation that has been the industry's self-prescribed panacea for several years is finally being put into practice anywhere other than in crane hire. The oft repeated mantra is that without consolidation, plant hirers will continue to scrap over a market that is not big enough to support them all: at least not to support them all profitably.
Complaints about low rates and competitors buying work by cutting prices are as vociferous as they have ever been - vociferous enough to imply that industry is not sustainable in its current form.
Over capacity
Hewden Stuart's managing director of general rental services Fred Batho says: "There's no question there's still over-capacity in the market. People are still chasing work and there's a constant competitive edge to the hire rates that are being quoted."
The market is not unhealthy at the moment. With the continuing boom in construction, the overall market for plant hire is continuing to expand.
CPA director Colin Wood says: "The link between plant hire and construction and infrastructure work is still profound. The main thrust of general plant is still very much construction and civil engineering, and construction certainly seems buoyant. There's no sign of the bottom falling out of the market."
The problem is that there are too many companies competing for a share of this business. However, the fact that plant hire as we now know it has been about for more than 60 years suggests that this is not necessarily the case.
Low rates can be seen as an inevitable consequence of an industry that has very low barriers to entry.
Moreover, the expansion plans of some in the sector indicate a fundamental belief in the profitability of plant hire - the situation that justifies the amount of investment the industry sees on a yearly basis.
These plans may seem to suggest more competition and a further reduction in margins for those companies struggling to make ends meet in a buyers' market. But they also suggest that plant hire can be a worthwhile, profitable business if the right approach is taken.
Determining the right approach
The difficulty is in determining what the right approach should be. There will be as many solutions as there are plant hire companies.
Nevertheless, certain general themes are apparent, and key among these is service. It is faith in the ability to translate service levels into a profitable plant hire business that, last year, persuaded Keith Price, Paul Bamford and David Symons to effect a management buy-out of Cox Plant from its parent company Andrews Sykes.
After several years of relative stagnation, at least in terms of investment in new fleet, the business could have been seen as collapsed, especially in the context of a market already suffering from over-supply. Managing director Keith Price does not see it this way, although to some extent he agrees with the picture of supply outstripping demand. "I think this is the case especially in some areas, like access, and general plant to a degree."
He agrees that the level of penetration of plant hire into its principal market of construction and the level of plant hire's reliance on construction are such that construction alone cannot be relied on to generate significant new markets.
"There is considerable potential for growth into new areas like utilities," says Price, "which was one of the reasons we bought Llewellyn Plant Hire. But the construction market is well saturated in terms of plant hire."
Nevertheless, he maintains that even in construction, business can be expanded if the level of service is up to scratch. "You can pick up business where others don't perform, for example, if companies can't provide the level of service required as a result of cutting rates."
In this respect, Price says the strongest competitors can often be the local companies that form the bedrock of the traditional plant hire sector. "These companies often have a good relationship with the local market. This shows the importance of good links to local market. But it is equally important that they also have good levels of service."
Chris Balls of Midlands-based JC Balls echoes these sentiments. "It's a service industry, simple as that."
The company was founded 40 years ago, and Balls insists the pressure on rates is nothing new. "Pressure on rates is always there. When the company was first formed you probably charged 23 shillings an hour for a backhoe. Now you might be looking at £18 an hour plus overtime; there's no real improvement."
The distinction has to be made, he says, on service. "Either me or my brother will answer the phone 24-hours-a-day, seven days a week; things will be dealt with."
Diversification
Balls has not concentrated solely on developing this service element as an add-on to the plant hire business. The firm has also diversified into areas where there is more scope for the level of service they provide. "Maybe 60% of our business now is as an earthmoving subcontractor rather than just plant hire," Balls says.
"The days of earthmoving being done on a simple plant hire basis are disappearing fast. People want it done on a price now and this means we can offer to take on responsibility for the whole job."
To extend this service, the company has also established a recycling yard and bought a crusher to deal with hard materials found on site.
However, service is about more than just the practical completion of the work for which plant is designed. It includes the negotiation of the hire in the first place. Gamble director Trevor Gamble says the biggest single factor in the perpetual pressure on rates is the lack of quality management on hire desks. "In which other industry would you put people in a position to negotiate a return on major investments without providing them with an underlying knowledge of how much you need to earn to make money out of them?" he asks.
"Very few hire companies have business training for those on the hire desk, which results in the inability to explain why a piece of kit needs to be sent out at £x per hour or per day," he says.
Gamble does not blame the desk operatives themselves. Instead he says it is the responsibility, and the failing of senior management. Such an indictment extends across the industry, and demonstrates that service is more than just an optional extra.
It also demonstrates the complexity of plant hire, a complexity that suggests the simple expedient of linking over-supply and pressure on rates as cause and effect is perhaps inappropriate.
If this is the case, the industry will have to look to more than just consolidation to ensure a sustainable and profitable future.<F0A8>