Tool's gold

HSS, Speedy Hire and Vp's Hire Station cover the entire UK. And Brandon Tool Hire - on the back of encouraging results for the first six months of 2003 - has plans to go national within five years.
Add the names Hewden, Gap and A-Plant, as well as the builders' merchants cum tool hirers such as Travis Perkins and Jewson, and a picture emerges of a very active marketplace.
There are also numerous small local independent firms that offer an invaluable service, but in recent times these have come under the threat of takeover from the industry's big boys.
However, it is not just the small independent stores that have come under threat. A case in point was Speedy Hire's acquisition of Jewson's standalone tool equipment operations in 2002.
During the past five years, the tool hire market has gone through extensive change and consolidation, with most industry sources predicting that the trend is set to continue. Historically, tool hire companies have been loose amalgamations of networks of local branches.
Autonomy of the local branch has been a great strength in providing excellence in customer care, but this freedom has not been balanced, and has not assisted other developments. The combination of these factors has made a holistic approach to managing equipment hire a complex and often opaque issue.
But this is all set to change as hire companies begin to reach critical mass and become more market focused. It is predicted that the next five years will see fundamental changes in the way businesses compete.
Speedy Hire chief operating officer Steve Corcoran says the emphasis on quality and range of equipment, nationwide network locations and favourable price agreements will become normal and the minimum for firms to be seen as acceptable suppliers.
Corcoran says: "The tool hire sector has seen business increase because of more PFI and regional construction contracts coming online. Contractors no longer have all their own tools, they want fewer overheads and capital costs. They're also working further afield, and consequently don't have the tools readily available, so using tool hire outlets is the answer."
Tool hire has, in recent years, performed better than plant hire, although there have been a few hiccups along the way.
The overall effect of Ashtead's (A-Plant) problems resulted in the market suffering uncertainty with a number of hirers facing similar problems. As Ashtead is the most high profile of the quoted hire companies, it affected sentiment towards the sector as a whole.
Historically, HSS is generally credited with starting the tool hire sector in the 1950s, and today has one of the most extensive national network of branches. Managing director Lister Fielding says the tool hire market is still going through a period of consolidation and consequently will be stronger as a result.
"The consolidation trend will probably continue hand-in-hand with a more professional approach," he says. "A number of smaller outfits have been taken over, but there are still more opening up, as well as competition from builders' merchants getting into tool hire. We see this as a challenge and not a threat, as the best way forward is to have a good geographical network, which is basically what we have."
A place in the industry
Although the consolidation of the industry has seen many smaller outfits disappear, the independent local tool hire shop still has a place, says Fielding.
"These stores always have their loyal customer base that is loath to change its tool hire habits. The best way of getting this trade is not necessarily through takeovers but through good service and price," says Fielding.
Brandon Tool Hire chief executive Charles Skinner sees the market in the same light. "Many independent hire shops have been lost with the continuing consolidation of the industry. But this was always likely to happen, as good national coverage is critical.
"Our strength is our geography. We've always been strong in the South West. In five years, however, we plan to have national coverage."
Skinner does not foresee any change in the trend for consolidation. "In the long term, I think this will continue as there are still too many tool hire companies."
Gap Plant and Tool Hire joint managing director Douglas Anderson agrees. "Small businesses in all industries find it more difficult to survive than their larger competitors. Just the amount of paperwork that needs to be completed before you even open the doors for trading is mind-boggling.
"The larger contractors today want more efficiency and can achieve this by demanding more from their suppliers. The end result of this is fewer suppliers, and more sole supplier and preferred supplier deals with the remaining plant and tool hirers," says Anderson.
Of the top 50 UK contractors, Gap says it has preferred dealer status with at least 36. "Small local hirers find it extremely difficult to get this type of work as they don't have the stock or the locality to service it," says Anderson.
However, independent hire stores are making a stand and Herts Equipment Rental director Richard Soames says they make up the largest market in the UK.
"Although we can't get the national agreements on our own, as a group we can make people listen."
This was the thinking behind the founding of the Hire Alliance, an organisation that represents the majority of independent hire depots in the UK and negotiates supplier deals on their behalf. The advantage is that these stores together form a considerable market and as a group they can easily compete with the larger national companies.
"Independent hirers may have their entire stock at only two or three depots, but that doesn't mean they have less equipment than larger outfits. The bigger companies may share some equipment across four or five depots," says Soames.
Vp's Hire Station managing director Andrew Makepeace says the majority of small local hire operations have now gone, but those that remain have the advantage of good relationships with local tradespeople.
"These outlets are not necessarily needed, but there's still an opportunity for them," he says.
Saturated market
For many of the larger players, the tool hire market is becoming saturated and companies are looking for new areas and product groups to move into.
"At Hire Station we've opened Safety Hire and Lifting Hire to broaden our customer base," says Makepeace.
The specialist stores offering equipment for lifting and access, welding, surveying, gardening and landscaping have been a growth area, with most of the larger hire companies following suit.
On a cautionary note, how-ever, Charles Brandon thinks there is a danger of many tool hirers overcommitting themselves. "Over the past few years many tool hirers have reverted to their core business activities, as uneconomical ventures aren't sustainable."
A-Plant tool hire shops managing director Richard Dey says: "The sector is obviously linked to construction activity and as there's a lot of building at the moment, the tool hire market is doing well."
Although its parent company has had its problems in recent times, A-Plant's tool hire division is more than upbeat. It separated its plant and tool hire businesses last year and this, says Dey, has allowed the company to focus on its customer base.
"We're moving forward year-on-year as we now have a dedicated tool hire team. Over the next few years we see ourselves moving more into the high street arena," he says. "At the moment we mainly focus on shopfitters, and heating and ventilation specialists - what we call the clean end. By opening up high street shops as opposed to our present locations on industrial estates we've become more visible."
Dey says DIY enthusiasts would then be more likely to use an A-Plant shop, although he points out that this sector of the market stands at less than 5%.
"TV programmes such as BBC's Groundforce and Changing Rooms have certainly increased this market and I predict it will expand even more."
As for tool hire's future, most agree that it will be the survival of the biggest.
Gap's Anderson says: "I'd like to think that in 15 to 20 years Gap will have a number of super depots dotted around the UK, offering everything from excavators to scaffolding to tools, the ultimate one-stop-shop for builders and contractors."
If the super depot trend does take off, it will probably be the final nail in the coffin for the small independent tool hire outfits, similar to the scenario that has seen the large DIY superstores like B&Q and Homebase herald the demise of small high street ironmongers.
But only the largest tool hirers will have the financial muscle for a national network of super depots. "The largest companies in the sector will continue to
prosper," says Anderson. <F0A8>