Published: September 2012
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About this report
In this report we review the UK tool hire industry. We quantify the market size and historical growth rates while reviewing key factors behind these figures and exploring drivers of profitability.
We also carry out an in-depth analysis of the drivers of industry growth – in particular relevant economic and market indicators such as levels of unemployment, construction and infrastructure spending, oil exploration, housing transactions and DIY spending. Our analysis of historical trends and forecasts is anchored in this information.
While many reports on the industry contain data and description, a critical objective for us in writing this report has been to prioritise our insights and conclusions.
What are the objectives of this market report?
Tool hire is a significant UK industry which has seen its fortunes vary dramatically in response to the economic environment. We believe that, in order for those involved in the market to make the best decisions in this complex and changing environment, they need to have access to the best information and understanding of the trends and drivers. The aim of this report is to provide this.
It is intended for tool hire companies themselves as well as investors and others considering entering the market, banks, analysts, consultants and other advisors with interests in the sector.
What are the sources and methodology?
This market report is based on
– Publicly available data including company annual reports, websites, press releases and government statistics.
– Interviews with senior-level contacts in the market.
– In-depth analysis of the macroeconomic environment and other relevant market drivers.
Information from these sources has been synthesised and presented clearly and concisely with extensive use of charts and tables to illuminate points and support conclusions.
The UK Tool Hire Market – 5
Market size and growth – 9
Market size & growth
Performance of leading providers
Market drivers – 13
Discussion of market drivers
Drivers and their impact
Market Trends – 20
Competitive landscape – 22
Profiles of the main competitors
Forecasts – 29
Key drivers forecast
Risks to the forecast
Appendix – 34
List of figures (UK Tool Hire Market Report)
1. Comparison between 7-day hire price and RRP for example hire items / £
2. Speedy Hire: net book value of rental fleet / £m
3. Revenue segmentation by market served / %
4. Market size and growth / £m
5. Leading operators’ historical revenue / £m
6. Speedy Revenue Segmentation Comparison / £m
7. Leading operators pre-tax profit and margin trend / £m, %
8. Employee numbers, revenue per employee for leading operators / £’000
9. Net book value of rental fleets, fleet asset turns / £m, turns
10.Speedy Hire: net book value of rental fleet, fleet asset turns / £m, turns
11. UK GDP in current prices (money GDP), inflation (GDP deflator) and real GDP / % annual changes
12.UK Inflation: Consumer price index and GDP deflator / % annual change
13. UK employment / annual % change
14. UK construction spending by type / £bn
15. UK infrastructure investment pipeline by sector (2011) / %
16. Total Expenses of UK Oil Exploration / £bn
17. Residential property transaction volumes / m
18. Total DIY spend by households / £bn
19. Leading operators’ historical revenue / £m
20. Leading operators’ pre-tax profit margin / %
21. Employees and revenue per employee for leading operators (most recent year) / £’000
22. Speedy Hire Plc. summary financials
23. A-Plant Hire Company summary financials
24. HSS Hire Service Group Limited summary financials
25. Brandon Hire Limited summary financials
26. Hire Station Limited summary financials
27. UK GDP in current prices, inflation (GDP deflator) and real GDP / % annual changes. Historical and forecast
28. UK Consumer Price Index and GDP deflator / % annual change. Historical and 29. OBR Autumn 2011 forecast
30. UK employment / annual % change
31. UK construction spending: historical and forecast / £bn.
32. Total Expenses of UK Oil Exploration / £bn
33. Forecast market size and growth / £m
The tool hire market includes hand tools, such as drills welders or sanders, as well as smaller equipment, such as access equipment, coolers, heaters and pumps, which can be carried out of a hire shop and loaded into a car or van.
The industry has developed to meet the needs of user to have occasional or one-off access to a very broad range of equipment.
The main benefits of hiring versus owning the equipment include:
– High levels of availability of the latest equipment at the right location and in good working order.
– Freeing-up capital.
– Outsourcing costs of ownership – including repair and maintenance, equipment testing, storage and inventory management – as well as any liabilities.
– Simplifying charging of tools costs to specific jobs.
Hire companies generally serve both the short-term hire segment typically (3-12 day hire) and the leasing segment (focused on larger contracts, with 3-6 month periods being typical).
Market growth and drivers
The market is of the order of £1bn in size. Prior to the onset of recession in 2008, the industry enjoyed a combination of high growth and attractive margins. The market grew as penetration increased with new customers adopting it, existing customers using it more and the hire range and service offer extended to new areas.
The construction industry, its traditional core market, turned down in 2009 and other sectors, such as DIY and local builders, experienced difficulties as the slowdown in the housing market led to far less of the home improvement activity traditionally carried our following a move.
Following this tool hire revenues decreased and the set of leading companies became loss-making.
Tool hire companies responded to this by shrinking costs to match lower revenues by reducing both headcount levels and hire fleet sizes and focusing on revenue opportunities such as:
– More resilient areas of construction, such as infrastructure spending where the government has a long pipeline of major projects.
– Other sectors with more stable demand, such as manufacturing, maintenance services and utilities.
– Value added services.
– Overseas markets, such as the Middle East, where there remains a buoyant construction market and tool hire is less mature.
The market is served by a series of specialist operators, such as Speedy Hire, A-Plant (Ashtead), HSS Hire, Brandon Hire and Hire Station, as well as several competitors in adjacent markets – such as builders merchants and plant hire – which also have tool hire operations.
The tool hire market remains below the levels reached in 2007-08.
Ongoing weakness in both the construction sector and the economy as a whole suggests that recovery is not likely before 2014.