This time last year we were wondering if the UK plant hire industry had caught a cold 鈥� its previously robust performance looked decidedly off-colour.
Now it seems the sector has caught more than just a sniffle 鈥� flu, perhaps 鈥� but certainly in many cases a nasty dose of Covid-19. Total revenue for the top 20 firms according to their most recent figures has fallen by almost 3% to just over 拢2.8bn from 拢2.9bn last year.
This article was first published in the November 2021 issue of 今日看料 Magazine. Please sign up online聽
Worse still, profitability has declined markedly. Overall pre-tax profits are down 23.6%, from 拢203.4m last year to 拢155.3m this year.
Fourteen of our 20 leading hire companies registered a fall in turnover during their latest accounting period and of the 16 that made a pre-tax profit, nine saw their profit margins shrink.
Plant hirers generally enjoy better margins that most contractors, in whatever sector of the building or civil engineering industries. But this year, average pre-tax profit margins for the plant hire sector slipped from 7.1% last year to 5.5%.
Four companies this year recorded a loss on ordinary activities before tax: HSS Hire Group, Ainscough Crane Hire, Nationwide Platforms and AFI-Uplift.
HSS hasn鈥檛 made a profit since 2013 and its losses, during the difficult 12 months to December 2020, deepened significantly, from 拢5.8m in the red in 2019 to 拢26.3m last year. The impact of Covid-19 also resulted in significant reductions in revenue 鈥� down 18% to 拢269.9m.
Chief executive Steve Ashmore said: 鈥淒uring the course of the year, we took the decision to accelerate the implementation of our strategy. By increasing our focus on digital platforms, closing 134 of our branches, and partnering with builders鈥� merchants, we have been able to maintain national coverage while significantly reducing fixed costs. We are grateful for the overwhelming shareholder support for our strategy and in October successfully completed a 拢53m capital raise, further strengthening our balance sheet.鈥�
The business, he added, is 鈥渋n great shape to deliver on our strategy and our performance framework鈥�.
Unsurprisingly, many plant hirers reported that Covid-19 and the lockdown measures taken by the government had had a detrimental impact on their results.
Nationwide Access said that its trading activities were 鈥渕aterially and adversely鈥� impacted, particularly during the second quarter of 2020. Turnover was down 11% to 拢120m in the year to 31st December 2020 and 2019鈥檚 拢8.8m profit became a 拢3.4m pre-tax loss.
In the year to 25th September 2020 Ainscough Crane Hire turned over 拢74.5m and made an operating loss of 拢7.9m. Pre-tax loss was 拢7.5m and total net assets decreased to 拢49.4m (2019: 拢79.6m).
But in the 71 weeks to September 2019, the company had turned over 拢123m and made a pre-tax profit of 拢1.7m. (The company changed its financial year-end following a change of ownership in September 2019 when Oaktree Capital Management sold out to GSO Capital Partners.)
The company explains that, in the 12 months to September 2020, it incurred exceptional costs relating to refinancing, restructuring, implementation of a new management software system and a dilapidation provision against leasehold premises.
Nevertheless, despite a rocky ride through 2020, Ainscough is jauntily upbeat about its future prospects: 鈥淭he company鈥檚 end customer markets include infrastructure and construction and, as a result, the company expects an improvement in the market conditions as a result of the UK government鈥檚 鈥榖uild, build, build鈥� strategy,鈥� it said.
AFI-Uplift saw turnover fall by 34% to 拢37m in 2020 (2019: 拢56.4m) and its 2019 pre-tax loss of 拢2m increased to 拢5.7m. However, the company says it is taking a positive long-term view: 鈥淩ather than become defensive and live in hope that the industry will somehow revert back to the past, we chose to be more proactive and re-engineer large parts of our business in response to these challenges,鈥� it says.
One of the unfortunate consequences of this re-engineering was a significant number of job losses across the company.
This article was first published in the November 2021 issue of 今日看料 Magazine. Please sign up online聽
With Covid-19 rampaging across the globe, you鈥檇 probably expect everybody to feel the chill. You鈥檇 be wrong though. Not everybody has suffered. In fact, some have prospered and, in the UK plant-hire sector, none as much as the dominant player; the elephant in the room: Sunbelt Rentals.
For Sunbelt 鈥� formerly A-Plant, of course 鈥� 2020鈥檚 Covid-19 outbreak proved a financial blessing when it was called on to help with emergency medical facilities.
Annual results from Sunbelt鈥檚 parent company, Ashtead Group, reveal that the hire business almost doubled its UK profits in the year to 30th April 2021 and increased revenue by more than 35%.
Sunbelt Rentals has for many years been the largest UK plant and equipment hire operation by a huge margin. Last year that margin grew even larger. Turnover grew from 拢468.2m in 2019/20 to 拢635.1m in 2020/21. Pre-tax profit grew by 67.3%, from 拢36.4m to 拢60.9m.
The company said that the results 鈥渞eflect the higher level of ancillary and sales revenue associated with the work for the Department of Health, which accounted for [approximately] 29% of UK revenue in the year鈥�.
Sunbelt UK earned 拢184m on Covid response work during the year, of which 拢74m was made in the fourth quarter (February-April) when the vaccination programme was ramping up.
Ashtead chief executive Brendan Horgan said: 鈥淲e have shown that our business can perform in both good times and more challenging ones. We enter the new financial year with clear momentum [and] strong positions in all our markets.鈥�
Tellingly, Ashtead Group also announced that in future it will report its financial results in US dollars instead of pounds Sterling. The group, although massively dominant in the UK market, actually does more than 80% of its business in the US and derives around 90% of its profits there.
Sunbelt isn鈥檛 the only Top 20 UK hirer to report healthy results, however. Despite the generally gloomy picture emerging from our analysis of the figures, other firms also stand out, including P Flannery Plant Hire, L Lynch and Welsh firm Walters.
Both Lynch and Flannery saw turnover and pre-tax profit figures grow in their latest reporting periods, while Walters increased its profits despite a slight fall in revenues.
Significantly, though, the latest financial results for these companies all pre-date the outbreak of Covid-19 鈥� or at least the body-blow inflicted when the first lockdown was announced at the end of March 2020. Their next year figures will be more revealing.
Life is getting tougher for UK plant hirers. Next spring sees the end of the red diesel rebate and for many in the industry, costs will increase significantly as a result. More than one company on our table of Top 20 hirers alludes to the downward pressure on hire rates as a result of dwindling workloads.
So, 2020 was tough and 2021 not much better. The industry is now bracing itself for whatever shocks lie in store for 2022.
This article was first published in the November 2021 issue of 今日看料 Magazine. Please sign up online聽
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