This time last year we were wondering if the UK plant hire industry had caught a cold – its previously robust performance looked decidedly off-colour.
Now it seems the sector has caught more than just a sniffle – flu, perhaps – 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 £2.8bn from £2.9bn last year.
Worse still, profitability has declined markedly. Overall pre-tax profits are down 23.6%, from £203.4m last year to £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’t made a profit since 2013 and its losses, during the difficult 12 months to December 2020, deepened significantly, from £5.8m in the red in 2019 to £26.3m last year. The impact of Covid-19 also resulted in significant reductions in revenue – down 18% to £269.9m.
Chief executive Steve Ashmore said: “During 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’ 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 £53m capital raise, further strengthening our balance sheet.”
The business, he added, is “in great shape to deliver on our strategy and our performance framework”.
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 “materially and adversely” impacted, particularly during the second quarter of 2020. Turnover was down 11% to £120m in the year to 31st December 2020 and 2019’s £8.8m profit became a £3.4m pre-tax loss.
In the year to 25th September 2020 Ainscough Crane Hire turned over £74.5m and made an operating loss of £7.9m. Pre-tax loss was £7.5m and total net assets decreased to £49.4m (2019: £79.6m).
But in the 71 weeks to September 2019, the company had turned over £123m and made a pre-tax profit of £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: “The company’s 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’s ‘build, build, build’ strategy,” it said.
AFI-Uplift saw turnover fall by 34% to £37m in 2020 (2019: £56.4m) and its 2019 pre-tax loss of £2m increased to £5.7m. However, the company says it is taking a positive long-term view: “Rather 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,” it says.
One of the unfortunate consequences of this re-engineering was a significant number of job losses across the company.
With Covid-19 rampaging across the globe, you’d probably expect everybody to feel the chill. You’d 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 – formerly A-Plant, of course – 2020’s Covid-19 outbreak proved a financial blessing when it was called on to help with emergency medical facilities.
Annual results from Sunbelt’s 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 £468.2m in 2019/20 to £635.1m in 2020/21. Pre-tax profit grew by 67.3%, from £36.4m to £60.9m.
The company said that the results “reflect 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”.
Sunbelt UK earned £184m on Covid response work during the year, of which £74m was made in the fourth quarter (February-April) when the vaccination programme was ramping up.
Ashtead chief executive Brendan Horgan said: “We 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.”
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’t 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 – 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.