CITY
NEWS continued
Since July 2008 the company’s cost base has been reduced from a £464m run rate to £348.6m currently. Steve Corcoran states that some of this reduction can be explained by lower revenue, but over £80m has been achieved through specific management actions. One of the main features has been the establishment of a Group Shared Services Centre, which has replaced the network of regional offices.
In conjunction with this, the ‘One Speedy’ programme has been implemented and is said to be producing benefits for both the business and its customers. These changes mean that the only analysis of revenues and operating profit is between ‘UK & Ireland Asset Services’ and ‘International & Advisory Services’ with the latter, still in almost embryonic stages over the past accounting year, contributing £3.7m to revenues and £0.5m to operating profits. Speedy has declared its aim is to be “an international services provider”.
At present the international business is focused on Speedy’s five year agreement with Al Futtaim Carillion, which is currently delivering an annualised turnover of £10m; Speedy describes its longer term aim as the establishment of “full outsource” model with Speedy providing, alongside its traditional hire offering, complementary services such as “asset management, site support services and logistics control”. Once this is fully established, Speedy envisages extending it to other selected customers across the Middle East and elsewhere.
The other new operation ‘Branded and Advisory Services’, which currently has an annualised turnover of £2m, seeks “to leverage the Speedy brand by building broader and deeper relationships” with customers, through the provision of consultancy and training services. The range of services are initially being offered to the UK construction market, but will later be expanded to other sectors and geographies. Thus Speedy is setting itself some ambitious long term goals but, in the immediate future, it still has to grapple with how to grow its core business against the UK’s continuing economic problems.
SURPRISE HEWDEN PURCHASER
While there had been much speculation about who would actually buy Hewden, it is probably fair to say that the eventual purchaser came as something of a surprise to most in the industry as Sun European Partners LLP was not the private equity name rumoured to be ‘in the frame’. The European adviser to the US-based Sun Capital Partners has bought the hirer for gross proceeds of £110.2m (comprising cash of £90.2m, a £20m interest bearing 5-year loan note and a 5% equity warrant subject to certain conditions being met). Mike Waites, Finning President and Chief Executive commented that “owning a large, short-term rental business operating separately from our UK dealership does not align with our strategic objectives”. Many wonder why Finning thought it would ever do so.
The North American model of manufacturers owning hirers has not been accepted in the UK, where hire companies jealously guard their independence from manufacturers. So Hewden has passed from one North American owner to another. Will the industry see any difference? Sun’s objective must be to bring Hewden, which incurred a £25.7m operating loss last year on a 31% decline in revenues, back to profitability.
The company remains one of the largest players in the hire industry, with probably still the widest plant offering. Properly managed its fortunes should revive with those of the industry as a whole. Clearly Sun’s objectives must be either to eventually sell a revived Hewden in its entirety or as separate specialist businesses, or to float it, once it has re-established a record of profitability. Nevertheless a full recovery looks some way off and many doubt that Hewden will ever reclaim the exceptionally high status it once enjoyed.
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