This has been a mammoth year of expansion for Hireco, but it isn’t only the trailer leasing business that’s on the up
The rental business is not an easy one. Big overheads, narrow margins and the need for volume have caused some high-profile collapses and acquisitions since the start of this year alone.
So it would be fair to say that a business that has quadrupled the size of its fleet in little more than a decade is bucking the trend somewhat, especially when a quarter of that growth has happened in 2018. Such expansion has rendered Hireco the UK’s biggest buyer of new fleet trailers, with an average asset age of less than three years old.
Founded in Ireland in the 1970s, the contract hire specialist first established itself in the UK in the late 1990s and has grown rapidly during the past two decades, the latter half in particular, as sales director Tim Gibson explains. “In 2007, we were a business running around 1,500 trailers in the UK. Today, we’re running 6,000 and our revenue has spiked.”
He attributes the company’s growth, in part, to buying and selling trailers at a faster rate than the industry norm, keeping the average age as low as possible in an effort to minimise age-related issues.
“One of our USPs behind the scenes is that we’re turning the equipment over quite quickly. Historically, trailer companies have kept their kit for 15 years and at some point during that time it had given them a problem. We are looking to change everything at around five to seven years and our average age profile is around two-and-a-half years old. We might be at the table each year to buy 1,500 bits of kit, but we’re probably selling 700 or 800, so it’s quite an aggressive business plan.”
The firm supplies around 70% of its trailers to the UK’s top 100 transport companies, according to Gibson, while the remaining 30% go to mid-sized hauliers. Average hire periods are 16 months, and sub-three-year leases are not uncommon, as they typically run in tandem with the length of the leaser’s own contracts.
“With your big PLCs – your DHLs and people like that – everything they operate is rental or leased. They might get a three-year contract – say from Nestlé or someone – so investing in 100 trailers for three years, to a bespoke spec, is probably not worthwhile. Instead, they look to outsource.
“Or they might get that deal and it might only be a rolling year or something, so again they’re dipping into the rental market. If everyone had 10-year deals with their customers it would weaken the rental players, but obviously the real world sinks in and they don’t – and it’s where we score a lot. Fixing maintenance and other costs means that at least people can budget going forward.”
Hitting the big time
Supplying trailers to the country’s top 100 transport companies is more complex than leasing to smaller businesses. Where Hireco has, over time, moved predominantly to the former, it has had to adapt its operations from straightforward leasing to becoming far more ensconced in the haulage business.
“The customers we’re dealing with have changed dramatically,” says Gibson. “We’re probably dealing with tier-one customers, and with that comes a different approach. It’s more like a partnership, and involves compliance, wrapping yourself around the customer and growing with the customer. It becomes a very focused sort of business.”
Gibson estimates the firm has already reached its typical annual purchase rate of 1,500 trailers, including 1,200 from SDC and others sourced from Dennison, Schmitz, Krone, Lawrence David, Tiger and Gray & Adams, and is continuing to place orders to meet an increasing demand.
“We’ve had a big year this year and it’s still showing no signs of letting up. Trailer build-wise, we’re into February/March 2019 already; that maps out the future to some degree and it’s quite nice.”
Among the new business Hireco has picked up in 2018 is United Biscuits, which now trades under its parent group’s name of Pladis. It won a contract to supply the snack giant with 60 trailers on a long-term lease in February.
“We are at a stage where it’s snowballing,” says Gibson of the increasing new business. “By association, we’re getting people saying ‘we ought to be dealing with you’. We’ve worked hard to get to that sort of level. We’ve never previously had it where people have been tapping on our shoulders and saying ‘we’re interested in talking to you’.”
On the margins
Even though the company is on the up, Gibson acknowledges that the trailer contract hire industry is not easy pickings. “It’s a tough marketplace we’re dealing in. We’re all in a marginal industry, and a lot of our customers are making [margins of] 2% to 3%, so that’s difficult. It’s a volume game as well, so people who haven’t got the volume can be crushed quite easily – so it [the industry] is just a difficult one.”
As successful as its core business is, Hireco is also launching a series of new, supplementary initiatives. It officially opened a new 5-acre truck park in the DP World London Gateway at the end of August to address what it described as “a chronic shortage of parking in the surrounding area” (see box).
The firm’s proximity to DP World – its Essex head office is also located in Stanford-le-Hope – has also allowed it to offer maintenance and repair services to customers stopping at the site. Clients with trailers in need of TLC can swing by its HQ which is “five minutes down the road” and have any issues sorted while they wait. For more severe problems, it is able to swap damaged trailers for fully functional ones, availability permitting. The idea is that customers can leave defective trailers with the company for repair, depart with a temporary replacement, then swap back to the original on their next trip to the port.
Commenting on the move, Hireco MD James Smith said, “[We are] aiming to provide customers with a complete one-stop shop. This will include tyre replacement, fridge services, maintenance and repairs, truck and trailer hire and fast-moving replacement parts. Our aim is to keep users of the port moving, so maximising uptime will be key. Our clients won’t have to travel unnecessary mileage to keep their assets operational and legal. Therefore, this will be a huge cost saving and benefit for all port users.”
On the cosmetic side of things, the firm is also endeavouring to establish a stronger image by increasing the branding across its subsidiaries. In short, the company is in the process of issuing all its subdivisions – Serviceco, Hireco Trailer Sales, Hireco NI, Hireco Dublin, Hireco Truck Park etc – with consistent logos and imaging, the idea being that each division displays the same uniform identity, regardless of where it’s based or the nature of the service. In a similar vein, the company also made its first appearance at the CV Show this year and is planning a second outing next year, while it’s also in the process of applying for membership of the British Vehicle Rental and Leasing Association.
Though it has traditionally specialised in trailer rental, the company’s final new foray is a move into truck contract hire. Gibson was unable to give too much away when quizzed by CM, but he did tell us that Hireco was on the cusp of branching out into vehicle leasing and that its plans were not small.
“On the truck side, we’re looking at entering the marketplace really as a volume player which, from our understanding, is the key to it. Again, it’s a marginal business, but if you can make the volume work we believe we can do something there. It’s a pool that probably not many people fish in, and it’s historically been dominated by the big players.”
Hireco’s 5-acre truck park is open 24 hours and has 170 spaces available on both an ad-hoc and contract-hire basis. Those who plump for the latter will have payments processed automatically via an ANPR system, which will bill account holders for the exact amount of time their vehicles remain on the premises, while the former simply pay on exit. Costs are £2 per hour for the first five hours, while six to 24-hour periods are charged at a flat rate of £24.
The move is primarily a reaction to both anecdotal reports and a government survey published in May this year, which shed light on the lack of dedicated, off-highway spaces available throughout the country. The study found that, theoretically, 3,658 truck drivers have no other option than to park in off-site spaces, such as lay-bys and industrial estates every night of the year, while Hireco believes hotspots in Essex and Kent are particularly badly affected.
In addition to creating more spaces, the company is also attempting to brush up the image of truck stops with the new park. Amenities include male, female and disabled toilets, a restaurant – which is “not the standard greasy spoon” – and AdBlue and tyre pressure top-up facilities.