Onsite Rental Group in Australia wants to provide its customers with a real alternative to the country's dominant player, Coates Hire. The company's managing director, Mark Rich, talks to IRN Editor Murray Pollok.
For a country with a population of 22.7 million Australia has a massive rental market. Exclude crane rentals and you have an A$4 billion industry, which is about the same size as Germany's rental sector and only 40% smaller than the UK's.
Not only is it a big market, but it's also notable in that one company, Coates Hire, has a 25% share. The next largest general rentals player is Kennards Hire, with a much smaller 5% stake.
For Mark Rich, the recently appointed managing director of Onsite Rental Group, that spells opportunity; "Consolidation at the top has left a big gap in the market", he tells IRN, speaking on the phone from Onsite's head office in Sydney, "Customers are looking for an alternative."
Onsite is not alone in wanting to challenge Coates, but few have shown its willingness to grow quickly or its ability to fund that growth, primarily through its private equity owner, Next Capital.
At number three in Australia - IRN estimated its revenues at around A$150 million in the recent IRN100 survey - Onsite may be the latest obvious challenger to Coates, but it is certainly not a recent arrival. Its roots go back to the 90s when it was establishing itself as a force in powered access rentals.
Led by Trevor James - who retired as CEO earlier this year and is now a non-executive director - Onsite branched out far beyond its powered access origins, adding portable buildings, toilets, power and air.
Two recent acquisitions, however, have transformed it - that of WASP power rentals for A$40 million in August 2009, and Statewide Equipment for A$70 million last December. The latter has boosted its coverage in Western Australia and brought a wider product range, including earthmoving and compaction.
If Onsite seriously want to challenge Coates, then it will need to continue to expand, and by a lot.
"The strategy is around growing our product groups and geographic growth - we have a blueprint for the next three years", says Mr Rich, who has a 31 year career in equipment rental, including long spells with both Wreckair and Coates Hire and more recently with Onsite's sister company in New Zealand, Hirepool.
The aim is to expand its network of depots from the current 23 to around double that within three years, and to make sure that all of these locations provide the full product offering. The depots are all designated as ‘hubs', with no smaller satellite or ‘spoke' locations.
"The business has been very strong in access, portable buildings and power in the eastern parts of Australia", says Mr Rich, "Statewide has brought a broader range - we see ourselves filling the gaps across the country."
This will require a significant investment in fleet, not least in earthmoving and compaction equipment, which are new products to the company. He says Onsite will "more than double the size of the fleet [over the next three years]...I think it offers a good return on investment."
Spending will be across the board, including the core areas of access, power and portable buildings; "All three are very successful and offer a lot of growth opportunity. No one [product] stands out and we are very keen to continue to invest. They are the core part of the business, and it wasn't by accident."
It will look at opening depots in major capital cities and at regional natural resource centres, with Queensland, New South Wales and Victoria offering "significant opportunities to grow the business."
The focus will remain on business to business rentals - not including consumer or DIY rental like Kennards - and on ‘dry hire', or non-operated plant.
If growth is the hallmark of the strategy, the company will also aim to differentiate itself by focusing on specialist product groups. Despite the addition of earthmoving and compaction, which sees it stock pretty much the full range that a generalist rental company would have, Mr Rich says "we still see ourselves as a diversified specialist."
This means teams dedicated to each of the main product groups, including power, access, accommodation and toilets, events, fences and scaffolds.
Is this about getting higher prices for products usually rented under the generalist banner? It's more than that, he says; "With focused teams you just do it better - sales, operations, maintenance, service. Our crews are dedicated. Customers want to talk to someone who really understands their business."
Reinforcing this specialist approach are four operating brands, including WASP for power rentals, Superloo (portable toilets), Onsite Events, and FirstOn. The last of these is a service where Onsite helps contractors to set up a new site, providing accommodation, security, amenities and water and power services.
In Onsite's favour, of course, is a buoyant Australian economy. Mr Rich says it is clear that investment in mining and other natural resources is providing the engine for growth; "That leads into a lot of infrastructure and other projects - processing plants, refineries or something else, plus roads and rail. A lot of the activity we're enjoying is led off the back of resources and mining."
In addition, he says residential construction in Sydney, for example, is now starting to perform well. "The story is of very strong mining and resources, but the other segments are looking promising."
"The economy here is in very good shape. We came through the global financial crisis without going into recession. The government put steps in place to help us get through that difficult time - that worked very well."
Those stimulus programmes are coming to an end; "but now more private investment is kicking in. We're confident that the economic fundamentals are still in place", says Mark Rich, "We're actually looking at five years of growth. It's a good time to be in the rental industry now."
Of course, it's also a good time for Coates Hire, which has its own expansion plans, including €1 billion in fleet investment over the next three years. Onsite will need all the help it can get - including the tailwind of a buoyant economy - if it is going to give Coates a genuine run for its money.
New Zealand too
Onsite Rental Group has a sister company in New Zealand called Hirepool, both of which are majority owned by Australian private equity firm Next Capital. In fact, Next Capital invested in Hirepool in 2006, a year before it took its stake in Onsite.
Links between the two companies have been strengthened by the appointment in February this year of former Hirepool director Mark Rich as chief executive of Onsite. Mr Rich spent a year with Hirepool as executive director after a long career in Australia's rental sector with Wreckair and Coates Hire.
Mr Rich, who as managing director of the group also has responsibility for Hirepool, tells IRN that the New Zealand business has a 55 year history and is the "largest in the country by quite a margin", with around 50 branches.
"It has a really strong track record and continues to outperform the New Zealand economy and the hire market", he says.
The Australian and New Zealand businesses are starting to work closer together as well. The Christchurch earthquake in February this year is a good example of that, with Onsite shipping hundreds of portable toilets from Sydney to Hirepool in New Zealand to provide support.
Mr Rich has high hopes for the business; "Right now they're playing rugby [the interview took place during the Rugby World Cup], but we're looking forward to the next few years because there will be strong growth in New Zealand based on reconstruction in Christchurch."