Boels Rental recently grew to double its size when it acquired Finland-based Cramo. The Dutch generalist rental company’s revenues went from €579 million in 2018 to €1.3 billion in 2019. This makes it the second largest rental company in Europe, after Loxam, and put it in 8th position in this year’s IRN100 listing of the world’s largest rental companies – published in the June issue of International Rental News (IRN).
As a result, Boels went from having 425 depots in 12 European countries, to having 750 depots across 17 European countries. So the company has experienced directly how the impact of the Covid-19 pandemic has varied across the continent.
Speaking to IRN, Pierre Boels, President of the European Rental Association (ERA) and CEO of Boels Rental, says, “All over Europe, here and there, we closed depots because there were not enough employees.”
This was due to employees calling in sick, not necessarily because they had the Covid-19 virus but because they feared they might have it or could contract it and pass it on.
As a result, taking the company’s home market as an example, five of Boels’ 120 depots in the Netherlands were closed due to staff shortages.
“That’s not dramatic, but still it’s closing and it’s totally against my philosophy to close depots,” says Boels.
Not all countries got off so lightly though, since some governments imposed severe lockdown measures; “We were actually very lucky that we were mainly in countries where governments decided not to have such a hard lockdown as in France and Spain,” says Boels.
“For example, in Germany, the Netherlands and the Nordics, there were no problems. But in Austria we had to close, and in Luxembourg, Italy and Belgium. Boels is B2B and B2C, and suddenly consumers were not allowed to leave their houses – such as in the Czech Republic, Austria and Belgium.”
Overall, out of Boels’ 750 depots, about 10% were shut during the peak of the crisis.
They generally did not remain closed for long though; “Our employees and management wanted to open as quickly as possible,” says Boels, “So as soon as it was possible to open, we opened. Some were closed for a week, some were closed for six weeks – that was the maximum.”
“It depended on whether the customers were coming back; if your construction sites were not opening, like in Belgium, you didn’t need all the depots.”
Health and safety measures
New health and safety measures were implemented across Boels’ network; “I am really proud of my staff,” Boels says. “They handled this Covid-19 crisis very seriously. In the depots, measures were taken, like social distancing, extra cleaning and disinfecting of equipment, and people who could work from their homes stayed at home.”
Depots have been adapted individually depending on the site; small city depots, for instance, have different limitations to large depots.
“We have a lot of equipment that can help, such as fencing,” says Boels. “We provided all the necessary tools and instructions.”
This included the creation and distribution of an instructional video, in which one depot was used as an example to demonstrate the various solutions that could be used in different depots.
One particular challenge that a lot of rental companies faced during the peak of the crisis was the cancellation of rental contracts because construction sites were being closed down. Boels responded to this with something the company calls a ‘rental stop’.
“It’s already something we do with customers… when they have some specialised equipment,” Boels says. “And in this instance, it was so clear that it was nothing they could manage; they were forced to close down their sites.”
He adds, “We are partners with our customers, and some of them were forced to stop their activities, so we accepted there would be a delay.”
“It lasted for a maximum of four weeks. But you of course feel that in your rental revenues.”
Something else highlighted by Boels is the fact that the pandemic has had the effect of accelerating the adoption of digital processes.
“More digitalised companies have been better able to cope with the crisis, being able to switch over to digital processes more easily,” he says.
During the second quarter of the year, Boels saw its website visits grow by 38% and online reservations increase by 59%; “Luckily we were ready for this,” says Boels, “Our online capabilities were perfectly in order. We already had a lot of customers who ordered equipment online, and that was much bigger now.”
The rental sector is of course closely tied to the construction industry, so looking ahead, Boels says, “The most important question is how much the construction market will recover over the next 12 to 18 months.”
He adds that there is great uncertainty, and very few new projects are being launched.
“Personally, I have experienced multiple recessions,” says Boels. “However, the current recession is very different from what I have experienced: it is global and everywhere at the same time.
“During other downturns, we could balance our profit and loss between countries. Currently, all countries are hit at the same time. That is unprecedented.”
So while the Cramo acquisition would have afforded Boels the benefit of geographical spread in a normal recession, that advantage is negated in this situation. While the Nordic countries might have suffered less during the peak of the crisis, all countries will now be simultaneously impacted by lower market confidence.
“When people are not confident,” says Boels, “they don’t build new offices and new houses. So there will be a recession and the recession will be everywhere.”
However, he adds, “Very often you see stimulation projects organised by governments. You see that now in the UK – they want to put several billion pounds into infrastructure. In the Netherlands, every time there is a recession, they open the ‘golden case’ and put money into infrastructure. That will not happen in Italy. But I think as Boels we are active in very strong countries that have the capacity to get stimulation projects in construction.”
On another positive note, Boels emphasises that recessions tend to have the effect of boosting rental penetration; “After each recession, we see a growing number of rented versus owned fleet. Rental will help contractors manage the uncertainties caused by this crisis.”
He adds, “Those construction companies who already outsourced equipment had very little burden of owning equipment during the lockdown.”
In the meantime, though, Boels has cut its planned capex for 2020 by 50%.
“I see the biggest risk in the fourth quarter of 2020,” Boels says. “Will there be enough new construction projects?”
“When I look at my company now, we are hit hard because of our event business, where Boels was very active, but revenues have recovered in a lot of countries – it’s not strong growth anymore but also not down dramatically. But the risk is now how long will the recession take?”
When growth is weak, there is no need to invest in new equipment, he says. And manufacturers who sell a lot to rental companies should be prepared for this; “When you are relying on the rental sector,” Boels says, “like in the access industry, then you know you have to have an organisation that can scale down factories.”
Boels also speaks of the Green Deal, which outlines the EU’s strategy to become a climate neutral continent by 2050, saying, “Despite the challenging circumstances, the pressing issue of climate change remains and will likely affect future business.”
He says, “The future of our industry may be much brighter than we think, because rental is an essential part of the green recovery.”
The need for the construction sector to reduce its CO2 emissions to meet the Green Deal’s targets, he says, is promising for rental because, in environmental terms, it often compares favourably with the ownership model.
Hybrid and electric
So this begs the question of how the Covid-19 crisis is affecting Boels’ investment plans for electric and hybrid equipment, which comes at a premium.
Boels believes it is entirely legislation-driven; “We see in a lot of countries – I see it in the Nordic countries, I see it in the Netherlands – where governments want all equipment on building sites to be electric. Otherwise they will not get a license.”
He adds, “When the rules come from Brussels, we accept that and put it into our government regulations. That’s the pressure.”
This can be advantageous for rental because construction companies become reluctant to invest in expensive equipment, especially when the regulations are subject to change.
“I don’t think rental companies are afraid of expensive stuff, but you want your money utilisation, your time utilisation,” Boels adds.
On the topic of legislation, the ERA recently supported CECE’s (Committee for European Construction Equipment) request to delay the Stage V transition deadlines in response to the Covid-19 pandemic. This, Boels says, is one example of how “the ERA stands up for rental companies but also, indirectly, for manufacturers.”
The ERA has also played an important role in keeping the industry abreast of developments throughout the crisis; “The ERA is able to inform its affiliated rental companies and national rental associations in a swift manner by its centralised approach, reaching around 5,000 rental companies throughout Europe,” Boels says.
Despite the pandemic, Boels and Cramo are still making good headway with the integration process.
“Initially, we thought the integration process would be heavily affected by Covid-19,” says Boels, “but it is taking place as we speak. It is a lot of work, but so far it’s running smoothly.”
He adds, “We have a lot of good managers joining us now, so that’s working.”
However, Boels expressed his frustration at not being able to meet people in person; “You want to ‘walk the floor and kick the tyres’, but that hasn’t been possible, and that’s really not nice.”
In terms of synergies, Boels will not share the estimated cost savings, but he says there would not need to be two head offices in the countries where the companies overlap – in Poland, the Czech Republic, Slovakia, Austria and Germany.
He adds, “There are synergies on IT systems, on marketing, on procurement, on overlapping support functions.
“In the Nordics, there are fewer synergies – that’s more best practices. Of course, there will be some procurement synergies and maybe some IT synergies there, but it’s not what we aim for immediately. We bought this company for the very long-term, so give us some time.”
Since Cramo has a strong presence in the Nordics, it will retain its name in those countries, but in markets where operations overlap, the Boels Rental brand will be adopted.
Boels says, “Cramo is very good at doing large projects, and Boels is very good at catering for smaller contractors and having a wider range of products and a wider range of customers. If we could learn from each other, that could make it a great company.”
As a result of the acquisition, Boels expects the combined company to become a leading player in 12 of the 17 countries of operation.
Aside from generally being a “good fit both strategically and culturally”, Boels highlights that the two companies have strong modular space businesses; “Boels is very big in site huts and Cramo is very big in site huts. There are a few major product lines for rental companies: access, earthmoving equipment and site huts. And both Boels and Cramo Germany, Cramo Nordics and Cramo Poland are very big in this product line.”
According to Boels, the combined company now has 650,000 items in its rental fleet and a wide product range.
Boels also has partnerships with DIY stores, including in the Nordic countries; “It’s a separate, niche business unit we have,” says Boels.
The company is still not present in some key markets, notably France and Spain. So what might the company’s future expansion plans be?
“We just did a very large acquisition and we doubled our size, so give me some time to make this a great success,” says Boels. “I said to myself this will be three years of exciting and hard work to make it a very great and successful merger, and in the meantime we will make our plans for the next five years. But at the moment, there are no plans to do anything else.”
Growth is in the DNA
However, he adds, “But you never know. It’s in the DNA of Boels that the company has to grow, and that can be in other markets or in more specialisation. It’s in our DNA, so somehow that will happen.”
Looking specifically at the UK, which Boels first entered in 2017 with the acquisition of tool rental firm Supply UK Group, Boels says, “I would love to make a success out of the Boels model in the biggest rental market in Europe, the UK. So we have a base now, we have a very good management team.”
He mentions that Asif Latief, who became Managing Director of the company’s UK operations in January 2020, is implementing some good initiatives.
Since its acquisition of Supply UK Group, Boels has subsequently bought Already Hire London in March 2018 and then Artisan Hire Centre and its sister company SAS in September 2018.
However, Boels says, “When I look at the UK, I don’t have the right feeling about whether the UK is doing well. How will Brexit help the UK have better economic growth than the rest of Europe? Growth of rental companies also has to come from economic growth.”
“So I can’t say I have big expansion plans for the UK at the moment.”
In the longer-term, though, this could be different; “The DNA of Boels is to grow, and our market share in the UK at the moment is too small.”
When asked whether Boels’ acquisition of Cramo might prompt other large mergers, Boels says, “There will always be consolidation. There are some rental companies who just want to grow, who want to consolidate and that will not stop.”
Though, the Covid-19 crisis might have put a hold on any such M&A discussions; “I think at the moment we have to worry about recession. Everybody’s a bit careful. But consolidation will happen again.”
Indeed, with bankruptcies and sell-offs likely to result from the pandemic, we could well see a spate of acquisitions in the medium- to long-term, so it will be interesting to see how the market evolves and how Boels changes with it.
Speaking during the Rental Awards and Market Update webinar held on 30 June and co-organised by IRN magazine and the European Rental Association (ERA), Pierre Boels explained how a recent ERA survey showed a distinct difference in how markets across Europe had been impacted by the Covid-19 pandemic.
Splitting Europe into four regions – Northern, Central and Southern Europe, and the UK – it is clear that the UK has been the hardest hit, with rental activity dropping by 40% compared to the previous year, and expected to be down 20-30% in the third quarter of 2020. As a result, UK respondents are expecting to cut 2020 investment by 40-70%.
Also badly affected is Southern Europe, where second quarter activity was down 20-40%, and third quarter activity is forecast to be 10-15% lower than the previous year. 2020 investment in this region is expected to be 40-50% lower than the year before.
Meanwhile, Central and Northern Europe have seen a relatively softer impact.
Rental activity in the second quarter was reported to be 10% lower than normal in Central Europe, and third quarter activity is expected to be just 5% below prior-year levels. Respondents from this region are, however, still expecting to cut investment by 20-50% this year.
Norther European respondents saw a 10% drop in activity in the first quarter, and are forecasting a 5-10% drop in the third quarter. Companies in the north are planning to reduce investment by just 10%.