BM Location's Thierry Robert explains the company's strategy.

19 June 2008

Thierry Robert, managing director of BM Location in France.

Thierry Robert, managing director of BM Location in France.

It is a paradox that Bergerat Monnoyeur Location (BM Loc), the rental business run by French Caterpillar dealer Bergerat Monnoyeur, is becoming more like an independent rental service company even as it extends its operational business links to its dealership parent.

The independence has come because the company has proven itself financially: it is making profits, which is a change from the situation in the difficult early years of the decade. The result is an expansion that started last year with the addition of 10 new depots and has accelerated this year with two acquisitions - Relmat and Cheraki - that have boosted the depot network from 80 to 105 branches.

The confidence is further illustrated by the company's plans to considerably expand its ‘allied product' offering beyond the Caterpillar-based earthmoving and roadbuilding machines that currently dominate the fleet (representing 60% by value), as well as its initiatives in other countries including Poland and Romania (see box story).

Yet, BM Location is, if anything, increasing its links to the dealership. Last year BM Loc starting selling Cat equipment to its customers - a move that exploits the rental company's network and relationships with small and mid-sized local contractors. Thierry Robert, BM Loc's managing director, meeting IRN in Monnoyeur's head office in the St Denis area of northern Paris, says the company is also thinking about adding longer term rentals to its operations, acting "as a bridge between the dealer and us".

But that getting ahead of the story: the key thing for Bergerat Monnoyeur and BM Loc is that it is in a position to grow. Alain Rosaz, managing director of the Cat dealership business within the Monnoyeur Group and a member of its executive board, puts the current situation in context; "BM Location has not always been profitable. In the beginning we had to learn, and we made some mistakes. 2001/2 was a bad time, but it's over now, and we have been able to build a very profitable rental business."

Part of the learning process was about finding the right relationship between the Cat dealer and the rental business. Whatever was done in the past - and Mr Rosaz does not want to go into details on "mistakes" - he says the two are working well together, and with Caterpillar; "We are focusing on the profitability of the rental business. Don't imagine that we would put any kind of machine [in to the rental fleet] - they are not pushing the rental business to buy 200 more Cat machines...They buy what they need. They are free - it depends on the network, on the business plan."

How is it using its freedom? Well, the focus, says Thierry Robert, is to continue to grow the business through expansion of the fleet, greenfield openings and selective acquisitions. He says regional rental companies with typically 10 branches will be the key targets - like Relmat and Cheraki - and the ultimate aim is to have a national network of between 150 and 200 locations.

"We still want to grow in France", says Alain Rosaz, "With the two acquisitions this year our network starts to be good, but there are still places to fill. We need to develop in the east of France and we are looking for opportunities."

A major initiative this year, however, is to expand the company's product offering, with a focus on non-Cat allied products targeted at general contractors and builders under a new ‘Pack Batiment' programme.

The plan is to add smaller tools, generators, aerial platforms and small rough terrain forklifts to around 25 BM Loc stores this year, with more to follow depending on progress.

Mr Robert says the fleet sizes at these trial stores will be increased by 30%, "So it will have a real impact...Rental is a local business: we are sure we can reach building construction customers close to our sites", he says. As part of the planned investment, BM Loc will double its aerial platform fleet by adding around 150 units this year, mainly JLG and Genie machines.

He says the aim is to generate a return on investment on this new equipment of between 45 and 50%, and he hopes the diversification of the fleet to some smaller equipment will also help increase the group's average time utilisation, which is currently in the 43-50% range. Mr Robert wants that to be nearer 60%.

This is where we come back to the other initiatives, such as the long term rentals plan. "Most rental companies stop at one year, but we are thinking about longer, one or two years. It could be a bridge between the dealer and us", says Mr Robert, who adds that these deals could well offer a buy option at the end of the rental. (The main Cat dealership already has its own long-term rental operation for machines in the 15 to 40 t range.)

Also on the cards is an extension upwards in the size of the machines in the BM Loc fleet. Mr Robert says there is a good level of demand for rental of excavators up to 15 or 20 t, and it could be that the current upper limit of 12 t is raised.

There are further synergies with the dealership as well. "For six months we have been selling Cat machines through the rental network...it was an opportunity", says Mr Robert, "It's difficult to have the same channel for all customers. The rental network is a nice tool for sales." So far this has been a very small business - just 25 to 30 machines - but he thinks it can be a lot more; "We feel customers are looking for a lot of services from us."

The current BM Loc network also shares around five locations with its sister Cat dealership, and there are opportunities here, too, for synergies where both the rental company and the dealership need a new location. For example, last August the company moved into a new, shared depot in Rouen, although with separate offices and workshops.

The important thing with these joint depots is that they must satisfy the location criteria for the rental depot, says Sophie Hulin, BM Loc's marketing manager, which means visible, close to where its customers are and near a city.

BM Loc is a Cat Rental Store, of course, and Mr Robert also talks about the potential for cooperation between the different European Cat Rental Store operations, companies like Hewden and MVS Zeppelin, in dealing with large contractors who are working in more than one European country.

"We will for sure do it", he says. "It's really a differentiator...we can be a pan-European network, and offer services for the customers who work in Spain and France, for example. The door will open faster with these customers...I hope that we can offer solutions by next year."

The target for this year is to grow the BM Loc revenues from last year's €80 million to €125-130 million this year, an increase that will reflect the two acquisitions as well as like-for-like rises.

But the growth is about profit, not about league tables. "Rental is a development issue for Monnoyeur", says Alain Rosaz, "I would say we don't care if we are number 1, 2 or 3 - we are not running in that race - we just want a good network, and to be present."

For Thierry Robert, who spent 10 years in the dealership before entering the BM Loc rental business in 2003, it has become more than just a job; "With sales", he says, "there is a success every week. With rental, it's every hour."

=== BOX STORY ===
Outside France

Bergerat Monnoyeur is Caterpillar dealer in Belgium, Poland, Romania and Algeria in addition to France, so it is no surprise that rental is on the agenda in these territories as well.

The company already has rental locations in Belgium, and opened in February its first rental depot in Poland, on the western side of Warsaw. BM has been selling Cat machines in Poland for over 10 years, "So we know the culture of the country, and many Polish people know Monnoyeur", says BM Loc's Thierry Robert.

The dept is starting with €1.5 million worth of equipment - 60-70% Cat by value - and it will be almost all new machines; "Maybe we won't be the cheapest in Poland, but we will have good machines...Poland is ready for new equipment."

There is a plan for a second depot in Warsaw, and for five additional branches in the country by 2009, with the possibility of using existing BM dealer locations.

In Romania, meanwhile, the first depot will open in July at an existing Bergerat Monnoyeur depot in Bucharest. The fleet will open with some large machines, up to 25 or 30 t and including dozers; "because there is a real demand for them. Rental is still new in Romania. We will open the first one and see how it goes", says Mr Robert.

As far as Algeria goes, rental is also in mind, but it is not a priority; "We're waiting, we'll see", says Mr Robert.

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