Interrview: Hirepool's Brian Stephen

Established in 1955 with a branch network that operates from nationwide leased sites and offering a wide-ranging, modern hire fleet, Hirepool has evolved through a combination of acquisitions, geographical expansion and shrewd organic investment.

A merger with rival Hirequip in May 2013 resulted in a larger and broader product base and infrastructure and bolstered an already loyal customer following.

Together, the two combined are greater than the individual components, says Brian Stephen, new man at the helm.

“As a result we are in a pretty positive position. It means we have greater key growth opportunities. We’re in a stronger position to go forward with organic growth and product bolt-ons. We’re focussing on [still] higher performance,” Mr Stephen said.

Customers range from major construction and maintenance companies to commercial customers such as builders, plumbers and event companies, along with small tradesmen and DIY households.

Hirepool’s offering finds its natural markets across various industry sectors, stages of a project or an asset’s life cycle, from construction and operations to maintenance activities.

Mr Stephen says Hirepool has a long tradition of establishing robust customer relationships, with its key top ten customers having traded with the business for more than 15 years, on average.

Hiring everything from DIY drills to 45 t plus excavators, and events marquees to trucks and toilets, Hirepool has gained household name status in its close to 60 year history, a national footprint with 58 branches and a new boss.

The boss in question, Mr Stephen, is a dyed-in-the-wool career hire-man who speaks of Hirepool’s next stage of development with considerable relish. Previously CEO of Hirequip, and now Hirepool’s CEO overseeing the final stages of integration, Mr Stephen brings together management experience from two of New Zealand’s biggest hire outfits.

And the Hirequip acquisition brought with it in turn a legacy of trading at a ‘heavy end’ of the market, which is one of the many areas currently being considered and actively developed by Mr Stephen. “Complementary” and “synergy”, are words that crop up.

The dust was still settling from the Hirequip acquisition when in June, an unsuccessful Initial Public Offering (IPO), which had been slated to raise around NZ$300 million (€186 million), was widely reported to have lacked appeal by some institutional investors, who thought the proposed share price range of between NZ$1.10 (€0.68) and NZ$1.50 (€0.93) was too high.


Bullish


Nonetheless the company is in bullish mood, thanks to a strong and diverse New Zealand economy. And despite the let-down with regards to the IPO, owners of the equipment hire company, Next Capital and Macquarie, say they're comfortable retaining control of the business given the domestic construction industry’s favourable outlook.

Now based in Auckland, at the hub of the North Island’s construction plant community, Mr Stephen said he wasn't ruling out any opportunity to acquire “good fit” companies that can enhance Hirepool’s position.

The New Zealand market may be fragmented, with a number of relatively large and small competitors, including perhaps its biggest, Porter Hire and Kennards, so there are opportunities to be had; at the right time and the right price.

New Zealand’s construction industry is currently thriving, buoyed by economic and demographic growth, relative to a 4.6 million population.

This growth has spurred major infrastructure projects such as the NZ$1.4 billion (€870 million) Waterview project in Auckland City, which is one of the country's ‘Roads of National Significance’, or ‘RoNS’ major infrastructure projects which surround New Zealand’s five major population centres.

The idea is for the country's government to invest in transport infrastructure now to encourage future economic growth, rather than wait until the strain on the existing network becomes a handbrake on progress.

There is also much activity, of course, in Canterbury and specifically Christchurch, which was devastated by the earthquakes of 2010/11. The rebuild there is estimated to cost at least NZ$40 billion (€24.9 billion).

Hirepool has no fewer than eight branches within easy reach of the ‘quake stricken city, and the company offers most equipment, be it large and small, to the commercial contractor and domestic hirer, alike.
This commercial environment is one in which Mr Stephen is comfortable.

Beginning his career in the business in Dunedin on the south island, he worked his way north to Christchurch, where he remained until 2001, later relocating to Auckland in a management role for Ready Hire.

Later he joined Hirequip and later still was appointed to the position of COO at Hirepool, and subsequently its CEO in March of this year. He has overseen the integration of the two companies during this period.


Strength


Craigs Investment Partners, appointed to launch the IPO, drew particular attention to Hirepool’s strengths in the current New Zealand economy.

In its prospectus for the planned IPO it noted: “There are in particular large construction and infrastructure projects, [which are drivers of] Hirepool’s performance. While the industry Hirepool operates in is cyclical, the New Zealand economy is currently experiencing a period of expansion."

It said factors influencing this expansion included national construction spend driven by large infrastructure projects as well as the Christchurch rebuild. In addition, it said increased residential building activity in Auckland, strong soft commodity export prices, increased net immigration and increasing consumer and business confidence were also driving growth. Construction businesses in New Zealand would agree.

Hirepool is keen to stress its disciplined ‘whole-of-life approach’ to fleet management, with capital expenditure managed to reflect activity levels of the fleet and the broader economy.

“Hirepool undertakes a regular review of fleet requirements based on a range of key factors,” says Mr Stephen. “These include the performance of the fleet, customer demand, procurement and maintenance costs and estimated remaining useful life.”

The merger of Hirepool and Hirequip created surplus fleet capacity. Craigs says this has enabled Hirepool to optimise the combined fleet base via targeted asset divestments, allowing management to reduce capital.

So, how has this impacted on integration of the two companies? Mr Stephen said, “The integration and consolidation of the two companies is pretty much complete.” Some 90 sites were “consolidated” to the present number.

The company now employs some 600 full time employees, which swells during the New Zealand summer months of October to May due to the seasonal nature of the construction industry.


Rebuilding


With average growth in the economy of 2.7% projected to be 3.6% by March 2015, New Zealand is experiencing a growth driven by the Canterbury rebuild and a recovery in domestic demand.

Recovering world demand as well as elevated, commodity prices are expected to provide further assistance to export growth.

On the back of this growth, the next ten years should see an increase in infrastructure and commercial and residential building. The Canterbury rebuild and Auckland housing shortage will be the key drivers of this.

One of those key infrastructure projects is the Waterview project, a NZ$1.4 billion (€869 million) scheme to connect major routes to the north and south of New Zealand’s most populous city.

Now around half-way through its programme, it has already provided significant income for contractors, plant operators and hirers alike for some time. ‘Alice’, a tunnel boring machine (TBM) that has recently completed one of two, 2.4 km tunnels as part of the scheme, broke into daylight at the end of September.

The NZ Transport Agency’s Highways Manager for Auckland, Brett Gliddon, describes its significance. “It is a huge engineering feat for New Zealand, one that is attracting worldwide attention.”

It is one of many reasons why Mr Stephen continues to wear a smile. That, and having major investors in the form of Next Capital which, in in July 2006, invested AU$27 million (€18.6 million) to purchase 75% of Hirepool, and has deep enough pockets to keep investing. The total transaction value was AU$139 million (€95.7 million).


Bolt-on deals


In the ensuing eight years, there have been a number of successes, including several bolt-on accretive acquisitions across New Zealand, adding both geographic and product diversification.

Examples include broadening into trucks and commercial vehicle hire with the acquisition of Henderson Rentals, and into road barricade hire through Barricading Solutions. Hirepool has also undertaken a number of greenfield initiatives, including the establishment of Hirepool Energy Division, a product extension into power rental services.

Next Capital has also initiated internal control measures to reduce the cost base of the group, particularly around systems and extraction of synergies in capital procurement and rebranding Hirepool as New Zealand Rental Group (NZRG), reflecting the national presence and wide ranging products and services offered across the group as a whole.

Undoubtedly, Mr Stephen reflects, the purchase of Hirequip out of receivership has allowed Hirepool to target a range of growth opportunities nationwide. “The company’s New Zealand-wide footprint gives it the ability to provide a best in class fleet and the most experienced staff in the industry.”

He says the focus is very much on growing the business. “We continue to keep our eyes open to a number of opportunities where there are gaps in the New Zealand rental market and we intend to continue to provide a better offering to our customer base.”

Continuing its foray into building a bigger, modern fleet, the company last August announced one of the biggest single heavy equipment orders in the country for some time.

It involved taking delivery of 75 new Komatsu excavators, ranging in size from 1.8 t to major infrastructure scale 20 t machines. Part of a NZ$20 million (€12.4 million) budget approved by shareholders, they will be deployed across the national network of outlets.

Clearly delighted with the order, Mr Stephen said the investment underlined the commitment from the company’s major shareholders, Next Capital to continue supporting the business in its next stage of development.

Coincidentally, no stranger to natural events taking their toll on the nation’s infrastructure, New Zealand suffered major damage following heavy rains in the extreme north of the North Island, to which many of these machines were dispatched in order to help local authorities and contractors restoring roads ravaged by landslides and subsidence.

Mr Stephen is determined to capitalise on the opportunities provided by a relatively buoyant Australasian economy and the challenges faced on the South Island. Acquisitive, and not reactive, he says, he’s looking to improve margins in the coming period. “We’re in no hurry, but we are interested in adding high performing businesses to our portfolio, for the benefit of our customers,” he said.

That same ethic extends to day-to-day operational matters at the point of sale. “We’re constantly looking to improve the speed and efficiency of processing orders and the PoS. That includes a big commitment to training and the capacity to deal with a larger customer base.

This is an interview from the November/December issue of IRN. For the full feature, including extra images and box stories, please subscribe to the magazine: http://www.khl.com/subscriptions/