IRN-100: the latest survey reveals the extent of the rental slowdown.

Revenues at the world's top 100 rental companies fell by 15% last year, and the reduction was closer to 20% for the largest companies. Murray Pollok reports in the IRN-100 survey for the year 2009.

Nobody needs statistical proof to know that 2009 was a year to endure for the rental business worldwide, certainly not the 11000 employees we estimate have lost their jobs from IRN-100 companies since the start of last year. The top 100 are employing 7.5% fewer people on average than a year ago and that rises to 10% for the top 20.

Still, if it's statistical proof that you are after, then this year's IRN-100 provides it. As a group, the top 100 companies saw total rental revenues fall by 15%, although average declines at the top 10 companies were even higher at 20.3%. Similarly, the top 50 European companies saw revenues fall by 20%. (These percentage changes are ‘like-for-like', having been corrected for currency fluctuations.)

The greater fall among the larger rental companies in North America and Europe this year was reflected in last year's survey as well, when the top 10 reported a 6.5% reduction in 2008 revenues compared to a 3% revenue increase for the top 100 as a whole. When markets fall, it is often the larger renters who bear the brunt.

Top of the list remains United Rentals, although in terms of rental revenues Aggreko is not far behind. However, include United Rentals' other revenues, for sales of equipment for example, and its lead strengthens.

In a year in which there was almost no merger and acquisition activity many of the names at the top are the same as in previous years, although Aggreko's rise to number two place illustrates its ability to grow even as its North American and European markets come under pressure.

The top 50 European companies reported revenues of €8.8 billion - down 20% - with Loxam still well out in front, almost €200 million ahead of its nearest rival Ramirent. There are larger European- based companies than Loxam, such as Aggreko and Ashtead, but these firms generate the majority of their revenues outside Europe. This 20% fall compares pretty well with the 17.2% reduction for Europe reported by the ERA in its recently published IHS Global Insight rental market study.

Companies reporting rental revenue falls of more than 25% last year included Hertz, United Rentals, Speedy Hire, RSC, HUNE and Ramirent. (Spain's other big renter, GAM, fell by 24%). Japan's bigger rental companies also saw revenue falls, but generally in the 10-15% range. By our reckoning, only 14 of this year's top 100 companies actually saw revenue growth last year.

Who was growing? Well, top of the league was Mills Rental, which saw a 35% increase in 2009, while fellow Brazilian company Solaris was the third fastest mover with a 15% rise. Number two was MCC Plant Hire, which is based in South Africa and operates throughout Sub-Saharan Africa. MCC only rents larger equipment (10 t and above) and has in the past few years been renewing and expanding its fleet on the back of a steadily growing market.
Two European crane rental companies managed growth over 10% - Ainscough in the UK and Sarens of Belgium - and German access renter Mateco also managed to boost revenues last year. Wacker Neuson increases its German and eastern European rental business by 15% (largely by increasing volumes at its existing depots) and Fluor Corp's US-based rental subsidiary Ameco managed to expand revenues by around 6%. Touax, the French company that rents mobile accommodation units as well as sea containers and railcars, boosted its accommodation business by 6%.

This year sees several new entrants to the list. Hewden comes back under its own steam following its sale by Finning to a private equity company. That sale means that Finning drops out of the top 100 - its remaining rental businesses in Canada, Bolivia, Uruguay and Chile together accounted for €47 million in revenues last year, which is just below the €49 million drop off point.

Other new entrants are Mills and Solaris, both of which are benefitting from Brazil's continued growth. Godwin Pumps comes in for the first time with revenues of between €70 and €105 million at its US rental business - it should certainly have featured in the list in previous years - and Touax is in the list by virtue of its steadily growing temporary accommodation business.

Another new entrant is ELA Container, the German company that rents portable accommodation and storage throughout Europe. The company is expanding its geographical spread and, for example, is moving into the Middle East. Canadian company Simplex, meanwhile, returns to the list having dropped out last year.

In addition to these companies there were several others new to the IRN-100 list that were ‘bubbling under' the top 100, including German heavy earthmoving rental company Manfred Hoffmann Baumaschinen (turnover €48 million) and Netherlands company Workx Materieelverhuur (turnover €46 million). See Table 10 for the full list of ‘near miss' companies.

Capital expenditure is another prime indicator of business sentiment. It is no surprise that, in a year of cash generation and cuts to non-essential spending, gross capital expenditure on equipment fell by a dramatic 70%. The top 25 spenders in 2009 invested around €1.29 billion in 2009 compared to €4.3 billion in 2008, and the top 100 as a whole invested around €1.68 billion, down from €5.5 billion in the previous year.

Those that were spending either have enormous fleets that need some degree of refreshment whatever the business conditions (such as United Rentals, Speedy, Nishio Rent All)) or companies that specialise in very large equipment, where even modest investment in unit terms translates into big money (Sarens for cranes and Emeco for large earthmoving equipment).

Aggreko and MCC Plant Hire (South Africa) - numbers two and four in the top spending list, respectively - are probably among the very few companies in the top 100 who were investing for growth last year.

The ERA/IRN RentalTracker survey undertaken at the end of the first quarter of 2010 did not suggest that spending will increase significantly in 2010, with most renters waiting to see definite improvements in demand before splashing out again.

Last year was also notable for having almost no merger and acquisition activity. Hewden's sale by Finning - although something of a ‘one-off' case - is one of the first signs of a return to activity, as is the recent stock market flotation by Mills in Brazil. More depressingly, Neff Rental's recent entry into Chapter 11 protection in the US - even if ‘prearranged' - may well be the first of several such restructurings that we see.

So the IRN-100 list for 2009 spells out in rather clinical detail the impact of the recession on the rental market. 2010 is likely to be a year of consolidation, with renters hoping to get back to profitability and readying themselves for a return to growth. Let's hope it comes sooner rather than later.

Notes

1) Rankings are based on rental revenues for 2009 (or the most recent financial year) and include sales of used fleet and consumables/contractor supplies. Where known, sales of new equipment have been excluded from the survey.

2) Figures denoted (Est) have been estimated by IRN. The figures denoted (1) are taken, with thanks, from the annual RER-100 survey produced by US-magazine RER (Rental Equipment Register). We also used the RentalInsight newsletter produced by Dan Kaplan and Yengst Associates for some US figures.

3) All revenues have been converted into € using exchange rates as at 31/12/09, as follows (exchange rates used in last year's survey are given in brackets):

€1.00 = US$1.43 (1.39)
= £0.89 (0.95)
= A$1.60 (1.99)
= C$1.50 (1.70)
= Y133 (126)
= SA Rand 10.6 (13.0)
= SKr10.26 (11.0)
= S$2.0 (2.0)
= NOK 8.30 (9.71)

Thank you

IRN would like to thank all those companies and individuals who contributed information to the survey. If you have comments on the list, or would like to be included next year, please contact the editor. Tel: +44 (0)1505 850 043; E-mail: Murray.Pollok@khl.com