Switched on: Kiloutou’s Xavier du Boÿs talks to IRN's Murray Pollok
31 January 2012
Kiloutou isn't just making acquisitions it's also engaged on at least three other significant initiatives. Murray Pollok met Xavier du Boÿs at the company's headquarters in Marcq-en-Barœul near Lille in northern France.
Someone has flicked the ‘on' switch at Kiloutou. In the space of 12 months, the French company has changed owner, made four acquisitions - including BM Location and Top'Loc - launched a major DIY ‘store-in-store' initiative, and started a rental ‘marketplace' offering everything from cars and vans to tools and excavators. It is also on the acquisition trail outside France for the first time.
Not content with having one growth strategy, Kiloutou appears to have four.
Xavier du Boÿs, Kiloutou's chairman and chief executive, manages to hide any signs of exhaustion as he hosts IRN's visit to the company's headquarters in Lille, northern France. In fact, he is the embodiment of calm as he explains the new initiatives, making each sound both necessary and somehow inevitable.
It is the online ‘marketplace' that seems to excite him the most, but it is fair to say that the industry at large will be rather more interested in the BM Location deal.
"It's very important", acknowledges Mr du Boÿs, "Kiloutou is not very strong in renting to civil works. Our market share in that sector is rather low, and BM is strong there. These kinds of clients represented a tenth of our business, but it is increasing, so clients were expecting more equipment.
"It's very important for French customers to have strong suppliers and partners. The market is very fragmented, which is not good for clients. They need strong partners offering new services, able to invest in IT and so on. They need Kiloutou everywhere in France."
Kiloutou is best known for its offering to building companies, tradesmen and individuals - the closest thing in France to a UK ‘tool hirer' like Speedy Hire or HSS, or Boels in the Netherlands. Its business with individuals or homeowners represent around 10% of revenues, compared to 20% ten years ago (when Kiloutou was a much smaller company).
The addition of BM Location is therefore a key shift in its profile. "We definitely want to stay as a leader for the building sector, but also become strong in civil works", says Mr du Boÿs, "It's very important to have different types of clients to use efficiently the same machines."
BM Location brings not just a new customer base and different equipment, but a depot and transport infrastructure suited to bigger machines. Kiloutou's fleet goes up to around 8 t, while BM Location has 20 t/40 t machines.
Kiloutou veteran Patrick Rybicki will become general manager of BM Location, helped by other Kiloutou management and existing BM Loc staff. The BM Loc brand will be retained for the time being, with "bridges built everywhere" between the two companies.
The deal - which does not include the use of the Cat Rental Store branding - is one of four the company has made in the last 12 months. Earlier this year it acquired access rental businesses Mediac'Up and also the access rental operation of SIME Location (a division of AltéAd). And shortly after it sealed BM Loc it announced another acquisition, of Top'Loc, a Lyon-based company with 18 depots and 120 employees.
In the French context, this can be seen as a response to the dominance of Loxam, which was reinforced recently by its acquisition of Locarest.
"Customers definitely need an alternative to Loxam", says Mr Du Boÿs, "If Loxam was alone, maybe it would be comfortable for them, but very bad for the industry. It needs competition - even for Loxam in the long term."
Loxam now has around 21% of the market, while Kiloutou will be more than 13%. "We wanted to get Locarest, we knew it was for sale", says Mr Du Boÿs, "But we did not buy BM Loc because Loxam bought Locarest. It was our strategy anyway."
BM Loc will also bring Kiloutou a lot of Caterpillar equipment, which makes up around half of the BM Loc fleet. "We will discover Cat and see how it looks", he says, "It's not cheap equipment, but if we get good value for money, then why not?"
The acquisitions have been made possible by Kiloutou's new private equity partners, PAI Partners, who acquired a majority shareholding last summer, replacing previous majority owner Sagard, also a private equity firm. Kiloutou's founder, Franky Mulliez, and Kiloutou's managers and employees remain as shareholders.
"We want to accelerate the growth with acquisitions", says Mr Du Boÿs, "With Sagard it was possible to make small acquisitions. [PAI] wants to accelerate development through acquisitions, through higher capital expenditure." He makes the point, though, that efforts to buy BM Loc were begun before the new owners arrived.
PAI Partners is also supporting Kiloutou in its moves outside France, another key strategy for the company. "We are doing many things at the same time, so it is hard to think about going international today, but it is in our plans", says Mr du Boÿs.
"We will be in one or two countries in the next few years...We have a deal with PAI. We need to be a success before launching many countries at the same time: one country first, others in the future."
The target countries have to be big enough to offer a real opportunity and also need to be mature equipment markets.
"It doesn't have to be close to France and it could be outside Europe. An opening will be next year . A bigger development will be in two years", says Mr du Boÿs, "It will certainly be an acquisition, but it could be a small acquisition. We are lucky to have shareholders who are able to support us. Financing will not be a problem."
Alongside the acquisitions and international strategies, Kiloutou has undertaken two other major initiatives this year, one of which, the new online rental ‘marketplace', is a particular enthusiasm of Mr du Boÿs.
The site - www.kiloutou.fr - offers 1500 products for rent, greatly expanding Kiloutou's own fleet offering. These products - available through agreements with 600 re-rental partners - include cars (with Europcar), 80 m aerial platforms, big excavators, large generators and more.
"If we want to promote the service everywhere in France, we need to have lots of partners. There are plenty of local partners who are simply not widely known."
The marketplace builds on the company's existing Kiloutou Global Service offering, which was targeted at major customers. Clients can now order online a wide package of equipment, with Kiloutou staff getting involved when orders require specialist knowledge.
"It's similar to Amazon. You know things are not supplied by Amazon, but you trust it because it's an Amazon partner", says Mr du Boÿs.
It is proving to be quite a big investment, especially in time, with around 15 to 20 dedicated staff. "It's going well - I'm very pleased with what's happening. It can be huge, or it could be small. Sometimes when you make investments you don't know what you will get for your money.
"If it's as good as I suspect, it will be a foundation for Kiloutou. If it's not so good, it's not terrible. It's a kind of bet."
The other start-up is a store-in-store operation established earlier this year with two partners in the DIY/builders merchant sector, Monsieur Bricolage and Bricorama. So far Kiloutou has 70 rental stations at these stores.
"We launched it earlier this year [in 2011]", says Mr du Boÿs, "It's going up, but it takes time. We provide equipment, training of DIY staff and maintenance". The product range currently covers around 100 tools and it is run on a revenue-share basis.
The plan is to more than double the network this year. " was the trial and a learning experience. Now we are ready to industrialise it." Monsieur Bricolage has around 455 stories in France and Bricorama has 150, which gives some indication of the growth potential.
"It is two different ways to address the customers", explains Mr du Boÿs, "but it will not change what we are doing with ‘consumers'. It will be a new service, not in competition with our branches."
There are other smaller developments as well, such as a move into training, particularly for powered access. France has a particular, rigorous approach to this, with courses often taking as long as three days. (In contrast, a typical IPAF training course will take a day).
Kiloutou has established its first few training centres and hopes to train around 1000 people at between 10 and 15 locations in 2012. "It will not make a huge turnover, but it is necessary", says Mr du Boÿs, "We don't believe that training today is always done properly - they prepare people for the exam. We want to do it in a way that trainees really learn something."
And in the background, organic growth continues. Kiloutou has opened as many as 30 new depots in a year and Mr du Boÿs says there will continue to be around 15 new openings each year. (In doing so, Kiloutou is paying homage to its 1980 origins, when four depots were opened on a single day in Lille.)
So, got all that? Acquisitions, online marketplace, training, depot openings, store-in-store operations and international expansion. Forgotten anything? Yes, actually. There are plans to expand the company's party and events business from the current single location in southern Paris to as many as six depots this year.
If he's not exhausted, then I am.
The Eurozone crisis has made budgeting difficult this year, particularly in assessing the appropriate levels of capital expenditure, says Xavier du Boÿs.
"It's a very hard time now", he says, "You listen to the media coverage, [but then] you see your own figures going well, and see that the order books of customers are quite good. For me, it's very difficult to know what will happen in 2012/13. For sure we need to reinvest, we need more machines. But how much? It's a hard question. We have decided and it will be at a reasonable level."
Whatever the business climate, Mr du Boÿs says Kiloutou has consistently outperformed the market; "We've increased market share for the last 10 years. During the crisis our increase was even bigger."
Sales in 2011 were around €330 million, up from €281 million in 2010, although that figure includes acquisitions. "Like-for-like it's more like a 10-15% increase", he says, "We increased investment in equipment, prices were slightly better and utilisation was a lot better."
This expansion has forced some management changes. For example, Olivier Colleau is now in charge of network operations, including sales and marketing. In past he was focused on strategy and development.
And Alain Loeb, chief financial officer, is taking on the additional roles of all support services, including human resources, equipment maintenance and used equipment sales.
Kiloutou believes that decision making should be devolved to the local level and staff are given the power to make decisions, and to make mistakes.
"We are confident of our people, and we give them power", says Xavier du Boÿs, "We give huge autonomy, even to young people. They are allowed to make mistakes. If you want people to take initiatives, and punish them when they make a mistake, then they won't take initiatives."
The flip side to this is the company's IT systems, which allow management to see exactly what is happening at regional and branch levels. "We can monitor activity. What's important is that we know what's happening, even if it is decentralised."
The devolving of decision-making is one aspect of Kiloutou's management approach. Another is its recognition of the needs of younger staff, who Mr du Boÿs says work in very particular ways; "Staff in their 20s are completely different. They are used to zipping from one thing to another, are very familiar with new technology, and their expectations are different.
"You have to teach them something new every day. Either you provide it, and get the best people, or you don't and they will go somewhere else. We spend a lot of energy trying to understand that. We spend a lot of energy on human resources in general. It works."