The Bishop comments on activity in the Plant Hire Sector
On a sunny, although rather muddy day, Bishopsgate attended PlantWorx 2017, one of the UK’s largest plant equipment shows, for what was a fascinating day of boys and their toys.
The UK construction sector is seeing overall growth, even with the events over the last two years including the Brexit referendum. This is supported by recent data showing that the first quarter of 2017 has seen construction output being revised up from 0.2% to 1.1% and new orders up by 4.2% in the first quarter of 2017 versus the prior year.
However, the sector continues to face significant challenges from political uncertainty to delays on some large infrastructure projects.
Speaking with several exhibitors it was clear there is still underlying confidence in the economy and continued anticipated investment from all corners of the UK
Market leader manufacturer of welfare cabins, Boss Cabins (based right here in Lincolnshire), highlighted the fact that the economy was still moving in the right direction.
Tim Allan, Director said "We’re continuing to see both large corporates, such as A-Plant and Elliot’s, and smaller plant hirers, acquire new Boss Cabins not just to replace their existing fleet but also for growth. Our order book is looking incredibly healthy!”
Boss Cabins were recently named in Virgin’s Fast Track 100 and London Stock Exchange 1000 Companies to Inspire Britain. These awards have stemmed from their innovative and disruptive approach to a stagnant market. The market has seen a number of these innovators reinvigorating certain sub sectors such as welfare cabins and trackway.
Niche plant hire companies such as Camfaud Concrete Pumps have also risen through the ranks and are experiencing significant growth.
Brendan Murphy, Commercial Director of Camfaud told us that “The construction market, which did see a slight dip due to uncertainty during the second half of 2016, is still showing significant resilience with large infrastructure projects leading the way such as the Thames Tideway, Hinckley Point and improvements to highways”.
M&A in the plant hire sector has continued with Camfaud Concrete Pumps, Premier Concrete Pumping and South Coast Concrete Pumping attracting an international purchaser, AFIs acquisition of Kimberly from private equity owners LDC, Lion Track Hire being sold to A-Plant and Primary Capital acquisition of Readypower Engineering Limited.
Plant hire multiples continue to grow with the likes of Ashtead plc further increasing its share price to over £1600p per share (trading at 7.1x EV/EBITDA), a 27.7% increase on prior year, and the private market witnessing EV/EBITDA multiples ranging from five to six times.
This buoyant market is being driven by
- plant hire companies looking to diversify their asset base to focus on high ROI’
- appetite from international players to expand into the UK (especially given the value of the pound
- the perceived future long term growth of the construction sector specifically in infrastructure and house building.
Furthermore, the rise of the "sharing economy" has helped the likes the Ashteads increase profits as construction firms move away from owning assets.
Geoffrey Drabble, Chief Executive of Ashtead said "we continue to benefit from the fact that people like to rent stuff and not own it any longer."
Whether the optimism continues, we will see, but what was clear from visiting and speaking with exhibitors was that there was confidence in the UK economy and it was business as usual.
Bishopsgate has advised on several construction based businesses with its newest Dealmaker, James McBain Allan previously advising family owned businesses, Camfaud and PCP, the largest concrete pumping company in the UK, to US based Brundage Bone. BCF is well placed to provide its expertise to any business the construction and plant hire sector.
Bishopsgate Corporate Finance is one of the UK’s longest established corporate finance boutiques focused on providing lead advisory services to businesses valued between £2m and £50m. Founded in 1996, Bishopsgate has since advised on over 180 transactions with a total value in excess of £1 billion. Our clients include owner managed businesses, private equity backed companies and fully listed PLCs.