Yield and utilisation
The central trade-off, and the one that most fleet decisions eventually reduce to.
Sector 06 / Equipment hire
B2B and B2C rental, fleet utilisation and the branch economics underneath it.
Yield against utilisation, return on capital rather than EBITDA, and a branch network to hold in balance.
Sector overview
Yield against utilisation, decided branch by branch.
The equipment hire sector consists of a range of B2B and B2C segments catering for many different end use requirements, from construction and mining equipment through to consumer leisure rental items. Despite the variety of end segments, effective rental businesses aim to optimise the trade-off between high yields and high utilisation of assets. The more sophisticated operators apply dynamic pricing, differentiated channel strategies and digital marketing to optimise fleet returns.
Given the very high capital requirements associated with rental businesses, EBITDA is not a particularly useful indicator of performance. Measures of return on capital, and an effective capital allocation decision-making process, are essential to long-term high performance.
National businesses must also manage a network of branches. The trade-off between delegating decisions to local branch managers and adherence to national target yields has to be balanced carefully, keeping enough responsiveness to local conditions without excessive margin dilution.
Market forces
Four levers on fleet returns.
The first two set the revenue line, the second two determine whether it survives contact with the branch network.
Dynamic pricing and channel
Differentiated channel strategies and digital marketing applied to optimise returns.
Return on capital, not EBITDA
High capital intensity makes EBITDA a poor guide. Return on capital and allocation discipline matter more.
Branch portfolio management
Local responsiveness set against national target yields, without excessive margin dilution.
Selected client examples
Three equipment hire engagements.
Named clients are withheld. Each of these ran with a small, senior team working alongside the client’s own people.
Strategy and performance
NZ leading general equipment hire business
Medium term strategy and performance improvement.
- Developed a strategy which underpinned a doubling in profitability over three years
- Enabled a successful recapitalisation of the business and an exit for some investors
- Now firmly entrenched as the leading player in New Zealand
Turnaround
Leading AU B2B equipment hire business
Turnaround strategy development and execution.
- Developed a medium-term turnaround strategy and provided initial execution support
- Enabled a successful recapitalisation and eventual exit for key investors
Due diligence
ANZ leisure vehicle rental company
Commercial due diligence and post-acquisition strategy.
- Provided commercial support for the acquisition of a complementary leisure vehicle rental business
- Developed a post-acquisition integration plan and oversaw the launch of a re-branded product offer
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