There is a whiff of Schadenfreude about Albury Asset Rentals of late. The specialist in forklift trucks and materials handling equipment may well be affected by the onset of a recession, but at least the credit crunch has forced out a thorny competitor from its turf.
Bank of Ireland Business Finance, which withdrew from the UK in February, has left in its wake £20m of the materials-handling equipment market for the likes of Albury to sweep up.
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“They took a chunk of our market and they brought our margins down a bit, but now they’ve gone back to Dublin, I’m pleased to say,” Kevin Lofting, founder and managing director, said.
With 30 per cent share of the estimated £350m finance market for forklift trucks and warehousing equipment, Lofting predicted Albury could easily squeeze out another 11 per cent in new business growth this year with Bank of Ireland out of the picture.
Equally, margins are expected to rise back to what Lofting describes as normal levels. Bank of Ireland staged an aggressive strategy by halving profit margins when it launched itself into the contract-hire business three years ago.
“We never actually matched them at any stage, but what we were doing was lessening ours,” Lofting said. “For whatever reason, they chose the fork-truck business as a sales-aid business because they thought the margins were better, and what they did then was basically cut the margins down to a direct margin, which doesn’t really reflect the fact you’re offering a full sales-aid product.”
Albury’s deals are originated predominantly through vendor finance. It primarily offers a contract-hire product by which it receives rental payments from the end-user net of maintenance fees, which go to the dealer. At the end of the contract, which typically runs for five years, Albury exercises its option to oblige the
manufacturer to repurchase the used equipment at an agreed price,
thereby protecting itself from residual value risk.
Last year, Albury wrote £90m in new business, representing 23
per cent growth on 2006. This resulted in a net-profit contribution
of almost £3m to the BNP Paribas group, of which Albury is a
subsidiary, and a net book value of assets worth £215m.
Without playing down the consequences of a possible recession,
Lofting admitted that this year will probably not be smooth
sailing. The material-handling equipment market is especially
sensitive to consumer demand and Lofting explained that the
replacement cycle for forklifts can stretch to 15 years.
“It’s actually quite low down in the food chain in terms of the
wish to upgrade because of the longevity of the equipment,” he
commented.
Yet, 10 years after formation, Lofting believes Albury has a
pretty sturdy team to tackle the hard times. “I’ve been in this
market for, dare I say it, 25 years, which is a bit sad, really,
but it has paid the mortgage and quite a few other people’s
mortgages as well.”
