Christian Humphreys of Sanderson Weatherall explains how plant hire operators can benefit from asset valuation and advisory advice
The Covid-19 pandemic has presented challenges to all industries and the rail industry has been no different with general disruption across the country and works delayed on a number of projects, most notably the delayed start to the pipeline of Network Rail works under Control Period 6 (CP6). In such an ever-changing market and as uncertain factors rest on the horizon, we believe that asset-based lending is a perfect solution for plant hire operators to manage a high capital expenditure sector by way of utilising the fleet assets on a revolving lending security facility. This facility provides the flexibility to assess new opportunities in the market, buy new machines to service the demands and needs of the sector and continue the important
upgrades and certification renewals that are required to operate on the Network Rail infrastructure.
Although there has been, and continues to be, significant delay in the awarding of works under the CP6 framework; once the operations do commence in full, it will create huge demand on the plant hire operators; and it is anticipated that this should lead to longer track possession periods, which is the most efficient way for works to be completed. Therefore, the requirement to have a good, well maintained and appropriately certified fleet ready for deployment is clear.
The bulk of work for the rail plant hire operators and their clients will be focused on improvements in the efficiency of existing infrastructure to that end the plant hire operators will be hopeful of securing work on the upgrade of the existing rail infrastructure and acquiring good businesses and assets for growth is key to their development.
The challenge for these rail plant hire providers is to operate a fleet that is well maintained, properly tested and available for hire at all times. For wheeled machines, referred to as RRVs and wheeled attachments; predominantly trailers, ECC accreditation is a requirement for use on Network Rail infrastructure. The seven yearly upgrades to assets required for ECC certification can be expensive and time consuming and impact fleet availability. The planning of the ECC upgrade works is paramount as Network Rail and its contractors look to the rail plant hire providers for reliable and ready fleet availability.
There have been a number of acquisitions in recent years that have seen businesses bought outright, in some cases by management teams and others by existing providers. As well as potentially extending the size of a company’s fleet and its geographical coverage, we have also noticed a trend for the acquisition of smaller more niche companies which run machines for more specific requirements, thereby extending the acquirers hire offering.
New machines added to rail plant hire operator fleets relieve some of the pressure on the upgrade requirements of the ageing machines that, through upgrade themselves, further enhance the quality of the fleet of rail assets. Investment in smaller attachments such as bowsers, cross lifting beams and tow bars approved for the London Underground also help add to the desirability and reliability of the hire fleets.
Despite the challenges faced our multidisciplinary asset valuation and disposal teams have continued to provide fleet valuation advice to support the needs some of the most respected and well-known rail plant hire operators across the UK.
During 2020, our market leading machinery and business assets team conducted three dedicated online auctions of road rail vehicles, rail infrastructure and maintenance contractors’ plant and equipment. Assisting with the disposal of surplus equipment the auctions collectively realised over £3 million for our clients. Using our extensive network of contacts, the auctions attracted over 300 registered bidders in the form of dedicated rail buyers from all over Europe including; UK, Germany, Ireland, Spain, Italy, Hungary, Bulgaria, Poland and even sold equipment to buyers as far as Australia.
Sanderson Weatherall generally advises financial institutions in the asset based lending sector, along with supporting the M&A market and corporate finance sector. We conduct annual valuations on rail related hire fleets totalling in excess of £140 million, supporting lenders and plant hire operators with fleet management and portfolio analysis for secured lending purposes, acquisitions and disposals of surplus plant and equipment when appropriate in order to free up further working capital.
Valuations provided by Sanderson Weatherall over the years, engaged directly by the plant hire operators and the asset-based lenders has afforded growth and acquisitions of many businesses, supported investment in new machines, modifications and upgrades.