Access Group heads east for growth

Fourteen years after being founded in Perth, equipment hire company Access Group Australia is taking on the big players in the Sydney market.

Perth entrepreneur John Jones showed impeccable timing when he established Access Group Australia.

It was 2002 and Western Australia was about to enter its decade-long resources construction boom.

Recently appointed chief executive Tom Fraser has inherited a much tougher market, but says the business is well placed.

“John has been building for these times for a long period of time,” Mr Fraser said.

“He’s been very disciplined and has reinvested in the business, so we have a very strong balance sheet and have a lot of equity in the machines.”

With the business on a strong footing, Access Group is pursuing growth on the east coast, opening branches in Sydney and Newcastle.

In doing so, it is going head to head with big players such as Onsite Rental Group and Coates Hire, which are also targeting infrastructure projects in Sydney.

Access Group has grown to have annual turnover of $80 million, EBITDA of $45 million, and 190 people.

That makes it a minnow relative to Coates, which posted turnover of $919 million last year.

The east coast expansion comes at a time of unprecedented pricing pressure, which has already led to the demise of one big national competitor, Force Corp.

“Market rates have been driven down, it’s very competitive at the moment,” Mr Fraser said.

He believes part of the problem rests with private equity funds, which have bought some of the major players in the market.

“Their funding arrangements allow them to drive the rates right down, purely as a necessity to get their utilisation up,” Mr Fraser said.

“They just have to go and get the work otherwise they won’t survive.

“We saw that with Force; they were in the same boat, private equity with Helmsman Capital.”

Asset valuation firm TIGER ASSET GROUP said the industry included a number of private equity owned businesses with ageing fleets.

“Our research indicates some have fleets with an average age close to 10 years and without the balance sheet capacity to purchase large quantities of new assets,” Tiger said in a review of the equipment hire industry.

The extreme competition in the market has been highlighted by Kerry Stokes’ Seven Group Holdings, which owns Coates in joint venture with The Carlyle Group.

“Competition among hire firms remains ferocious as many struggle to remain in business, resulting in irrational competition,” Seven Group’s 2015 annual review stated.

Coates entrenched its market leadership last August when it snapped up Force Corp’s access and truck assets, adding 3,700 items to its fleet, which totalled more than 10,000 items after the deal was completed.

At the same time, Coates has responded to the market downturn by selling $300 million of equipment last year and has plans to sell an additional $300 million over the next two years.

Sydney plans

Mr Fraser said Access Group undertook a detailed study before opening its Sydney branch last year.

“It was about understanding the market; we saw a lot of businesses over there with older equipment,” he said.

“One of our unique selling points is that we have very new, high-quality equipment.”

Access Group stocks the Genie brand, which Mr Fraser said was superior to most others, and its fleet had an average age of just 3.6 years

The east coast expansion is the latest in a series of growth initiatives by Access Group during the past decade, including the establishment of a transport division and growth of operations in the Pilbara and Northern Territory.

The group has also widened its product range beyond access equipment, such as elevator work platforms and boom lifts, to include lighting towers and generators.

A recent initiative introduced by Mr Fraser was the introduction of a lean management system, which has helped the group improve its systems and processes.

“Lean management is about continuous improvement on a daily basis,” he said.

“It allows us to be far more efficient and reduce the waste and downtime.

“As I understand it, we’re the first to introduce lean management into our sector.”