Changing& direction
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Rental company Collease planned to build a used truck site in Manchester, next door to its rental operation, but instead of selling used trucks, it now buys them Words/images: Kevin Swallow The best laid schemes often go astray leading to a change of tack. Duncan Scillitoe (pictured), MID of Essex-based rental company Collease, told CM some time ago of his intention to open a used truck dealership in Manchester, next to its rental site, a stone's throw from the BBC Media Village and opposite Old Trafford football ground.
After buying the strip of land beside the Wharfside Way, the 'used truck dealership' project ran into planning and security problems and Scillitoe was forced to rethink. Now the project will open in Scunthorpe in February, but Scillitoe admits that any location for used trucks is less of an issue than it would have been before the days of the internet.
However, there is a twist to the story. Rather than becoming a purveyor of used trucks he has spotted an opportunity in the market to start buying them and hiring them back out. In the past 18 months, Collease has bought 150 used trucks compared with just 50 new ones "Older vehicles are easier to buy, they are outside the initial warranty period so we can do all the work ourselves, and we can hire them out at slightly cheaper prices than a new truck. A used truck does the same job," he says Many of the trucks have been hired out from the Manchester site. Since 2009 it has become Collease's leading site, representing 40% of its turnover — quite an achievement for a rental operation that started in Manchester nine years ago with one person and a caravan.
The Manchester site moved to its current 3.5-acre premises in 2005 and the company bought land from its landlord 18 months ago. Aside from the rental operation, Scillitoe intends to offer yard space to hauliers, with several companies already expressing an interest.
Temporary building Long-term intentions included building a workshop but planning problems thwarted this, so Collease has compromised with a temporary building that uses lift equipment to service and maintain the fleet until full planning is approved.
Unlike a dealership, Collease doesn't have to seek work to fill workshop hours — its team of four technicians in the workshop and two mobile vans operating out of Manchester look after more than 300 trailers, mainly skeletal for container work, and 200 trucks, of which 70% are tractor units.
If it had been a dealership, Trafford Park's location, west of Manchester, would have represented a significant problem for customers on the east side of the city. "Trafford Park hasn't been that successful, customers tend to be in a circle around the city," says Scillitoe.
"We have replacement vehicles that customers can take away when a truck comes in for repair or maintenance work. This reduces downtime and allows customers to continue to work."
Handheld devices Further investment has been made in more than 20 handheld personal digital assistant (PDA) devices provided by Coventry-based Talecom.
For all Collease's philosophy to acquire the things it needs to work with, Scillitoe admits that leasing the PDAs at a cost of £120,000 over five years is more cost-effective because technology always moves forward and owning it can often lead to companies hanging on to obsolete and outdated equipment for longer than they should.
"The PDAs mean we can de-hire from any depot. Currently we have to fax, scan, download or email the interchange process.
"With this we can do it in minutes and customers can look at real-time information through the website and monitor damage," he says He intends to extend PDA use to cover service sheets. • To own or not to own?
Collease's approach to assets is straightforward; it buys them and then hires them out.
Duncan Scillitoe says: We are a wholly owned business: the sites, the assets, the workshops. The industry is edging towards [vehicles with] operating lease, repair and maintenance with the manufacturer, and tyre deals with suppliers."
This approach was taken by a lot of rental businesses during the recession to reduce overheads and to adopt a return on capital employed (Roce). This is used to prove the value the business gains from its assets or is losing for its liabilities. It's a fairly blunt method that can be skewed.
For example, a mature business with depreciated assets tends to have a higher Roce than newer, possibly better businesses. While cashf low is affected by inflation, the book value of assets is not.
The problem for a rental business taking this approach is that it has little tangible business on paper except for the contract agreements with its suppliers and customers.
Scillitoe is at pains to explain the benefits of the rental company owning its assets and managing the risks that possession brings, which is at odds with the lease and rental sectors' obsession to pass responsibility on to third parties to provide vehicles and servicing.
"Risk is where we make our money, and we have to be big and bad enough to do it —we bare the residual risk and own the workshop to bare the maintenance risk because we think we are good at it. Collease maintains 90% of the equipment out on hire inside a 25-mile radius from Trafford Park. This allows us to touch and feel the vehicle and do the work in our own time, while not being obliged to conform to other parties' timescales," he says.
40,000TH DENNISON TRAILER In October last year, Collease bought the 40 000th trailer built by Dennison Trailers, based in Lancaster. Customer and supplier had a relationship stretching back more than 2,000 trailers — an impressive 5% of all the manufacturer's production.
Duncan Scillitoe explains: "There are many reasons why we have stuck with Dennison: superb build quality, reliability, longevity, excellent residual values and Dennison's unswerving dedication to getting it right."
Rather than put the silver tri-axle skelly trailer into the Collease fleet, it was decided to put the vehicle with an owner-driver, Gary Reynolds, who operates at GSA Transport in Milton Keynes.