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Putting the focus on profitabilit ,
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A downsizing strategy kicked off an extensive remarketing programme that turned TLS from 'all things to all customers' to a company providing select core products to specific markets.
Words: Kevin Swallow / images: Tom Cunningham
There was a time when GE Capitalowned rental company TLS prided itself on being able to provide an operator with any specification of vehicle. With 40,000 vehicles on its books, you could, in theory, source a motorbike right through to a 44t truck.
Andrew Winlow's appointment six years ago as UK remarketing leader changed all of that. Out went heavies and specialist equipment and in stayed cars, car-derived vans (CDVs), vans and two-axle rigids.
"My remit was to exit certain categories in the quickest time possible with the minimum loss to the business," he explains. "Today, TLS has 15,000 vehicles. This has allowed us to focus more on profitability rather than turning vehicles into quick cash."
Careful planning
Divesting more than half your portfolio needs careful planning. "It was a case of offloading; auctions played a part in turning vehicles into cash very quickly, but we also wanted to be a bit more strategic in finding the right customer base and the right return," he says.
Companies that ran specific equipment were approached, as well as trade. As the fleet diminished in size, greater emphasis was placed on vehicle value. "It allowed us to spend more time on attaining greater margins on the back end and growing our retail centre." he says.
"Manufacturers weren't overly helpful," he adds. "They have their own price restraints. We knew that finding the right customer base, as opposed to going back to the manufacturer, would give us better prices."
The whole process took two years, and Wallow oversaw the consolidation as TLS refocused on light CV products. At the end of 2007, he moved on to GE Plant Hire as director, asset management, and was replaced at TLS by Phil Tabb, director of asset management. "TLS looked at the customer base it wanted to serve., the returns it wanted to achieve and the skills set it had at the time," says Tabb. "TLS has a strong branch footprint, workshops, and knowledge in the business. In the past when we went into these extraneous markets, we were looking more at making money, but not having the necessary level of expertise or the infrastructure to maximise the market. It [downsizing] meant going back to basics."
"And at that time," adds Winlow, "the light CV market and 75-18t market were growing very quickly."
Now TLS serves two specific customer types, says Tabb. "Your large corporate who needs a finance solution for a significant value of assets on their balance sheet — they may not want to own their vehicles. Their market is more sophisticated and they require more than a straight ownership solution. Then you have your smaller, traditional rental customer who can't afford to own, or need, an additional vehicle," he adds.
The emphasis has also changed in terms of remarketing. TLS's rental fleet is mainly short-term hire, with 1,500 contract-hire stock. Maximum vehicle age varies from 30 months on vans to 36 months on its truck range. Of its 15,000 vehicles, 70% is split evenly between CDVs and light CVs, 15% consisting of 75t vehicles and heavier, with the remainder being cars.
A reduction in vehicle numbers means TLS has more control over how it annually remarkets 6,000 vehicles, and key to this strategy is Broadway Motor Company. Winlow explains: "Broadway is a sister company to TLS. It used to handle the sale of cars to retail users, however, eight years ago we changed the way the business ran to selling light CVs.
"It has become very successful in the past five years and we have been expanding the business to five new sites: Rotherham, Gateshead, Liverpool, Manchester and London. More than 40% of our business is retailed through Broadway directly to end-users.
"With all the changes we have seen and the sectors we have exited, we have lost a certain group of customers. We're now dealing with local authorities and small to medium-sized businesses — a small customer base that looks after the vehicles.
Presentable standard
"So the days of having the vehicles coming back beaten up by the end-users are over. Vehicles are coming back in a very presentable standard, so more volume of our return can be put into end-users. The plan is to grow the actual retail sites," he says.
When TLS was remarketing 17,000 vehicles a year, it had to use all the channels (auction and trade) available, explains Tabb. Now it can sell more standardised products through traders and more enhanced products through Broadway.
He adds: "Given that we have seen an excellent return through Broadway in recent years, and that it is a significant add-on to the TLS rental strategy, we would like to expand this from 40% to reach 60-70%. We are looking to have new [TLS] sites in Liverpool, the South West and the Midlands, and to channel more vehicles through Broadway [where] returns are greater through retail than trade.
"In taking over from Andrew, I will continue to build on what he has put in place."
The rental company is now carrying out third-party repair and maintenance work in addition to its in-house workshop network, and wants to move towards more contract-hire deals.
"But it's one step at a time. At the moment we are a solid, daily rental business looking to expand our contract-hire fleet and excellent remarketing capability, which we would like to explore with our customers in terms of remarketing their own [non-TLS] vehicles," he says. "We also own a significant workshop base that we can leverage to offer maintenance to our fleet and customer base." II