Large contractors are offloading risk through increased subcontracting in the wake of Carillion’s collapse, according to Speedy chief executive Russell Down.
The plant hire company lost £2.1m due to Carillion’s collapse and Mr Down said he had noticed a change in the behavour among large contractors.
“In the aftermath of [Carillion] a lot of contractors are becoming more risk-averse,” he said.
“They are subcontracting more and passing that risk down the supply chain.”
Mr Down spoke to Construction News following the release of the hire company’s results for the year to 31 March 2018.
It reported a 25 per cent increase in pre-tax profit from £14.4m to £18m on revenue of £377.4m, but was forced to write off £2.1m it was owed by Carillion when it collapsed in January.
Mr Down said the company had managed the situation in the run-up to the collapse as well as could be expected.
He said: “We were aware of Carillion and the challenges it was going through. We managed it fairly tightly.
“For us it was a £12m-a-year account and £2m is 60-days, so we weren’t caught on the 120-day payment terms and things like that.
“It was as tightly managed as it could be, but there’s always going to be credit risk out there, and toward the end [of Carillion] you couldn’t get credit insurance against it.
“With hindsight, I don’t think we would have done anything differently than we actually did.”
Around 52 per cent of Speedy’s revenue comes from its major customers, with the company stating that it serves 85 of the 100 largest contractors in the UK whose annual spend with the firm is between £500,000 and £20m.
Aside from its traditional offering of plant, machinery and tools, Speedy said it sees an opportunity to offer more services to large contractors.
“Things like training and testing, we haven’t historically sold a lot of that into these contractors, so we have the ability to grow revenue through that,” Mr Down said
In 2017 Speedy purchased two powered access hire companies for £21.3m, and the firm has plans for more aquisitons over the next few years.
“We’ve got a pipeline of acquisitions that will help us to grow to the business, whether that’s more specialist hire businesses or more on the services side,” the chief executive told CN.
However, he did not believe acquiring further tool hire businesses would add significant value, adding that organic growth and investing in its equipment represented a better route.
“I don’t see any large acquisitions on the tool hire side that we would be going for,” he said.
Mr Down said the company had become leaner and more customer-focused since he took over in 2015, which involved slimming down its range to focus on the most in-demand products, and rolling out new digital services.
He said the benefits of this were reflected in its results for the year to 31 March, which showed increased profit while the value of its fleet fell from £194.8m to £188.8m, excluding recent acquisitions.
Mr Down said: “We’re becoming a more efficient organisation by making sure what we’ve got in our hire fleet is what our customers want and we’re not holding the assets that aren’t going out on hire.”
When Mr Down took over as chief executive in July 2015 the company had endured two years of falling profit, an accounting scandal in the Middle East and the departure of two chief executives.
He previously told CN that the situation at company was “probably worse than I thought” when he stepped in.
Speaking after its latest results, he said: “We’ve done a pretty good job over the last couple of years and we have a very solid and robust base.
“I’m pretty happy with the position we find ourselves in today.”
This article has been amended to state Speedy’s turnover excluding joint ventures