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Tools of the family trade

SMALL PLANT & TOOLS

GAP group is on the verge of achieving real national coverage but, true to form, it has its own way of going about it. Its joint managing directors, Douglas and Iain Anderson, give Andrew Gaved the lowdown

IF YOU want to know how committed GAP's Douglas Anderson is to his plant and tool business, ask him what he was doing last summer, when he should have been convalescing in hospital after a triple heart bypass.

Many customers and suppliers already know the answer, because throughout his time on the ward, Mr Anderson insisted on taking care of business.

'I wanted to take my laptop in but the hospital wouldn't let me. I was bored, ' he says, before adding, 'But I am taking it easy.'

A likely story.

Mr Anderson has been running the company with his brother Iain for the last 15 years, since inheriting it from their father. Although they work closely, they claim not to have any problems with sibling rivalry. Douglas puts this down to keeping distinct, complementary roles.

'Iain does operations and I'm development. It just seems to work, ' he says. 'If we both wanted to be operations, then we would probably split the country down the middle and do it that way. But we are pretty comfortable with the roles.'

The group remains one of a very small number of companies that dare to cross the Chinese wall of 'plant' and 'tools'.

The Andersons are proud of their rarity value.

'It's simple, ' says Iain. 'We asked customers what they wanted. They are all reducing suppliers and locations. With us, if they want anything, from a six inch drill up to a large compressor, they can get it from a single depot. With our competitors, I reckon you would have to phone a minimum of two different locations, if not more.

'What's happened to the rest of the market is not particularly customer-driven. Organisations that do both plant and tools have split their operations because of the scale the business has reached. You don't need 300 plant depots for national coverage.'

The firm currently has 45 branches and is continuing to expand nationally - up to a point. Another of GAP's claims to distinctiveness is that it is not planning to open depots ad infinitum, believing that development money could be better spent on the equipment.

'It is unlikely we will go above 100 depots, and 70 to 80 is more realistic. But we are spending more money on the fleet at the moment than A-Plant, ' says Iain.

GAP is an advocate of the organic route to expansion, rather than using its cash for acquisitions.

'A number of factors impact the business in acquisitions, ' says Iain. 'The chances are the owner or manager won't stay. The location probably isn't ideally suited. The age profile of the fleet is unlikely to match our requirements, and the company name, on which its reputation rests, will not be retained.'

By contrast, he says, a greenfield site allows them to choose the mix of people, plant and location they want.

'Plus, a new location gives us a certain amount of business because customers always want to try out the new kid on the block, ' he adds.

The firm believes it needs another seven or eight openings to claim national coverage, then a further 15 to 20 to fill in gaps. Its expansion programme is focused on three to five depot openings a year, rolling southwards from the Midlands down.

'I'm minded to be nearer three, as the infrastructure and management have to follow and the southern depots tend to be the biggest ones, ' says Iain.

The immediate future will see GAP tackling the London market, with planned openings in Heathrow and Thurrock in the next couple of months.

In the quest to provide national coverage, the company has entered into an innovative partnership with fellow tool hirer Brandon. The two firms will hire in regions where their partner has no branches.

It is unusual enough in the plant industry for two closely competing companies to work in partnership, but GAP and Brandon are upping the ante by jointly bidding for work with national contractors.

To the Andersons, it is simply a question of commercial sense, albeit brought about by similar cultures and a shared outlook on life between themselves and Brandon's managing director, Charles Fletcher.

'If we went in on our own, we wouldn't win, ' says Iain. 'It requires us to be honest with each other. It's good for us and good for Brandon. Obviously, as we both expand, the need for the marriage will reduce.'

GAP has a pretty even balance between tools and plant and is standardising its depots, so if they lean too far towards one sector the brake can be put on.

'We reckon we have the balance about right at 50:50.

We want the range to be no more than 60:40 one way or another for each depot, ' says Douglas.

'Our fleet is younger than our competitors. It's the best in the industry seriously. That means you tend to get fewer breakdowns and you are also likely to get more customer satisfaction than with older technology.'

GAP is not planning to extend its range extensively.

'We are good at the product range we've got. It's unlikely we will follow the competition into specialist divisions, ' he adds.

If there is one word that comes up time and again when talking about GAP's leadership, it's 'shrewd'.

The brothers have a formidable reputation among suppliers for negotiating and they apply that to hire, too.

'Managers and hire controllers should have more bottle, ' says Douglas. 'They need to go the customer and hold their nerve. If you try, you can get more. It's like when you hire a car, you expect to pay for the best equipment.'

The Andersons believe this lack of nerve is one of the reasons the industry is experiencing problems, and they are adamant that the drop in hire rates is of the sector's own making. They are particularly critical of the the quality of the sales forces.

'Ours have minimum hire rates that they can't go below without referring to the management. But there are a number of poorly trained salesmen in the industry.

The customer is the long-term loser, though, because rock-bottom prices are inevitably going to be subsidised by shortcuts in safety, ' says Douglas.

The naivety of the sales team is also to blame, according to the brothers.

'A customer may turn down a £100 offer because they are only prepared to pay £95. But some salesmen then go straight down to £80 to get the sale - leaving £15 on the table, ' says Douglas.

GAP believes its business model will stand it in good stead as the economy bites.

'Our reinvestment in kit for the last financial year was 50 per cent of turnover. Compare that with other nationals, such as Speedy, which was 31 per cent, or A-Plant, which was just 17 per cent, ' he adds.

Douglas also has a bone to pick with analysts in the City. 'The City doesn't seem to click on to such matters as depreciation of assets, but you can make the figures say anything you would like. If you look at depreciation as a percentage of debts, A-Plant is on 18 per cent and Speedy is on 24 per cent. That means Speedy is not writing off its equipment quickly enough.'

Although the hire market is showing few signs of real growth at the moment, the Andersons have a distinct air of bullishness about them.

'We reckon we have less than 2 per cent of the market. So there is plenty to go at, ' says Iain.

'It is slightly easier to win from our competitors than it was in the past. In fact, there has never been a better opportunity for GAP.'

Andersons on. . .

The tool hire market:

'It wouldn't surprise me if builders' merchants went out of tool hire.

I can't understand why they are in it, as they are offering nothing to the market.'

National competitors:

'Is it too simple to say that if a company is worth less now than it was 10 years ago, it is unsuccessful?'

Service:

'If everyone is buying the same equipment from manufacturers, the level of service is crucial. Customers accept that kit breaks down, they just want it fixed quickly.'

Customers:

'Contractors say, 'We only make a 2 per cent margin and you make 14 per cent', but they don't have the capital expenditure we have.'