PMV MIDDLE EAST THE RISE OF RENTAL WITH STEVE CAYGILL Regional General manager - UAE, Oman & Qatar YOUR INDUSTRY OUTLOOK AND DEMAND FOR EQUIPMENT RENTAL, WHICH SECTORS HAVE PERFORMED WELL THIS YEAR AND ARE LIKELY TO DO SO IN 2021?
Obviously, this year has been particularly challenging across the market, the UAE was fortunate in the sense that it maintained its gas component of work and demands because of the independence that the UAE is seeking in respect to its domestic gas needs and thus currently in the middle of three year projects for that infrastructure program. A lot of work associated with both onshore and offshore have been relatively robust and consistent, however other challenges obviously are within the events industry where we have a fair presence here across the region so that’s been considerably challenging. We did have the ability in some respect to offset that with some of our COVID-19 response work that we provided across the region particularly herein the UAE and that’s kept us in a fairly strong position against full year budget expectations and projections for 2020. In this isolated area of response work the UAE actually performed well and cushioned other more negative market segments, however due to our flexibility we had to be able to maximize our opportunities when they arrived and more importantly support our clients. The other areas that were relatively challenged and flat was Saudi which has seen a reduction in the event segment where we were expecting a very significant 2020 based on planned and scheduled events. As for Qatar that was flat, but in Oman there was a slight retraction and Bahrain saw a small retraction but in saying that, the Group performed well in Byrne's regional markets.
WHAT HELPED YOU ACQUIRE AND RETAIN CUSTOMERS THIS YEAR?
At Byrne, we have about 17 branches now across the GCC, so it’s our ability to be positioned where our clients are currently or looking to expand to in terms of their geographical footprint. We try to position ourselves across the markets where we see an uplift in projects that have been released or where we see a growth in a particular sector or market.
We have around 12,000 items of plant across the region therefore we are the one-stop-shop solution to our client who can come to us for nonmechanical equipment, mechanical equipment as well as now providing them fuel through our fuel business, if they demand it. Therefore what we see is a single point of communicating with our business development team for our client and we can support their needs from A-Z. By default we see a high retention customer yield or by extension attract additional customers. It's having that suite of services that can really help them and ideally takeaway the headache for them which generally is what, I think, the rental industry is for. We exist to support what they are trying to do be that in construction or oil and gas exploration by allowing them to streamline their attentions and focus on their core business needs and specialization.
BENEFITS OF RENTING VS PURCHASING EQUIPMENT
From a traditional procurement perspective, I have seem clients mindsets shift the last few years from historically wanting to own the assets and rental was deemed wasted or lost money as they retained no asset at the end of the rental duration. However, as margins get tighter and efficiencies needing to be improved to support their bottom line, rental is now starting to be viewed very differently. What you are starting to see in some companies, particularly in construction and some oil and gas specialists, starting to review plant departments as a possible expensive overhead and they obviously have a bottom line impact carry that support infrastructure. They have working capital that they need to maintain and support – which is more costly than maybe first considered. What is becoming more of a trend is if they don’t own the asset are simply renting then the whole cost of consumables, parts and staff all become the rental asset owners responsibility and by extension a cost in cost out model – simply bring fleet in and out on demand and support project needs without extended legacy costs if they owned the asset and carried it on their books indefinitely without visibility of future projects. As a rental provider your managed by your client based on service level and if you don’t provide that service level you get credit notices issued from your client, so we are focused on service level – we remind ourselves we are here to support them. R & M on the assets, our clients tend to look at a project in its life span which is 18 months to two years so for me from an assessment point of view if I was a client looking to invest in an asset or rent for a project, then the key assessment would be do I have clear demand beyond 2 years for the asset/s if the answer is NO - then anything sub two years from my experience definitely has value in a rental proposition.
COULD RENTAL BE THE PERFECT CIRCULAR MODEL FOR THE MEA REGION?
The circular model which has been tabled in Europe hasn’t hit our shores here in the middle east yet but in reflection could have a possible adaption or adoption here. I don’t necessarily think OEM’s would be overly excited by it as their market may be more centralized to rental companies rather than large projects or large contractors, as this model in its premise is to extend the life cycle which is very much the model adopted by the rental industry no necessarily project specific companies. For a rental company , the cycling is a much longer window at a 5-7 year model in some assets categories and the larger more expensive assets are taken with a longer term view of life cycling. By definition a rental company assists life cycle and supports OEMs emission footprint as they may not need to manufacture as many assets life expectancy through the rental industry would be extended. However this is a very new initiative announced a few weeks ago and a lot more needs to be understood before such scenarios could become a reality.
CHALLENGES AND STAYING AHEAD OF THE COMPETITION
Two points from an inventory management prospective we've applied an RFID system across the business tag in and tag out so we’re tracking assets door to door to client or from the client back to the depot and we also analyze third party transporters or our own transporting assets. At Byrne we definitely track and scan our assets to monitor the use and make sure they aren’t being abused and finding out too late. The second part to the answer, going through 2020 and into 2021 we are looking to adapt a leaner more efficient policy in our business, margins are tighter and we need to keep our assets mobilized, this always comes back to the question about inventory management and that’s something we’re looking at in quite a lot of detail as we set up our 2021 budget, certainly the RFID tracking is a key component of that supporting data to appropriately analyze the utilization of assets.