Three-quarters of CV rental companies expect growth

The van market is the fleet industry’s fastest–growing sector and commercial vehicle companies are expecting continued growth, says British Vehicle Rental and Leasing Association (BVRLA).

Of the CV rental and leasing companies which responded to its 2014 CV Informer research, 75% expect business to increase this year.

Respondents plan to purchase 70,000 new vans collectively within the next 12 months.

It paints a positive picture of the industry and one which goes some way to explaining the acquisition of Burnt Tree by Enterprise Rent-A-Car.

Gerry Keaney, chief executive of BVRLA, said: “The acquisition of Burnt Tree by Enterprise reflects the feelings of optimism and the opportunities for growth in the vehicle rental sector.

“New entrants, acquisitions and consolidation are hallmarks of a healthy sector, and the rental and leasing industry is going from strength to strength in 2014.”

BVRLA members’ short-term rental fleets also grew by 20% last year and the association has recently welcomed a number of rental brokers into its membership.

Paul Jones, a partner at Clearwater International, which advised Burnt Tree on its sale to Enterprise, also believes the sector is ripe for growth.

He said: “As the economy continues to strengthen and funding is more readily available, the vehicle outsourcing market is on an upward trajectory.”

Burnt Tree’s performance is testimony to that after being ranked 14th in this year’s Sunday Times Profit Track 100, with profits jumping from £1.4 million in 2009 to £10.3m in 2012.

Jones added: “The Enterprise deal is illustrative of industry attractiveness and the interest for delivering growth strategies through acquisitions.

“There has also been notable activity from private equity players, such as HG Capital and Sovereign, which also demonstrates the growth potential within the wider commercial vehicle rental, contract hire and fleet management market.”

Enterprise’s acquisition of Burnt Tree for an undisclosed sum significantly increases its potential in the flexible commercial rental sector as it aims to challenge Northgate’s dominance in this area.

Northgate’s UK revenues topped £380m in 2013/14 with a fleet of 53,900 vehicles. Three-quarters consists of small and medium vans, while 17% is accounted for by larger commercial vehicles. The company, which operates out of 68 sites, employs more than 1,900 people.

In contrast, Burnt Tree’s diverse fleet of 17,000 commercial vehicles, including vans, HGVs, refrigerated trucks and accessible minibuses, will increase Enterprise’s Flex-E-Rent division beyond 25,000 units, complementing a fleet of more than 60,000 cars.

Enterprise told Fleet News that, in the immediate short-term, the Enterprise Flex-E-Rent and Burnt Tree businesses will continue to operate as two brands, with a view to creating a combined entity which will be headquartered in Shrewsbury.

Flex-E-Rent director Danny Glynn will lead the new business, while Burnt Tree chief executive Richard Metcalfe will remain in an advisory role to help steer the direction of the combined business.

Metcalfe said: “Last year we stated our ambition to become the leading and largest company in our industry. In time, this agreement will allow Burnt Tree to achieve its full potential to become the market leader.”

Growth in the CV sector is not just confined to rental; contract hire and leasing companies are also eyeing an opportunity to expand their operations.

Lex Autolease, for example, wants to increase the size of its fleet by 100,000 vehicles to 370,000 by the end of 2017.

More than half of this increase (55,000) will come from light commercial vehicles, in particular by targeting SMEs with its new Driveways product.

Launched in April, it offers customers a range of type-approved converted vans and is targeting 2,500 units in
2014, rising to 7,500 in 2015.

Meanwhile, LeasePlan reported a 6.4% increase in its van risk fleet, up from 2,292 units in 2013 to 38,102, according to a mid-year update from the FN50.

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