Australian Industrial Rental (AIR), a private Australian equipment hire company, is an attractive target in the equipment hire services space for the construction and mining industries, said founder, majority owner and CEO Simon Mair.

The company had revenues of AUD 8m for FY10/11. It plans to reach revenues of AUD 24m in three years through organic growth, he said.

Founded in 2007, AIR rents air compressors, power generators and light towers, with 70% of hire services going to the mining sector, and the rest to the construction and industrial services sectors.

The company considers itself an attractive target due to the increasing demand for equipment hire from the mining sector. Its staff are also trained to help set up equipment for its clients, a level of service that is lacking among its competitors, he said. The company grew its EBITDA by 41% in the last year, and its services are being recognized by big names and clients such as Xstrata, Kagara and BHP.

The Queensland-based company sees an exit unlikely in the next 12 to 24 months due to its potential for further growth as well as the fact that it is currently undervalued, he said. It currently has a AUD 9.7m to AUD 15m valuation since a turnaround strategy was implemented, as per media reports. Mair confirmed this valuation and said he expects the company to be worth at least AUD 60m before an exit.

There has been consolidation in the equipment hire and mining services space, with Western Australia-based Coates Hire recently said to be buying out Western Australia-based Tru-Blu Hire, Mair said. AIR was also approached by Coates and PE-backed competitors in the past 18 months, Mair said. Despite discussions, AIR rejected a deal partly because it felt the valuation being offered was not enough, he added.

In the next 12 months, AIR will continue to invest in equipment, and expand presence in Kalgoorlie, as well as service clients in New Zealand and Papa New Guinea.

AIR has refinanced its debt spread over seven banks to purchase hire equipment, which is due in the next 18 months to three years. Its main banks are Westpac, NAB, Bank of Queensland and Suncorp.  

AIR struggled to meet revenue targets and pay its bank loans and suppliers during the financial crisis – FY08/09, according to media reports. Mair confirmed this and also confirmed other reports that said one of its creditors was a week away from appointing an administrator. AIR then hired Vantage Performance to assist with a turnaround strategy, which helped it manage cash flow and gave credibility to the main banks to refinance its debt, Mair said. At the time, debt was in excess of AUD 10m, he said.

Its competitors are Coates Hire and Graco.

by Silvia Garcia

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AIR chief executive Simon Mair can smile at the near miss now, “but at the time it was a scary ride”. 

AIR specialises in renting air compressors, power generators and light towers.  In the 2008-2009 financial year, even as the GFC was causing economic havoc, AIR recorded growth of 60% on the previous year. 

AIR debuted as a BRW Fast Starter company in 2009 but by the end of that year the GFC had caught up with it and the company’s revenue was more than 50 per cent below target.  The company was struggling to service loans with seven banks and several suppliers.  “We started well and were becoming established in key strategic locations but then we were blindsided by the GFC,” Mair says. 

When AIR sought the assistance of Brisbane-based turnaround specialist Vantage Performance, one of the creditor banks was one week from appointing an administrator.  Once Vantage was appointed, the decision was made to close AIR’s NSW head office and assets were redeployed to the Queensland towns of Townsville and Mt Isa.  “We’ve benefited from a very deliberate strategy to focus on opportunities in the regional mining sector,” Mair says.  It has since opened an office in Mackay. 

Mair says the near-death experience and the salvage operation that followed taught him many valuable lessons.  They included: to be prepared to say no to new work if you don’t have the cash flow to handle the project; to be more astute with who you surround yourself with in the business; and to have the right systems and processes in place. 

Vantage director Steve Hogan, who sits on AIR’s newly formed advisory board, says the value of the business has increased from $9.7millio to $15.5 million since the turnaround strategy was implemented. 

Leo D’Angelo Fisher

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AIR provided generators and lighting for the weekend and was extremely proud and excited to be part of such a fantastic community event. All sponsors worked collaboratively with each other to make the event the success that it was. AIR very much looks forward to an ongoing role in supporting the Mt Isa community (and other communities that it operates in) have such successful events and outcomes that help to build community spirit and camaraderie. AIR is already planning its involvement in the 2012 Mt Isa Rodeo!

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Kagara’s base metal operations consist of three underground mines, an open pit mine and three processing facilities across the northern Queensland region west of Townsville and Cairns. AIR is Kagara’s preferred supplier for power generation. AIR machines supply diesel power to keep the mine and production facilities running to meet Kagara’s substantial production profile in addition to providing power to the worker accommodation, camp kitchens and remote refrigeration requirements.

Bevan Reents, AIR’s National Service Manger leads the team that delivers the 24/7 power supply from AIR machines has no downtime due to the criticality of the power requirements. Bevan has said that “AIR is totally committed in its responsibility to keep Kagara operations powered. AIR has adopted a partnership approach with Kagara and in turn AIR services are closely aligned with Kagara’s business objectives. AIR’s culture of service excellence and continuous improvement is key to AIR’s ongoing strategic relationship with Kagara.”

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AIR was advised by the customer at contract award that AIR was selected because they are “highly regarded as the remote power specialists in the industry”. It was clear to them that AIR not only had the ability to deliver but that “AIR’s approach to work with them in such a consultative and flexible manner has enabled the customer to achieve their project objectives and timeline for optimum power output”. AIR advice led to significant fuel savings which has been an added benefit and cost saving that AIR’s competitors could not match.

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