Insight: Kier Group sells FPS to Endless in £17.9m buyout

Kier Group has sold its FPS (Fleet and Passenger Services) division, which provides specialist vehicle contract leasing and fleet management services to the public sector, to private equity firm Endless for £17.9 million, as part of a management buy-out.

The disposal of the company, to be renamed Essential Fleet Services, includes the transfer of FPS’s finance lease debt of approximately £32m (as at June 30, 2015).

FPS became part of construction and services company Kier as a result of the May Gurney acquisition in 2013.  In the year ending June 30, 2015, its estimated third party revenues and profit before interest and tax are £34m and £5.6m, respectively. May Gurney acquired the business, originally called TransLinc, for £34.9m in 2011.

Haydn Mursell, chief executive at Kier, said: “FPS was acquired as part of the May Gurney transaction. However, in light of our strict return on capital requirements, we concluded that it would be appropriate to dispose of FPS to a specialist operator which will be managed by the existing management team.”

Ray O’Toole, managing director, and David Liston, operations director, led the management buyout.

O’Toole said that Essential Fleet Services will “branch outside the public sector” by offering contract hire and maintenance to the corporate market, using its 20 workshops or third party suppliers. It will also offer corporate customers a full range of fleet management services, including driving licence checking, accident management and daily rental. 

“We’ve done a lot of work identifying those opportunities and getting into a position where we could do it ,” O’Toole said.

“There is a great opportunity to grow in that market and Endless bought into that business plan.”

The company currently has 60 ‘key clients’ and a further 50 ‘smaller fleets’, according to O’Toole, with a risk fleet size of 3,500 vehicles, made up of 1,800 light commercial vehicles plus a number of specialist vehicles (gritters, refuse collection vehicles and 7.5 tonne vehicles).

This positions it at number 45 in the FN50, although it has no cars and has no plans to offer contract hire or fleet management for car fleets.

O’Toole said that it was “difficult to predict” how much the risk fleet would grow but is expecting the company to double its turnover within three to five years.

“If we look through the binoculars in three to five years’ time we’ll be a leading player in the market,” he said.

The company plans to increase its customer retention rate (currently in excess of 70%) and improve its bid to win ratio (currently in excess of 40%).

It will retain its major client, Kier, under a new five-year agreement which will see Essential Fleet Services continue to supply Kier with fleet services to its local authority highways and utilities businesses.

O’Toole added that talks began with Endless and a number of other bidders towards the end of last year.

There was “keen interest” but Endless was the “natural fit”, according to O’Toole.

He said: “Endless was immediately aligned with the growth ambitions of the management team and the future for Essential feels very bright.  We are also grateful to Kier for enabling us to quickly deliver this buyout once it was clear that Essential did not fit with its core strategy.”

Mathew Deering, partner at Endless, added: “As soon as we became aware that Essential was non-core to its parent’s strategy, we knew we wanted to back Ray, David and the team in the transition to an independent business.  We are delighted to have partnered with Kier to become the new owners of a strong and well-invested business with an attractive long-term growth plan.”