Compel buys Hire IT for £3m

Rental defragmentation

Compel is buying rival IT rental firm The Brewton Group (which trades as Hire IT) for £3m cash from its own resources.

For the year to 31 December 2004, Hire IT had rental revenues of £7.3m, operating profits of £300,000 and a loss before tax of £10,000 “after substantial interest payments to some of the owners of the business”.

Compel is paying no goodwill – it says the fair value of net assets of Hire IT is £3m, comprising a freehold property in Bracknell worth £1m, rental assets of £4.9m and debt of £0.9m. It is to merge the business and its 58 staff into Hamilton Rentals, its computer rental business, which is, it says, the leader in an “otherwise fragmented market”.

The firm estimates merger costs of £500,000 and once that is out of the way for the deal to be earnings enhancing.

Compel also owns a big Oracle consultancy, called Compelsolve. The group currently turns over around £65m a year and employs 300 people. Once upon a time, it was one of the UK’s biggest IT product resellers, ranking third in behind Computacenter and SCC.

It was a consolidator in this business too, buying many smaller resellers across the country. But margin squeeze and falling sales in the post-Y2K fall-out put paid to its ambitions in commodity PC reselling. Compel fled the sector, flogging its by now lossmaking business to SCC in March 2001 for up to £18.5m. But they have been arguing over the price ever since over the deal.

Spats aside, Compel’s departure from IT hardware maybe wasn’t such a bad thing, the way sales have turned out lately, with Computacenter and Morse both issuing profit warnings in recent weeks. ®