World finance :: Earnings, Money and Personal finances

Companies must decide whether its best to buy their equipment or rent it




If you walk through an old factory the first thing you are struck by is the amount of equipment, machinery and tools in the place.

Some of the equipment might be redundant a reminder of technology or markets of a bygone era. Other equipment is on standby waiting for the next order or a change in the economy.

Whichever way it is, a yard full of gear is a yard full of money for any organisation. Even worse, if the yard is owned by the company there is more capital locked up in an asset that might be going nowhere.

This is where the phrases sale and leaseback and equipment financing came into being. By companies and contractors renting gear when they need it, and building the cost into their quotes, they have become more efficient with their use of capital.

It also means that businesses that hold the gear and rent it out have flourished here and around the world.

The decision about making any capital investment is to work out the return you will generate on it in the short term and long term.

If a piece of equipment is used for a single job but will not be used again in the foreseeable future, then the strategy of hiring comes into its own.

But if the equipment is likely to be used in an ongoing basis depending on the depth of capital of the business it can make sense to buy the equipment (even with finance) and eventually own it outright.

The sense will come down to the mathematics of how long you hold onto the equipment and how much revenue it will generate, or not.

The other advantage of leasing equipment is that you have the ability to keep the equipment that you use up to date while at the same time avoiding costly maintenance and repairs.

One problem for many companies in a world of fast-changing technology is that faster and more flexible organisations can hold their costs and their quotes lower than the competition.

LITTLE RIPPER OF A STRIPPER

FOR some, business skills are in the blood. They can keep a family business moving forward for generations.

In the case of the Kennards best-known for Kennards Hire son Rory took a different path, but one entirely parallel with the interests of the family.

Rory Kennard is an inventor a bit like his grandfather. Oddly, he didnt learn this about himself until he was at university and working in a packaging machine development company to make ends meet.

He started to look, and think: There must be a better way to do this.

As he says: I think in my innate nature, inefficiency frustrates me: maybe because Im impatient, or just want to get things done faster.

From there, he started helping out people with ideas to make machines work better. His break came when somebody complained that a vinyl stripping machine was unreliable.

He built a better one ... and today, more than 10 years later, the Makinex floor stripper remains one of his core products, along with mini-dumpers, mixing stations, jackhammers, infra-red heaters and high pressure washers.

Rory is doing something his father Andy has not done. He is building his business around the world, with the aim: 20 products in 20 countries in 10 years. Already Makinex is selling into North America, Japan, the UK, Europe and New Zealand. Our focus is on the big chains, like the US-based Home Depot and Sun Belt Rentals. As well as Speedy Hire in the UK, he said.

These are the suburbs which performed better than any other during




HOUSE values jumped 47 per cent in Australia’s best performing property market in 2016, while the strongest performing unit market wasn’t far behind.

Australias best performing property markets for 2016 have been identified in the latest CoreLogic Best of the Best report which analyses the winners in the property market, from increases in values, to rental rises and returns for investors.

And the winner is.....

Windsor in Victoria.

The median value of houses in Windsor increased by 47 per cent in the past 12 months while for the unit market it was Hunters Hill in NSW where median unit values jumped by a massive 45.8 per cent during the same period.

It wasnt just capital city suburbs that performed well during the year.

The gold medal suburb for property investors in the house market was Rosebery in Tasmania.

It achieved the highest gross rental yield of 9.3 per cent, while unit owners in Woree in Cairns achieved a gross rental yield of 8.7 per cent.

The unit market achieved the highest median weekly asking rent in Dawes Point in Sydney where it was $1775 a week.

In the house market it was $1725 a week in Tamarama in Sydney.

In terms of chalking up the highest value of sales for the year unsurprisingly it was in Sydney.

Mosman recorded $1,047,292,200 worth of house sales while for units it was Melbourne for a total of $739,769,597.

CoreLogic research director Tim Lawless said the results showed just how diverse and complex Australias property market was.

Not just across capital cities but also regionally and across product types,’ he said.

They are all moving at different speeds, I cant remember a time when we have seen so much diversity nationally across our markets.

Markets are always going to be running at different speeds, but to see Perth and Darwin tracking backwards for as long as they have now, since 2014, and Sydney and Melbourne values rising for nearly five years now at a fairly consistently high pace of capital gains and rental yields slowing to new historic lows and rental rates very flat generally - it is just the fact that the complexity of the market is such that there are so many indicators moving in different directions.’

Mr Lawless said the market had not performed how he had expected it would this year.

Absolutely not. I would have thought by the end of 2016 the market would have been slowing down due to affordability constraints for example in Sydney and Melbourne, due to very low rental yields, due to less investment. But the fact is the second half of 2016 has seen some re-acceleration in market conditions.

Of course we saw interest rates cuts in May and August which seems to have added some further incentives particularly for investors.’

Mr Lawless said investor numbers had been consistently rising since May with loans to investors increasing more than 15 per cent during that time.

His perspective of what the market would be like for 2017 was similar to how he thought 2016 would play out.

I think it is going to be a year of more moderate conditions and I think the renewed level of growth probably just reinforces that and the fact that we simply cant see dwelling values continuing to rise like what they have, on a backdrop of low wages growth and now it looks like rising interest rates as well.’