Mistral Bus and Coach
Two decades and a new home for Mistral’s twin operations
Mistral Bus and Coach have been providing quality new and used leased vehicles to the industry since 1992 and this year they will be celebrating twenty three years in business. Five years ago Mistral Asset Finance was formed and earlier this year the two companies relocated to new offices in Manchester. Kirsty Flatt met up with Guy Wadsworth, Chief Operating Officer of Mistral Asset Finance and Steve Low, Guy’s equivalent at Mistral Bus and Coach at their Lowry House headquarters.
With stunning views over the skyline of Manchester from their suite on the fourteenth floor, it is easy to appreciate what a conducive working environment it must be, although Steve and Guy readily admit that some personalisation is needed to detract from the rather stark newness of it all. Guy and his team have been here for a while although operating from smaller offices, whilst Steve and the bus rental team joined earlier this year.
Only a few administrative and accounts staff are left at the former trading centre in Knutsford and as Steve pointed out ‘Knutsford is not the easiest to get to.’ Although their roots are firmly Northern, having sprung from Cheshire Bus and Coach, both businesses cover the whole of the UK. Guy went on to explain that they had mapped their customer base and they were ‘truly national’. ‘We’re not global…yet’ Steve quipped.
For those of you that don’t know the structure of the Mistral Group, it is privately owned by Simon Fawcett who acts as CEO and Chairman. Guy manages the finance side of the business whilst Steve heads up rental, with a shared CFO sitting over both companies. Although they may all now be under one roof, there has been no merger and they continue to operate as two separate trading entities.
Mistral Bus and Coach
Mistral Bus and Coach exclusively lease ADL vehicles a fact Steve confirmed, although he went on to say, ‘Every now and again an existing client might ask for us to provide a rental agreement on another vehicle that ADL are not able to provide.’ There is no exclusivity agreement but, ‘we automatically quote ADL on new bus products. They are our default partner and this has been the case for the last three years. There was a formal communication during the middle of last year.’ Some joint branding was used at Euro Bus Expo last November and Steve confirmed that they would do more of that over this year.
I asked who had approached whom and Steve gave me the history of their working relationship. ‘When I joined in January ’99, I’d been working for Plaxton’s as it was then. Cheshire Bus and Coach, as it was called before Mistral, had a 100% Plaxton fleet. There were Plaxton Beaver bus bodies based on a Mercedes Benz 814 chassis and Pointer bodies on the Dennis Dart chassis. In the intervening 16 to 17 years, we have always bought buses from whatever incarnation they have been; Plaxton, Transbus, Alexander Dennis.’
Through the years strategic alliances have been formed with other companies. Mistral partnered with Optare for many years and latterly with Wrightbus when they launched the StreetLite, but underlying this was the ever present relationship that there has been with Plaxtons/ADL.
Steve went on to explain, ‘They were growing their retail business and we had direct links which were useful to them; it made sense to try and combine the two businesses.’ They will also be working together on the new Cheetah XL, which according to the ADL website, will be available from the first week in April. Mistral already has ten vehicles allocated that they will be able to rent to the market, with deliveries commencing in May.
Steve explained how they link product with the operator’s requirements and although they are currently more aligned to buses, in fact it is 100% of their current business model, this will change once the Cheetah is available. ‘We are predominantly midi bus at present with the Enviro200 being our main product, then a future development towards midi coaches when the new Cheetah XL comes out.’
‘We have customers from every size of operator, anyone who wants to rent a new or used bus, from First Group to sole traders, and everything in between. We buy the asset and retain ownership, simply renting it to the operator for a monthly amount that is in line with the length of the contract. We work closely with ADL’s retail sales team to try and hold the correct level of stock for the market conditions, although this is notoriously hard to predict. ADL always have stock planned in build so we can usually react to any customer requirement quickly even if there isn’t stock sitting on the ground waiting to go out. If there is a particularly unusual build requirement and the lead time on that product is too long, we will supply a rental vehicle for the intervening period to allow the operator to start the contract. Our part of the market has to be reactive, people are winning contracts on short lead times and they don’t have the luxury of being able to order vehicles 18 months in advance. This is a key strength for ADL and ourselves and allows us to be very active in the retail sector of the market.’
It is very clear speaking to Steve that he has a real understanding of the market as the discussion moved on to Euro5 v Euro6, concessionary fares, BSOG, new technology and quality contracts, the last topic quite relevant as we were sat in central Manchester. I’m sure that this knowledge and empathy has helped to make Mistral Bus and Coach the success that it is today. He has seen the fluctuations in the market and has had to deal with its instabilities, as he commented, ‘you have to be sympathetic to what’s going on as a supplier in the market.’
In order to keep abreast of changing regulations, the rental sales business model is that they prefer not to hold vehicles over five years of age. At the end of the period, the customer has the option to buy the vehicle or rent something else. Steve explained, ‘Some rental companies believe that you should hold the asset for its full life but we keep a very modern, fully compliant fleet and recycle it quickly. Our vehicles comply with European Whole Vehicle Type Approval and the Disability Discrimination Act.’
The latest telematics are fitted in all the new vehicles to track them, at substantial cost to the company, but as Steve said, ‘We are protecting our investment. Vehicle management systems give us the confidence our asset is being looked after and enable us to see how they are being driven and cared for.’
They don’t buy back vehicles, or accept part exchanges although they can often help to place a second hand vehicle with another operator through Steve and his team’s market knowledge and regular interaction with his customers; they know who is likely to buy. As part of the service, they go out to the operator and offer help and guidance where needed. ‘We want to see how the operation runs as we are investing our vehicles with them, it is important that we do this face to face.’
Mistral Asset Finance
Guy wanted to make it very clear that the finance business does not only fund Mistral vehicles and that the two businesses have very different customer bases, hence the reason for operating as two separate companies, but in synergy with each other. ‘We can fund any new or used bus or coach across the sector, therefore our target audience is greater than Steve’s. Our vehicle split is pretty much 50/50 bus and coach.’
He went on to say, ‘Whilst we work very closely with ADL and will finance anything that they do, we can offer finance on any vehicle in the market, new and used. We will work with any supplier and operator in the sector.’
The finance market is a healthy one and you need to have something to stand out from your competitors. Guy explained Mistral’s USP was that, ‘We specialise in the bus and coach market only and this sets us apart. We have good relationships with all the first tier funders, but we also lend our own money. We have our own portfolio which is purely bus and coach. We should and do have the ability to find the perfect home for every operator and find the right package for every deal.’
‘It’s about understanding the asset.’ Steve continued, ‘We are like a dealer sitting alongside them. We can say what a realistic price for that vehicle is. Some lenders haven’t got a feel for the industry in terms of the asset.’ Guy added, ‘We will fund a ten year old bus or a brand new top of the range executive coach, using a first tier funder or own book lending. If an older vehicle has a life left and it’s financially viable, we will take it on, whereas some lenders wont offer funding if it’s over ten years old. We look at each individual business case.’
Guy’s team does not source vehicles although often a recommendation has come through the rental side of the business. In the majority of finance deals, the operator has found the right vehicle before they come for funding and are looking for the best deal.
In addition to the leads from Steve’s customers and the direct contacts that come in, they use a telemarketing company to generate leads. They have specialist knowledge of the bus and coach sector and have been working with Mistral Group for a number of years. Mistral Asset Finance has a broad marketing campaign which includes networking, advertising in the trade press and attendance at shows. Euro Bus Expo last year was the first time that they had their own stand. Guy said this had ‘helped with our identity, as a specialist funder in the sector and ensured that we had our best ever show this year.’
The asset finance division is still a relatively new player in the market having started up five years ago from scratch with a sales force whose background was with Alliance and Leicester and Hansar. We are continually developing and increasing our customer base, we certainly don’t know every operator. The key is to provide a good service and hope they will come back to us and we can continue to build up our company portfolio. We do have some shared customers, there’s a lot of synergy between the two of us and Steve will often pass on leads.’
There are a lot of shared staff within the group, mainly in administration and finance as well as the sales team who have product knowledge of both sides of the business. This concept is relatively new although William Devine has represented both businesses in Scotland since he joined in 2012. It was important that the two sales forces worked closely together to give a full offering from sale to rental through to finance. ‘The aim is to expand the customer base, work closer with the dealer and supplier and be the funder of choice, whilst developing more within the current market’, said Guy. Steve added, ‘We have sales people going in to the same customers; they should have knowledge of both areas of the business as part of their skill set.’
A process of recruiting someone for the south of England has just been completed and Dave Cheeseman has recently joined the team. Dave will work across both divisions and bring his considerable experience to the Group, having worked at Dennis, East Lancs and latterly Optare. ‘With every customer we see, it’s about what is the best option for the customer.’ In a recent example, a previous finance customer went for a long term rental, from Guy’s perspective, ‘It was not the result we wanted but it was what was best for the customer.’
There are currently, four people in sales and with the new recruit and Guy and Steve, it equates to a strong team of seven.
Steve gave another example of how they work together, ‘There is sometimes an occasion when someone only wants to lease a vehicle for say 12 months because of the nature of the contract, we then give them the option to buy, which the finance division can assist with by offering a long term funding option. It de-risks from day one and the customer has already proved his reliability.’
As Steve explained, ‘We work hand in hand, when the rental vehicles come to the end of their term, we replenish the fleet and sell them on; Finance can then have the opportunity to fund the sale of the second hand vehicle.’
Steve: ‘From our perspective, it is diversifying in to parallel markets; by taking the Cheetahs, this will be the first time we have looked seriously at the coaching side. Assuming that goes well, there is no reason why we wouldn’t move in to full size coaches, although it is a more congested market with more people that do it. It will be a logical, commonsense thing to do with the relationship we have with ADL and the products they have in the market.’
‘There might be opportunities in Ireland but we have no plans to go international – it’s a different set of risks.’
Steve then went on to say how the market had changed through legislation. ‘The twin, parallel strands of low floor, then emissions has driven the renewal of the bus fleet in the last 15 years. Would business have grown without that legislation? Who knows, but it will have had an effect.’
‘We are moving towards full electric, it’s the talk of the market but whether it’s five or ten years down the line, who knows. We need to keep abreast of what is happening in the market. The step entry Beaver market is falling away this year and by 2016, all single decks must be DDA compliant and we need to be prepared for that. Then there are regional low emission zones which could create micro markets.’
Guy: ‘We are experiencing a good time; rates are very competitive and the market is attractive to funders because of the quality assets that have a good residual value making them re-saleable. There are more available options for operators with the most stable interest rates for a long time and there are no changes expected in the next 12-18 months – they can’t get any lower.’
‘The new FCA regulations help to provide structure to the finance industry and ensure high standards are maintained. We’re not looking to expand outside of the sector, we are just going to continue to expand our portfolio and offer an excellent service.’