29/07/2014 - 14:15

Contractors geared up for sector downturn

29/07/2014 - 14:15

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In the final installment of our four-part series on EY Entrepreneur of the Year nominees, we talk to chief executives of six contracting and consulting businesses.

RAPID GROWTH: Killarnee founder Paul Thompson.

In the final instalment of our four-part series on EY Entrepreneur of the Year nominees, we talk to chief executives of six contracting and consulting businesses.

Contractors that have prospered on the back of resources projects during the past decade have adopted different strategies in response to the challenges posed by the sector’s slowdown.

Some, like Monford Group, have picked up work on big infrastructure projects in Perth, to partially offset the slowdown.

Others, like ASX-listed OTOC, have won government work, including on the immigration camps on Nauru.

Like many of her peers, 360 Environmental director Michelle Rhodes said the key was to be responsive to changing opportunities.

“Our challenge is to move into markets as they present, and to be agile,” she said.

Ms Rhodes said 360 was helped by the ability of its consultants to work across land development, infrastructure, resources and other industries.

“We’re looking to do more in agriculture, we think that’s a big opportunity.”

Wallis Drilling managing director Graeme Wallis has seen a few downturns during his time in the industry.

He said Wallis’s turnover is down about 30 per cent, in line with the market as a whole.

“All the service companies are battling at the moment, but that’s the mining industry,” Mr Wallis told Business News

Like many of its peers, Wallis has trimmed its staff numbers in response and currently has about 230 people.

OTOC’s executive director Adam Lamond believes that, despite the downturn, his business is in a strong position.

This is shown by the EBIT (earnings before interest and tax) margin, which has been improving since 2011.

“We’ve been streamlining the business and managing projects better as we’ve got better systems and processes in place,” Mr Lamond said.

The Whelans surveying business has diversified OTOC’s income, while the Nauru contracts are “starting to open up lots of opportunities in government work, in Australia and neighbouring countries”.

Starting out

While most contractors are adjusting to the market slowdown, this comes after some extraordinary growth.

Monford Group had two employees in 2010 and now has 180 staff.

It’s a similar story at Killarnee, another start-up that also has about 180 workers currently.

Both businesses were started by Irish migrants who came to Australia with no money but a great desire to get ahead – and a recognition they had nothing to lose by having a go.

Monford’s Declan White got his start with a small team, sub-contracting to John Holland on the Pluto LNG project.

“We started as a contractor with just three of us on site, and they wanted more and more from us,” Mr White said.

“I told them we were a start-up and didn’t have the cash backing, so we negotiated shorter payment terms from them.

“That was a big boost to get us started, and it helped them because they got the service they wanted.”

Monford has continued to develop, having obtained electrical, building, demolition, and asbestos removal licences, so the business can offer more services.

Mr White was on a very steep learning curve from the outset.

“The first challenge was red tape, learning about the regulations and the rules and things like superannuation,” he said.

“I did courses in the evening to educate myself, on book keeping, human resources, industrial relations, all sorts.”

Mr White said the project slowdown had made it easier for key people in the business to recruit quality staff.

At a strategic level, the business is still run by Mr White and his wife, Carly, who is also the CFO.

“She challenges me every day; we do the strategic planning,” he said.

Killarnee founder Paul Thompson bought a truck, employed three workers and drove north in search of his break.

“It was as simple as that,” he said.

“As an immigrant I had no real contacts.

“It started happening very quickly, before we knew it we had $3 million worth of work on our books.”

Killarnee is working on the Gorgon project on Barrow Island and the Burrup TAN project.

Mr Thompson said 2014 had been pretty quiet but could see some big opportunities, if he secured the right backing.

“I’d like to have the backing of an investor or a larger company so we can expand the business,” Mr Thompson told Business News

“The problem we’ve got is that there are jobs being offered to us that we can’t possibly fund.”

Kais Contractors was established in 2004, but it took two years before winning its first major contract, with Brierty.

Kais is a plant hire company specialising in equipment for ‘final trimming’ of roads for mining, infrastructure and civil construction.

Founder Sharon Kais worked multiple jobs and remortgaged the house to get the business going.

“The funding was really hard,” Ms Kais said.

Kais has grown to have 50 staff and $15 million annual turnover

“It’s been a great journey,” she said, with Kais recognised as a premium supplier in WA.

Ms Kais said she had always sought to have a diverse spread of clients, and was also looking to diversify into civil contracting, though on a small scale to ensure the business was not competing with its plant hire clients on bigger projects.

Success meter

For Mr Lamond, a measure of success is his ability to take time out of the business with his wife and children.

“We always set personal goals as well as business goals,” he said.

“We always said we would take a year off and live in Europe with the kids and give them an opportunity to learn a couple of languages.”

The appointment of new chief executive Simon Thomas has enabled Mr Lamond to step back from OTOC, though he remains a director and 30 per cent shareholder.

“The business has grown to where it’s bigger than the individual; lots of people get stuck in their business and can’t get out,” Mr Lamond said.

“If I can’t step out of the business and let it continue to succeed and grow, then I haven’t actually created a successful and sustainable business.”

Mr Wallis is at a different stage of his career, with succession planning being a major focus.

He joined Wallis Drilling in 1976, initially with his father and brother.

“One of the biggest achievements was having the three of us working in the company together,” Mr Wallis said.

While he continues as managing director, the company has a separate chief executive in Mark Crumby, who used to be its bank manager.

“He was the only banker who really tried to understand how we worked; others were interested in the finance but Mark wanted to know what we actually did,” Mr Wallis said.

He is in the process of establishing a formal board, which will include himself as chairman, his brother Jamie as a director, and his two sons as alternate directors.

The five-member board will also have independent directors from legal and finance backgrounds, along with Mr Crumby.

“It’s always a problem with family companies but I think we’re handling it quite well at this stage,” Mr Wallis said.


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