EMCO Building director John Ripp says Western Australia’s construction industry is facing some of the toughest times ever, with recovery not expected until mid next year.
Mr Ripp speaks with some experience. He’s been involved with EMCO for 17 years, the better part of the company’s 25-year history.
The past two decades have been a period of peaks and troughs for the Osborne Park-based building company, with the introduction of the GST and the recent GFC among the events to have a detrimental effect on the business.
Despite these difficulties, EMCO claims to have maintained a steady rate of growth over the years and now employs more than 50 staff.
A recent success was the signing of a $56 million deal to build a mixed-use development in Port Hedland.
EMCO was founded by Don Cousens in 1986 and Mr Ripp joined the business in 1994 after working in various finance and administration roles abroad.
At that time there were only five staff on board, and Mr Ripp said he and Mr Cousens knew the business had plateaued and it was time to implement new strategies for it to grow.
“We needed a more structured approach in looking for work and approaching the providers of work, who were mainly architects,” Mr Ripp told WA Business News.
“So we set about promoting ourselves to the architects and we worked very hard on refining our approach to tendering, estimating and acquiring the work.”
During the next seven years, EMCO grew to employ 16 staff and was involved in numerous retail developments and construction projects at schools.
However, the company hit a roadblock when the GST was introduced in July 2000.
“The nine months prior to the GST coming in was just pandemonium in the construction industry,” Mr Ripp said.
“When the GST came into play it bunched up a lot of work which normally would have been constructed after the GST date … it caused a shortage of labour and it caused us a lot of grief in terms of the costs of our projects.”
But the business adapted and by 2005, Mr Ripp said, had grown to almost 40 staff and was turning over close to $40 million.
Despite a constant stream of work stemming from the mining boom, Mr Ripp said the company was determined not to make the mistake of growing too fast, as many of its competitors had done.
“When you spike or hire large numbers to cater for the needs, you end up having situations where you compromise your values,” Mr Ripp said.
“Philosophically, with every boom there is a bust. I don’t think we anticipated the GFC but we were always mindful that we wanted to make sure the business was sufficiently well placed, and I think that curtailed our growth a bit.”
At the height of the boom in 2008, Mr Ripp said EMCO Building was turning over more than $80 million.
However, the company is now feeling the effects of the GFC and, like many others in the industry, has found securing work more difficult.
“Right at the moment I would say the construction industry across the board in Perth is doing it probably as tough as it’s ever been,” Mr Ripp said.
“We’re down about 15 per cent on turnover compared to what we were doing in the boom.”
With EMCO experiencing a decrease in its forward workload, Mr Ripp said the company had broadened its focus to include regional WA.
“We’ve had to broaden our approach to the marketplace, so we are looking at work up north and we are doing work out in the regions,” he said.
“We’ve just finished sizeable extensions to Geraldton Senior High School and we are about to embark on mixed-use development project in Port Hedland, which consists of 110 apartments and around eight commercial tenancies.”
While EMCO was once heavily focused on shopping centre developments and refurbishments, Mr Ripp said the market for retail projects was now almost non-existent.
“We used to do quite a bit of refurbishment work and shopping centre work all through the 1990s, but the retail market has dropped away considerably in the last half of the 2000s,” he said.
“The most work that has come out over the last six to eight months is the government work and in particular government schools; we are probably doing more government schools today than we have ever done.”
With up to nine other players sharing the market with EMCO, Mr Ripp said WA’s construction industry had become saturated.
He does not believe there will be an upturn in the market until the middle of next year, despite a number of new contracts being awarded around Perth.
For instance, commercial construction company Badge was recently awarded a $15 million contract to build an upmarket residential aged-care facility in Subiaco for the Berrington Care Group.
The new facility will consist of 112 studio apartments spread over three levels plus an undercroft car park and has an early 2013 completion date.
In addition, Probuild was recently awarded the Currie Hall expansion project at UWA, which will provide an additional 515 new self-catering dwellings at below-market rental rates.
The expansion will consist of three new five-to-seven-storey buildings, three major courtyards, secure storage for 200 bicycles and undercroft parking for 182 cars.
“I think the prospects for Perth are very positive, but the difficulty we have at the moment is that the works that’s going on up north is probably infrastructure work for the new projects,” Mr Ripp said.
“But once these projects start to move into production phase, then we will see the flow-on effect down to Perth.”