29/03/2017 - 11:46

End of boom not end of road for modular builder

29/03/2017 - 11:46

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Five years ago, modular building manufacturer McNally Group was riding the crest of the giant investment wave that was Western Australia’s resources construction boom.

End of boom not end of road for modular builder
Mark McNally says establishing a modular construction firm to complement his manufacturing outfit has insulated McNally Group from the resources downturn. Photo: Philip Gostelow

Five years ago, modular building manufacturer McNally Group was riding the crest of the giant investment wave that was Western Australia’s resources construction boom.

The company’s Henderson-based facility was manufacturing at capacity, with demand from resources giants, including Rio Tinto and Fortescue Metals Group, for custom-built villages driving rapid growth in McNally Group’s order book.

However, 2012 proved to be a turning point not only for the company, but also the state’s resources sector, as the mining investment boom ended and began its inevitable downturn.

Managing director Mark McNally said a review of the company’s operations following a 2012 Business News Rising Stars award win resulted in a new direction.

Mr McNally said competing against imported product in the modular buildings space was becoming increasingly difficult, a challenge that prompted an expansion and diversification strategy.

“We thought ‘there are two things that can happen here; imports will become more and more prevalent and they will take over, and we won’t be building any more here, or it could slow down and there are an awful lot of buildings around, so there are going to be a lot of relocations’,” Mr McNally told Business News.

Mr McNally said joining the wave of companies that imported modular pods, mostly from China, was never considered as a growth strategy.

“We really do believe in keeping jobs in Australia – everything that we do, we use local trades, local supply and that provides quality and a lot of confidence,” he said.

“It may cost slightly more, but in my opinion you’re de-risking the project.

“In terms of product control, on any day, our factory is open to our clients.

“They can come down, inspect it, see how it’s going; you’ve got higher quality and it’s de-risked, because you can see what’s going on first hand.”

Mr McNally said the company’s logical next step was to establish McNally Contracting, a separate construction entity specialising in modular villages.

“We started McNally Contracting with the understanding that construction is very different to manufacturing,” he said.

“However, we thought we could bridge the gap – we’d always thought that us manufacturing here and sending it a few thousand kilometres down the road to another construction company – that interface we felt we could improve.”

Over the past five years, McNally Contracting has grown into a larger entity than McNally Group, revenue-wise, as demand for new manufacturing fell off.

Mr McNally said a contract with Gold Road Resources at its Gruyere mine was McNally Contracting’s biggest growth catalyst, with the scope of works involving the relocation of two camps from the Pilbara to create a 650-person camp north-east of Laverton.

At the same time McNally Contracting was becoming a leader in modular construction in the resources space, McNally Group began spending heavily on research and development to enter Perth’s residential and hotel development markets.

“Instead of doing predominantly mining and resources work, we’ve been doing things like working up at Alkimos for Lendlease, doing a surf lifesaving club, and sales and information centres,” Mr McNally said.

“For a lot of apartment developments, we do the display suites.

“We do bathroom pods for hotels and apartments, aged care and hospitals – that type of thing. We really invested in making our manufacturing systems better.”

The change in scope has coincided with a modular building boom of sorts in Perth, primarily in the hotels market.

Mantra Group’s Peppers Kings Square hotel was completed last year, becoming the nation’s tallest modular structure.

SKS Group’s under-construction DoubleTree by Hilton project on James Street in Northbridge is also a modular build, while a host of other developments proposed across the city will use a prefabricated solution.

“There have been a few go up, and I just want them to go well, whoever it is, even if we have to compete with them,” Mr McNally said.

“A rising tide floats all boats, so we need modular construction or pre-fab just to be a solid alternative.

“It’s not going to take over and not every hotel will be modular, because it doesn’t suit that, but you want things to go well so people can get an understanding of the efficiencies in time and quality, that type of thing.

“That’s where we can fit in and bid for more projects.”

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