Strong demand for portables

With Western Australia’s resources boom exceeding all expectations, the three big manufacturers of portable accommodation are enjoying unprecedented demand.

Fleetwood Corporation, Nomad Consolidated and Ausco Building Systems dominate the sector nationally, and all have enjoyed strong expansion over recent years.

Nibbling at their heels are several smaller players, such as Blue Ridge WA, acquired last year by listed home insulation supplier Cool or Cosy.

However, fighting off new competitors isn’t the biggest challenge.

Like many businesses, the main challenge is managing rapid growth at a time of labour shortages and escalating materials costs.

Fleetwood has tackled this task by consolidating three manufacturing facilities to a new purpose-built site at High Wycombe.

It has also combined Fleetwood Portables, Fleetwood Durabuilt and Rainbow Transportable Homes into one entity, known as Fleetwood.

The person running the new entity is former Austal chief executive Bob McKinnon, who joined the group last June as a non-executive director but expanded his role a few months later.

“My plan was to be non-exec but there was a need for some executive support to get the businesses together and up and running, and I jumped at it,” Mr McKinnon told WA Business News.

“It’s a fantastic business and I’m really enjoying it here.”

That said, the consolidation process over the past year has clearly been difficult.

The company said recently that completion of its new premises has been delayed “as contractors experienced significant difficulties sourcing labour”.

Fleetwood’s production was also affected.

“Labour availability had a significant impact on production output during the period and is expected to continue to constrain production in the second half, although to a lesser extent,” the company said in its recent profit announcement.

Revenue for the half-year to December fell 25 per cent to $37 million, though this largely reflected a $14 million revenue boost in the previous period from BHP Billiton’s Ravensthorpe nickel project.  

The new premises at High Wycombe are operational, with about 200 staff and sub-contractors working in the site, and Mr McKinnon is confident the move will boost efficiency and growth.

“We are now in a position to apply all our resources to improving production techniques, and in particular production planning,” he said. “There is a significant logistical benefit but having everyone focused on one site makes a huge difference so far as production planning is concerned.”

Mr McKinnon said it was particularly important to be able to ramp-up production volumes to meet growth in demand, for instance for big mining projects.

However, Fleetwood isn’t just exposed to the mining sector; it also has a big exposure to the retirement market.

Mr McKinnon said the group effectively had five businesses operating from High Wycombe.

These include the manufacture of ‘park’ homes, which are mostly sold to National Lifestyle Villages and Aspen Group.

Fleetwood also manufactures ‘transportable’ homes, which are built on concrete slabs and are designed for families living in regional locations.

At any one time, the group is building between 30 and 40 park homes, 15 to 20 transportable homes and about 60 modular ‘floors’ for its ‘portable’ buildings, which are used mainly by the resources sector.

Fleetwood also generates income from about 1,000 rental buildings and owns Searipple Village in Karratha, which houses more than 700 people.

“All of those are businesses in their own right and help us to spread risk. It’s a very nice mix of business,” Mr McKinnon said.

The large office building at High Wycombe provides an example of what Fleetwood would like to do in future.

Using modular assembly, the office is comprised of a collection of portable buildings that are attractively linked together.

Brisbane-based Ausco, owned by South African company Waco International, has been in the manufactured accommodation industry for 40 years.

It employs about 200 staff and sub-contractors in WA, where its projects include building accommodation for Hamersley Iron’s Yandi iron ore mine.

National marketing manager Roger Bradford said WA was currently punching above its weight in terms of its contribution to group turnover.

The resources sector dominates Ausco’s WA business but the company also services sectors such as education, construction and park cabins.

Mr Bradford said a recently launched range of park cabins had been well received by the public.

In the resources sector, he believes Ausco offers a wider range of products than its competitors.

As well as selling its products, Ausco has about 10,000 buildings and 100,000 accessories, such as air-conditioners and refrigerators, available for hire nationally.

Mr Bradford believes another competitive edge is that Ausco is able to transport and install its buildings in remote locations, and perform associated civil works such as building roads.

Perth-based Nomad is a relative newcomer to the sector, starting operations 16 years ago, but it has grown to have about 180 staff and contractors.

Chief executive Phil Guy, who led a management buyout early this year, said revenue had more than tripled in the past three years and was projected to reach $85 million in the current financial year.

He anticipates further growth, targeting sales to reach $100 million with a matching increase in earnings.

Nomad’s services include the design, manufacture and installation of transportable buildings, with a focus on the resources sector.

It operates several facilities in Perth, including purpose-built premises in Henderson, and recently opened a factory in Brisbane to support its planned expansion.

Mr Guy said the resources sector accounted for about 85 per cent of current sales but he was seeking to diversify into the lifestyle and retirement village sectors.

“That’s definitely on our agenda over the next 12 months,” he said.

“We’re working with a number of lifestyle and retirement village developers who would use our products.”

Mr Guy said Nomad might even consider doing its own development if an appropriate opportunity arose.

The newest entrant to the manufactured accommodation industry in WA is Kewdale-based Blue Ridge, established last July by former Fleetwood Portables chief executive Alan MacKenzie.

He sold the business last October to Cool or Cosy for $250,000.

Cool or Cosy said Blue Ridge made a “relatively small contribution” to revenue in the half-year to December.

Specifically, it said a 4.6 per cent, or $570,000, increase in revenue largely represented the contribution of Blue Ridge.

It added that “forward order work and general enquiry levels indicate that the business should deliver an increased contribution in the second half”.

Cool or Cosy managing director Mario Di Lallo said the resources boom was keeping all manufacturers busy at the moment, but he was planning for life beyond the boom.

“At the moment there is plenty of room for all of us,” Mr Di Lallo said. “If people are still focused on the mining industry in two or three years they will be in for a shock.”

He said Blue Ridge believed there were big opportunities in regional areas, particularly servicing people seeking a ‘sea change’ or a ‘tree change’.

“The regional push is really where the growth is,” Mr Di Lallo said.