Even construction giant Hutchinson Builders finds tough going in battered sector

THINGS are pretty tough in the construction game at the moment even for the big boys such as Hutchinson Builders, Australia’s largest privately-owned building company.

Hutchinson builders chairman Scott Hutchinson. Photo: Glenn Hunt.

HARD AS NAILS

THINGS are pretty tough in the construction game at the moment even for the big boys. Hutchinson, Australia’s largest privately owned building company, posted profit before tax of $37.53 million last financial year on a turnover of $2.7 billion.

That’s a wafer-thin profit margin of just over 1 per cent, points out Hutchies’ chairman Scott Hutchinson. Scott says the company’s turnover has doubled since 2014 but profit margins have bounced around from one to three per cent.

HUTCHINSON BUILDERS TRIES TO RECOVER $431K FROM EMPLOYEE

Next year, he expects margins of about 1.25 per cent. Rising costs of labour and materials on fixed-price contracts have caught out many a building company even during boom times. “It’s a bit counter-intuitive but we don’t like booms,” Scott tells your diarist. “We prefer steady times.” Scott says the collapse of well-known firms such as JM Kelly Group and Sommer and Staff have been a real shock, but hopefully things are stabilising.

He says Hutchinson is well-capitalised, meaning it is placed to ride out tough times and deal with regulatory changes including the expansion of the project bank account (PBA) scheme. From March, there are plans to extend PBAs, which require builders to set aside money for subcontractors in a trust fund, to private sector projects worth more than $1 million.

Scott says that because of its strong balance sheet, project bank accounts would not be a financial burden to the company but they would require the allocation of more administrative resources. We hope Scott is right about the industry stabilising, but given recent events it might be time to batten down the hatches.

HOT PROPERTY

PUBLICAN James Power can not only turn out a top-notch steak at his Norman Hotel, dubbed the worst vegetarian eatery in Brisbane, but he also does a pretty hot property deal. City Beat spies tell us Power made an absolute killing on selling the old Bunnings site in Hudson Rd, Albion recently.

Power and a joint venture partner offloaded the 4608 square metre site for $14 million compared to the $7.35 million they purchased the property for in March 2009.

That’s a cool 90 per cent profit over the past decade. Power is the nephew of publican Bernie Power, the man took on Alan Bond with his Power Brewing in the 1980s. Bunnings is moving into a swish new, multi-level building at nearby Breakfast Creek Rd. The Albion site has been sold to a national auto retailer.

FLYING FORMATION

BRISBANE-BASED Alliance Airlines may have a big new shareholder in the Flying Kangaroo, but it is also forging closer links with Qantas’ rival Virgin Australia.

Alliance says that it has extended its wet lease services agreement with Virgin until the end of 2021. A wet lease is an arrangement where one airline provides an aircraft, complete with crew to another carrier. Alliance has been operating services for Virgin to regional towns since July 2017 but under the extended agreement it will launch services to Port Moresby later this month. Qantas earlier this month invested $60 million for a 20 per cent stake in Alliance as a precursor to taking control of the successful Queensland regional carrier. What will happen with the Virgin arrangement if that occurs is anyone’s guess.

Alliance chief executive Lee Schofield says the carrier was excited by the opportunity to start operating international services for Virgin.

Alliance will operate a five-day-a week service, Monday to Friday, to the Papua New Guinean capital departing Brisbane at 9.35 am and arriving at 12.45 pm local time. The service will depart Port Moresby at 1.35 pm and arrive back in Brisbane at 4.50pm.