The crisis got real for Joe Barr in late March. Construction sites in pandemic-ravaged Italy and Spain were closing and the country’s largest building companies feared the same would happen in Australia.
“It was late March, when we were hearing everything that was being done in Europe, it was ‘Oh my God, we’re going to have to stop the industry if we don’t manage this process’,” says Barr, the chief executive of China Communications Construction Company-owned builder and developer John Holland.
It was a tumultuous six months for the company. The virus coincided with a restructure that led to up to 200 job cuts, mostly in corporate roles and in building and infrastructure. Barr says the cuts were a rebalancing of the company that had grown rapidly over the past four years.
Amid speculation construction work would have to stop, there were many hurried discussions about how the industry could keep going and keep workers safe, especially after a subcontractor on a Melbourne site tested positive to the disease.
“We were talking as one in an industry about the need to keep an industry going. We had clients – private clients and government clients – and we had the unions, and everybody was on the same page: this is an important thing to keep going.”
They weren’t completely on the same page, however. The Australian Constructors Association, the lobby group representing the country’s largest builders, including John Holland, upset smaller builders led by Master Builders Australia – which strongly opposed any closure – when it proposed planning for a shutdown in a letter to Prime Minister Scott Morrison.
Barr points out it’s harder for builders of taller, thinner high-rise apartments and commercial office tower sites to implement social distancing. It’s easier on lower, flatter buildings, with fewer people and space to spread them out.
John Holland experienced that on its 275 George Street project in Sydney. When the pandemic hit in March, the builder was pouring concrete slabs for the narrow, 15-storey office tower with floor plates just 500 square metres in area.
“In those initial few days or weeks, we think we lost about 50 per cent productivity on that job because, instead of putting 20 people in the lift, we could only put four and to take everybody up to the floor to be able to work, it took a lot longer.”
But like other large builders, the company was able to adjust to the circumstances and in the end no sites closed. It split work teams and staggered them to reduce contact, it sequenced activities so that materials weren’t competing with workers for the lift.
“On that project we went from an initial hit of 50 per cent to an 80 per cent productivity rate,” he says. “But we have still only got 80 per cent of the productivity on that structure.”
John Holland’s construction revenue, from projects such as prisons, hospitals and schools, accounts for about one-quarter of total revenue, as do the categories of infrastructure, major projects and rail. In an industry with a lumpy revenue stream, total revenue for the six months to June stood at $2.01 billion, down 3.9 per cent from the $2.09 billion of the six months to June 2019 (out of a full-year total $3.96 billion).
The monthly revenue in June 2020 of $267 million was down 31 per cent from May’s $386 million and down 26 per cent on the June 2019 figure of $360 million.
Barr, who says productivity is a better measure of performance than absolute revenue numbers, isn’t concerned that a second wave of COVID-19 infections will force site closures.
“We have proven that we can work safely with the pandemic,” he says.
“We’ve got a number of months of evidence to say we can manage it well. Because on every major construction site, every major infrastructure project, we’ve been able to keep going.”
The bigger concern is whether clients have the confidence to commission new work.
“New projects need to keep coming down the pipeline,” he says.
Frontine Fallout is a new series running monthly in The Australian Financial Review, following 13 private businesses as they navigate the economic effects of the pandemic.
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