Suppliers and service providers to major projects desperate for work quadruple in six months

The overwhelming majority of suppliers and service providers to major projects in Australia are steady or busy with work, but the number of those desperate for work has quadrupled in the last six months.

The latest Projectory Quarterly Survey of Business Expectations revealed that nine per cent of respondents said their company was desperate for work – a fourfold increase since December.

Just over half of respondents reported their company as steady with work – a drop of nine per cent in the last six months.

Surprisingly, a third of respondents that six months ago said their company was ‘busy’ remained busy throughout the June quarter. The number that said their company was ‘very busy’ more than doubled from 2.22 per cent to 5.49 per cent in the same period.

The strongest five areas of growth in the June quarter compared to the March quarter were in sales revenue, employment hiring, marketing, profits and plant and equipment respectively. However, most respondents exceeded their June quarter forecasts made at the end of the March.

On average, plant and equipment expenditure was 6.31 per cent over forecast; new job hires 4.97 per cent; building and structures expenditure 2.65 per cent; and non-wage labour costs 2.33 per cent. Overtime utilization was up by 1.39 per cent and marketing expenditure was line ball.

These above forecast trends were in contrast to sales revenue, selling prices, wage growth and profits that were below forecast.

The biggest gap was in profit with respondents reporting 16.12 per cent less profit than forecast for the June quarter. This was followed by wage growth – 8.86 per cent below forecast; selling prices – 6.41 per cent below and sales revenue 4.45 per cent below.

Strongest performers

Respondents that reported sales revenue as up in the June quarter were mainly from:

·       Queensland;

·       agencies/consultants followed by manufacturers, EPCM firms, Tier 3 sub-contractors servicing EPCMs, and Tier 2 firms;

·       companies that had a smaller full time workforce and considerably fewer contractors and part-time staff;

·       companies that had an annual turnover greater than $1 million

Outlook

Overwhelmingly respondents were optimistic about their company’s performance and in their outlook for the major projects economy in Australia for the September quarter and the next 12 months.

Half of respondents expect revenue to go up in the September quarter and 45 per cent expect profits to go up.

Just over 28 per cent of respondents expect sales revenue to stay the same and 36 per cent expect profits to also stay the same.

One in five respondents expect sales revenue and profits to fall in the September quarter.

Fewer than five per cent of respondents expect the major projects economy in Australia to be much stronger in the September quarter, 29 per cent – somewhat stronger, 39 per cent – the same, 23 per cent – somewhat weaker and three per cent – much weaker.

The outlook for the next 12 months was more positive.

Ten per cent of respondents expect the major projects economy in Australia to be much stronger in the next 12 months, 44 per cent – somewhat stronger, 21 per cent – about the same, 22 per cent – somewhat weaker and 3.3 per cent – much weaker.

Pipeline of work

Most respondents at 27 per cent said they had more than 18 months of work in the pipeline; 24 per cent – three months; 18 per cent – six months; 13 per cent – 12 months; 10 per cent – nine months; and eight per cent – one month.

Opportunity sectors and states

Respondents ranked mining as the industry sector offering the best prospects for their company followed by infrastructure, oil and gas, construction – non-residential, energy and utilities, industrial, defence and construction – residential.

Western Australia ranked highest as the state offering the best prospects for their company followed by Queensland, New South Wales, Northern Territory, Victoria, South Australia, Australian Capital Territory and Tasmania.

About the survey

The latest Projectory Quarterly Survey of Business Expectations canvassed the views of 110 individuals with suppliers and service providers to major projects in Australia.

Most respondents were based in Western Australia – 37 per cent; followed by Queensland – 25 per cent; Victoria 15 per cent; New South Wales – 14 per cent; South Australia – six per cent and Northern Territory – one per cent.

The surveys are conducted by Projectory – an online lead generation service for suppliers and service providers to major projects in Australia.

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