Contractors Are Turning Corner

Article excerpt

OUR Ord Minnett research team has undertaken an Australian contractors' survey, with the aim of gauging contractors' thoughts about expected operating conditions over the next 12 months.

The survey focused particularly on expected profitability and changes to work-in-hand.

We contacted 111 contractors and asked them questions about what they were seeing in terms of project deferrals and cancellations, as well as changes in their ability to obtain credit Co for example, bonds and bank guarantees.

The results of the survey suggest the industry is turning a corner of sorts, largely driven by an increasing number of contractors who expect rising levels of work-in-hand over the coming year.

However, importantly, profit margin expectations remain subdued Co a reflection of the impact of more competitive tendering.

Key findings from the survey include: 1) large contractors, including the ASX-listed contractors, are, on balance, expecting improving business conditions; 2) most contractors are still experiencing project deferrals; 3) most contractors expect to benefit from government stimulus programs; 4) credit conditions remain tight but are thawing; and 5) an increasing number of contractors are already experiencing a shortage of skilled labour.

Large contractors, on balance, expect business conditions to improve over the coming 12 months, underpinned by rising levels of work-in-hand and stable and/or rising profit margins. …