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Warning to construction firms: Not so fast...


Construction companies should not get carried away, even with the industry seemingly on the verge of a boom, an expert says.

University of Canterbury MBA director Tony Mortensen said: “With the projected growth in the construction industry in New Zealand over the following next five years it is critical that contractors in this industry consider their exposure to risk. They need to understand how they can ensure that they do not overextend the organisation’s cashflows and other critical resources. The demise of Mainzeal, New Zealand’s biggest building group, demonstrates that even the perceived biggest and brightest companies may, in fact, be facing financial distress.”         

He acknowledged the two biggest drivers of construction growth were the recovery in Canterbury and the population growth in Auckland.

"There are some positive signs of growth in the coming periods. However, this in itself does not always guarantee success for everyone involved as even the busiest companies can sometimes find themselves in difficult trading conditions. It is important that those in the construction industry stick to the basics, even when faced with the prospect of significant growth."

He said an increase in the volume of work did not always translate into guaranteed financial stability.

"Even the best operators will have to be extra vigilant and apply sound business practices to ensure they remain financially viable throughout what will be one of the strongest economic times experienced in the past 40 years in New Zealand."

Tags: tony mortensen

Source: Landlords.co.nz

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