Australia, Finance

The winds of change are blowing

For some crane businesses the challenges of the last three years have been proved to be too much, with a number of good family-owned businesses deciding to close the doors. With 28 years plus of crane financing experience Jeff Wilson, Senior Partner at Finlease, predicts further changes will blow through the industry – and has tips on how to navigate them.

“I truly believe that a number of the older generation in our industry is plain tired,” Jeff says.

“They are tired after battling the many challenges presented by COVID, they are tired because of a lack of quality people available in the workforce, tired because the unions are ramping up negotiations on wage increases, tired with constant supply chain issues, tired because of the number of additional “regulations/ paperwork” required to stay in businesses. 

“They are tired because they haven’t been able to have taken holidays and recharged their energy levels and tired because they recognise there is a need to reinvest in their businesses to gear up for the work that’s here now and the work that is coming. This has led to some business owners saying, “You know what? “This is all too hard,” and with such strong secondary values on equipment, because of the chain supply issues, some owners are now simply closing their doors and selling their crane fleets,” Jeff says. 

Jeff provides an example of a business located in a flood prone area on the East Coast. Every time there is a flood the business and surrounding businesses go under; it takes the business and the local economy a good 12 months to 24 months to recover. 

On one occasion the business owners went through multiple floods in a year, they battled through COVID and then they were faced with the prospect of having to put their workers on similar EBAs to that of the capital cities. Unfortunately, not having the same utilisation of capital city-based companies it did put a lot of additional financial pressure on the company. So, after all the years in business, the owner said, “You know what? I don’t need this stress in my life anymore. I’ve had enough of this. I’ll just shut the doors.”

Jeff adds that the current extended lead times for new equipment is another reason that business owners are electing to go down this path, as the strong resale values of not just late model cranes, but transport equipment is allowing owners (rightly) to walk away with good equity. 

“If my intel is correct, unfortunately we are going to see further businesses putting  up their hands and saying, ‘my time is done let’s shut the doors’ and this may happen across the country,” Jeff says.

It is easy to understand the decision-making processes that lead to the closing of doors, and Jeff goes on to examine the impact this is going to have on the Sydney market as an example. There are bound to be positive outcomes for the remaining crane hire businesses, he says.

“This is why the Winds of Change describes perfectly the current environment. A crane hire company in Sydney operating say 10 cranes decides to shut the doors. For the sake of this example, let’s say there are 300 cranes in the Sydney market.

“The crane business says, “I’m shutting my doors,” and those 10 cranes are predominately sold out of the Sydney market leaving 290 cranes left to do the work of 300 cranes. The Winds of Change dictate that either the tried and trusted remaining businesses will pick up that work, or the opportunity will exist for the younger generation in the industry who are coming through will roll up their sleeves saying, “Hey, now’s the time for me to have a go” and find their first or second crane and start the journey of building a crane hire business” he said.

“So, there’s going to be a new generation, a younger generation, replacing those that have closed the doors. Over recent years, we’ve also seen a changing of the guard in well-established long-term family-owned businesses. We’ve seen it with the multiple businesses throughout Australia as the parents of the business now get ready for “slowing down” and their children stepping up and taking on more ownership responsibilities. 

The Winds of Change has seen the passing of the ‘old guard’ more recently with the passing of CICA Life Members Bob Parker, Robert Way and John Gillespie and more recently the sad and sudden passing of Gibb (Gibby) McKay earlier this year. 

There’s a lot of change happening before our very eyes and it’s not limited to the crane hire businesses either, says Jeff. The Winds of Change are blowing throughout the industry including a change in the leadership of our industry group, The Crane Industry Council of Australia (CICA), says Jeff.

“We’ve seen the CICA National President Tom Smith step down and Ben Pieyre from Boom Logistics step up and into the role. Two years ago, I personally decided to gradually step down as the Chair in NSW and this gave Anthony Heeks from Pace Cranes and myself the opportunity to work together on a seamless handover of responsibilities.

“We’ve seen some changes in Queensland as well with Steve Ganano stepping down as Chair and Pete Koschel from Tadano stepping up, and there’s also Marcus Rigney, the South Australian chair, stepping down. It does appear the time is right for change,” said Jeff.

“I can remember attending national conferences or attending tours to bauma and ConExpo, some 25-26 years ago, and remembering looking up to John Gillespie, Jeff Brundell, Robert Way and Gibby McKay (to mention a few) thinking they were our industry’s’ senior statesmen. I look now and I can see it’s my generation now running with the baton,” he said.

The Winds of Change are also blowing through the financial sector. Interest rates are increasing as an attempt to get inflation under control, there is talk of recession, the war in Europe looks like it isn’t about to end anytime soon and there is a continued shortage of labour. Jeff says these factors will have a different impact on the industry.

“I see the business world as being in a unique position. The media is telling us that the world is about to come to an end. Interest rates are continuing to rise and there’s no doubt at all about that, we’re all seeing it every month in our repayments.

“But when you listen to not just crane business owners but business owners in general, large medium or small, there is so much optimism about the amount of work/ infrastructure spend to come, the number of shovel-ready projects in the pipeline, and we’re still struggling with massive housing and labor shortages, so, I just can’t see
the construction industry changing or slowing down any time soon”. 

“But there are challenges. We’ve still got supply chain related issues, but these will ease in time, there’s a skills shortage and the unions are very active in trying to negotiate better outcomes for the membership. They know the construction sector is set for a good decade and they’re really pushing aggressively while they believe they can do,” he says.

“I have an expression that if you’re a medium-sized company, you are too small to be big, but you’re too big to be small. Because you’re that medium size, you can’t afford to have all the infrastructure a big company can afford. This can include a draftsman, a full-time mechanic, multiple office staff etc. 

“And because you’re the size you are, you’re too big to be operating with just one accounts person or running the business out of your home. You’ve got five to eight cranes and three trucks supporting them, so you need a yard to house all of this. So, a medium sized business is stuck with all these overheads whilst the smaller guys might operate from home with very low overheads,” he said.

The bigger businesses have multiple cranes and trucks that simply allow them to spread the costs of running the business over more assets thus reducing the cost of “back office” staff.

“And if you think about, it is the medium sized business that has the most to consider? It’s a fascinating change and it’s happening before our eyes, and we see it now. 

“The businesses themselves are good business and performing well.  It’s just that the owners are saying, “Hold on, I’ve just spent the last three years on this emotional rollercoaster of COVID related lockdowns, fires and floods, staff shortages, union pressures and now I’ve got to invest another $4 million just to survive? Their conclusion has been, “I don’t think I’m ready for that,” and the Winds of Change will continue to blow throughout the industry,” Jeff says. 

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