BUILDING: NMC's Remarkable Turn-Round Success
Recent Western Cape Business News
One company that has turned its fortune from bad to good is the NMC Construction Group, the well-known Cape Town head quartered company.
And while it may be an over-simplification to say that its turn-round in fortunes was swift, the manner in which it was achieved is worthy of documentation.
Few construction companies came away unscathed from the events of the last 12 months. The industry depends on growth and when that comes to a halt, things can get ugly. Chief executive officer of NMC, Shaun Webber, summed up the situation with the sort of clarity and no-nonsense approach that characterises his management style. “There were three aspects that affected construction companies globally. One was finding new work; the second was delivery; and the third was cash – clients stopped paying. We were no different. NMC lost a lot of confirmed business”.
The 30- year old, privately owned construction company, NMC put in place a diverse construction portfolio that strengthened its core activity – construction – moving it from being a niche industrial contractor to being a construction group whose portfolio embraces civil engineering, fenestration, flooring, construction and, significantly, enterprise development.
Most companies faced with such a scenario would dig in and just try to push through. NMC took the decision to diversify. “It was a difficult strategic decision”, says Webber. “But we knew that – the industry being cyclical – the cycle would come again”. By the third quarter of 2009, NMC had pulled back more than 75% of its lost business. “We had weathered the storm”.
Yet the catastrophe called for something more. For NMC Construction this was partly in its Alliance programme, the decision to expand its geographic footprint into other parts of Africa and the establishment of the NMC Business School.
Group marketing manager Stephanie King says this was a direct result of NMC’s policy to invest in its people and positioning itself within the industry as the employer of choice; no easy task in an industry with severe skills shortages at every level.
The end result, in real financial terms, must be satisfying. At its financial year-end – 31 July 2010– NMC Construction showed a year on year turnover growth of 33% compared to the previous year. Currently the whole group’s order book stands at R1.3 billion, far greater potential work in the pipeline.
Interestingly, although NMC had no part in the construction in any of the soccer world cup stadiums, this created good opportunities for the company. King points out that many companies operating on the CDIB Grade 9 Level had their focus on stadium work. This left NMC - a CDIB Level 9 company too - more freedom to partake in larger contracts.
It is also notable that there has been a significant shift in its work spread. In the past the industrial sector contributed 80% of the workload and this sector now represents 50%. The other sectors have come to the fore, with the commercial sector growing from 4% to 17%.
NMC Construction has not only diversified its activities, it’s also continuing expanding its geographical footprint. The Eastern Cape branch was established with a R350 million revenue, whilst its KwaZulu-Natal branch continues to grow.
Importantly, it’s now busy starting up a separate company in Namibia with local shareholding and partners in that country. It will also be opening up a division in Gauteng.
On the civils side subsidiary Brink&Heath continues to expand and pick up new work. (See separate article on page 39).
The company is also geared to increasingly offer ‘green’ building solutions. “Clients are much more attuned to the environment – especially as regards energy efficiency.”, King says.
It’s here that NMC’s Alliance approach comes into good play. All contractors working within the NMC Alliance do so as co-contractors rather than sub-contractors and are treated as full partners in the Alliance.
“In so doing, additional inputs to better green solutions are achieved through the combined efforts of the consultants, client, co-contractors and suppliers.”, she says.
The company is also adhering strictly to its Construction Management System, which addresses safety, health, quality and environment and to benchmark itself in terms of green and productivity.
NMC has grown over the past five years – even through the recession – and has a number of notable recent achievements under its belt, including the Benteler automotive production facility in PE, worth R140 million, a new Builders Warehouse in Durban with a contract value of R16 million and D&A Timbers in Balito Bay with a value of R9 million.
Even more impressive are the current projects with which NMC is involved in. Some of these include the New Observatory Residences for UCT students – a seven storey building of 22 600 sq m – to the value of R280 million, the new PE Town Lodge Hotel to the value of R93 million and the R580 million refurbishment of Eikestad Mall in Stellenbosch, which will run over three years.
All in all, there is much to keep NMC continuing its successful story.
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