Hutchies’ Profits Laid Low by Labour, Material Costs

Scott Hutchinson is in the driver’s seat of one of Australia’s largest privately owned construction companies with his foot still on the brake.

But things aren’t slowing down as quickly as he had hoped—particularly on the Gold Coast where he concedes Hutchinson Builders has “got blitzed a bit”.

In May, the chairman of the family-owned firm revealed to The Urban Developer that his company had knocked back about $7 billion worth of work so far this year.

Five months later he estimates: “It’d be well over $12 billion now”. 

“We're trying to slow things down wherever we can,” he said. “We've never closed our books but we’re just being much more selective.

“We're still signing up $200-$300 million a month and we're turning over about $300-$350 million a month. So we're trying to take on less than we get through but it's quite difficult.”

And it seems Hutchinson won’t be taking his foot off that brake for some time to come after the company’s pre-tax profit for 2022-23 dropped almost 80 per cent to $6.3 million from last year’s $28.9 million.

Overall, its gross profit plunged 39.3 per cent to $36.3 million from $63.2 the previous year. Construction costs were to blame with costs of materials and labour soaring and outpacing revenue. 

“I have to keep stressing this because it's so counterintuitive. When your turnover goes up, your profit goes negative,” Hutchinson said.

Looking at the road ahead, he is not expecting it will get any smoother for at least another 12 months.

Hutchies financial data, 2019-2023

^{Source: Hutchinson Builders website, 2023.}
 
“We’re hoping for maybe a half-decent year in 2024-25,” he said. “There’ll be nothing again this financial year … probably close to zero, might be just in the black like we did last year.

“But it won’t be good and we haven't had a good year since 2017.

“It’s still overheated but it's coming off. It could only do one thing. I mean, building prices in southeast Queensland have risen 40 per cent. It has hit  private development for six.

“That’s pretty much gone and it’s just government work and that sort of stuff now. But it’s still hell getting anything built. It’s slower and it’s just hard work

“This last kick really took everyone by surprise. The speed and the volume was just insane and it's the Gold Coast going off. Everyone pushed the button at once … and so we’ve got blitzed a bit.

“We all know the Goldie goes crazy and then it goes back to zero and that's what's going to happen but it’s just taking a bit longer.”

The company’s revenue for 2022-23 was up 17.3 per cent to $3.12 billion from $2.66 billion the previous year but costs also rose higher, by 18.8 per cent to $3.08 billion from $2.59 billion.

“We're still madly over capitalised but we don't want to use that capital to go to $4 billion,” Hutchinson said. “We're trying to keep it under $3 billion.”

Data from Hutchinson Builders shows that the company had net tangible assets worth $326 million at the end of the 2019 financial year and that this had only increased to $391 million at the end of the 2023 financial year.

▲ The rain of La Nina had a greater impact than Covid, says Scott Hutchinson.

Hutchinson said all builders were facing the same challenges across the industry as projects racked up losses in the face of rising labour shortages and construction costs.

But he also has accused the $3.6-billion Queens Wharf project in Brisbane of holding hostage a workforce that could go elsewhere while Multiplex and Destination Brisbane Consortium work out their differences. 

In February, he told The Urban Developer that the weather forecast for the months ahead would also be key to getting projects back on track and completed faster.

“We need a recession and a drought and things will get back to normal … and I reckon we might get both,” Hutchinson said at the time.

Later commenting on the Bureau of Meteorology declaring an El Nino event that would bring less rain, he added: “At the moment because we’re all used to wet weather, and also post-Covid and the boom, construction times have all blown out. But clients and everybody else understands that.

“As soon as it’s dry, and after about 12 months of everybody expecting it to be dry, you’ll find clients will demand tighter build times.”

▲  Scott Hutchinson says the Queens Wharf delays are stopping big numbers of workers from moving on to other projects, causing delays.

Hutchinson Builders is 111-years-old and its boss says times are as tough as they get but his company is being careful and strategic and will survive.

Earlier this year it stepped in to bring formwork inhouse, crucial to getting projects built and completed, in the process employing many subcontractors out of work when other companies went bust.

It has also recently opened an extensive joinery workshop as part of a strategy to expand its in-house trades capacity to ensure continuity of supply of essential services to its projects.

The company made a similar move during the pre-GFC construction boom, bringing cranes in-house.