Building for the future
It is often said that only the strong survive in times of crisis, and nowhere has that been more aptly illustrated than by the boom and bust market of DubaiÔÇÖs construction industry. Andrew Pelis talks to one company that is weathering the storm better than most.
Strength in hard times comes from character, a sensible long-term strategy and years of experience, all of which are present in abundance at ANC Contracting. Part of the ANC Group, which was established in Dubai back in 1976, the company is 100 per cent locally owned and has been incorporated for over 30 years, during which time the area has been entirely transformed.
Operating with ISO 9001 accreditation, ANC Contracting has, during its lifetime, developed an excellent reputation for delivering quality projects. Among the highest profile of these is the 50-storey Arenco Tower, an iconic office building located close to Dubai Media City. In addition, the companyÔÇÖs project of 146 luxury villas on the Jumeirah Golf Estates Earth Course will shortly receive top billing as the course plays host to the inaugural Dubai World Championships.
ANC ContractingÔÇÖs general manager Chris Preece has worked in the Gulf region for 31 years. He joined the company two years ago, at a time when demand had become astronomical. ÔÇ£The market here was over-heating and needed a correction,ÔÇØ he says. ÔÇ£The last five years saw a lot of less desirable elements enter the Dubai marketplace as the growth of the area became stratospheric. What has happened since then has flushed away a lot of the less amenable businesses and has focused peopleÔÇÖs minds on a more professional approach. In my opinion, it is the best thing that could have happened and has provided a much-needed culling.ÔÇØ
The effects of the economic downturn have certainly affected margins, but Preece feels that ANC Contracting is well-placed to ride out the current storm. ÔÇ£Pre-crisis, we were a Dubai contractor but we are now moving into more markets,ÔÇØ he says. ÔÇ£In the past, we have had a particular emphasis on commercial, residential, high-rise and corporate buildings in the Dubai area, but we are now looking at opportunities in Abu Dhabi, Saudi Arabia and Oman.ÔÇØ
Preece came on board during the last peak in business growth with a directive to ÔÇÿchase the spikeÔÇÖ. ÔÇ£Around that timeÔÇö2007ÔÇöwe had in the region of 50 to 100 per cent annual growth and it was very much a contractorsÔÇÖ market. Contractors back then were able to pick and choose what projects to work on.
ÔÇ£Even then, we were broadening our base in terms of type of work and geographical location,ÔÇØ he continues. ÔÇ£We are now tendering a lot more industrial projects than before and recently bid on a cable factory contract. In the past, we wouldnÔÇÖt have really looked at manufacturing projects but the days of 200 or 300 towers going up in Dubai are over, so we have had to diversify.ÔÇØ
Today, ANC Contracting has annual revenues of roughly one billion dirham (approximately Ôé¼182 million) and aspirations of sustainable growth in the region of 10 to 15 per cent per annum. Prior to the sharp peak of the last two years, both the company and Preece had witnessed consistent growth throughout the eighties and nineties in Dubai, and it was only in 2003 that the new era of boom really took hold.
ÔÇ£What we have seen in the last year in terms of decline has more or less balanced out the exceptional period that preceded it for five years,ÔÇØ Preece explains. ÔÇ£We have therefore returned back to normal levels in a sense, and we pitch ourselves at the upper middle end of the market.ÔÇØ
One area of the local construction industry that has visibly changed has been the number of workers and the levels of skills available. Currently, ANC Contracting has a headcount of around 4,000, including 3,500 skilled and unskilled workers. The supply and demand equation has changed greatly in the short space of two years. ÔÇ£In 2007 and the first half of last year, there was massive demand for projects and few resources available,ÔÇØ Preece explains. ÔÇ£That has turned over now and there is lots of supply and much less demand; we have plenty of resources in the area as lots of skilled workers have wanted to stay on for various reasons. We have therefore been able to recruit from a very experienced pool.ÔÇØ
Preece highlights safety as a priority in the workplace and as one reason why skilled workers come to ANC Contracting. ÔÇ£We pride ourselves on looking after our workforce. There really is no value you can attach to a lifeÔÇöit is about ensuring that everyone has a safe environment to work in. The strain comes when timeframes are pushed to the limit to complete projects on time and corners are cutÔÇöwe have never taken that approach.ÔÇØ
While Preece admits that prior to the crisis, finding the resources to deliver had become problematic, that issue has now largely dissipated and todayÔÇÖs main challenge is to maintain competitiveness in a demanding marketplace. ÔÇ£It comes down to hard and fast marketing, market influence and identifying niches in your markets that add value,ÔÇØ he says. ÔÇ£We feel we have made the right moves and at this stage we are looking no further ahead than next year with our planning.ÔÇØ
Looking to the future, Preece is confident that ANC ContractingÔÇÖs blend of experience and diversity will see it ride out the current commercial and economic storm. ÔÇ£The next three months is crunch time for many companies. Clients are not paying and the whole market is squeezed of cash. However, there is light at the end of the tunnel thanks to new money as a result of the [governmentÔÇÖs] bond share. We have also seen prices on some of the materials we use come down.
ÔÇ£WeÔÇÖve taken the measures we needed to in order to broaden our markets in 2010 but at the moment the whole supply chain is starved of money,ÔÇØ he continues. ÔÇ£Everything is in place and we are strong enough to surviveÔÇöwe just need to wait for the financial markets to free up cash which has been promised.ÔÇØ
Preece says that many of the newer businesses donÔÇÖt have the experience of operating in a bear market; by contrast, ANC Contracting knows how to respond and what to expect. ÔÇ£WeÔÇÖre well-placed to cope with a different, more demanding market and we have contacts and a good client base, thanks to our long history and reputation. Having cut our costs and started moving into new markets, we are confident that we can maintain our forecasts,ÔÇØ he concludes.
