Norfolk’s Mechanical division has more than 50 branches across Australia, New Zealand and more recently, India. It provides a range of services including the design, construction, installation and maintenance of HVAC (heating, ventilation and air-conditioning) and refrigeration systems, duct cleaning services, plumbing and pipeline services.
The Mechanical division has a portfolio of seven leading brands, including Haden, Smith Brothers Plumbing, Ductclean, Climatech, Tempest, Airforce and Airfield.
For the year ending 31 March 2008, the division delivered a very strong pro-forma EBIT growth of 25% with pro-forma EBIT of $16.5 million, from a year earlier, and EBIT margin of 6.3%. Pro-forma gross profit from recurring revenue rose to 74% in FY2008, up from 58% for FY2007.
During the year, Norfolk also successfully acquired two new businesses to complement this strong brand portfolio, The Plumbing Doctor (Canberra Region) and Gold Coast Airconditioning Services. These acquisitions expanded Norfolk’s geographical coverage in Australia and also increased annual revenue by approximately $9 million.
The strategic acquisition of the Plumbing Doctor in the Canberra region supports Norfolk’s strategy of growing its plumbing services capability geographically in markets where it has little or no existing presence.
The Plumbing Doctor’s client base consists largely of stable government and residential customers, delivering consistently strong cash flow and accuracy in forecasting revenues. Approximately 50% of residential sales are ‘pay on completion’, combined with the certainty and regularity of income from large government residential plumbing maintenance contracts.
The potential for further growth through this acquisition is high, particularly through additional government and corporate maintenance contracts, and expanding the pipeline service offerings into the ACT region. Water conservation projects, the efficient application of innovative maintenance and usage initiatives, and the potential expansion into light construction all present growth opportunities for us in the Canberra region.
During the year Norfolk expanded its operations on the Gold Coast with the acquisition of Gold Coast Airconditioning Services, a specialist in air-conditioning refurbishment and installation projects, preventative maintenance and service contracts.
A key part of Norfolk’s mechanical expansion strategy is to identify ‘geographical gaps’ and strengthen its position where there is a clear demand for its services. The Gold Coast, with high population growth expected to continue for the next two decades, fits these criteria.
In addition to domestic expansion, the division significantly expanded its geographic position in India with the acquisition of Trans America Air-conditioning, now re-named as Norfolk Mechanical India.
Over the coming year the Mechanical division will be expanded across India into various regions to capture further contracts and market share in a market offering significant potential for Norfolk’s services and expertise.
This will involve expanding Norfolk Mechanical India’s coverage, via new branches or onsite technicians, and developing the flexibility to provide the most appropriate solution depending on customers’ individual requirements.
The Mechanical division is well positioned to capitalise on the momentum of the booming economy in India and over the next few years the division’s aim is to have pan-India operations in all 56 states. The expansion is supported by existing customer relationships, new service contracts and targeting expanding industry sectors including the retail, infrastructure, hospitality, IT&T and medical science sectors. These industries are experiencing significant growth and present an excellent opportunity for Norfolk to increases its presence in this market.
The Mechanical division has already established firm client relationships in India and contracts have been secured with leading organisations such as Nortel and Honeywell, through Jones Lang LaSalle in India.
The Mechanical division has been successful in securing new accounts over the past year, demonstrating the variety and reach of the businesses within the division.
Tempest was awarded the highly valuable design and build contract for the 30,000m² DFO complex in Cairns. Climatech was awarded the air-conditioning installation contract for the new Millennium Phase 3 (MP3) complex to be built in Greenlane, Auckland. This is the latest instalment in the Millennium projects and consists of a three-level commercial building with retail space and car parking facilities, and a floor area of around 8,000m².
Meanwhile, Haden was appointed to refurbish the two-level domestic airport terminal and a new Departures Terminal project for the Cairns Port Authority, including the installation of two new chillers to complement the four existing chillers. Haden has also secured a national maintenance contract for a leading Australian retail brand that further develops an important national customer relationship.
In Canberra, Haden was awarded the contract to complete HVAC services and laboratory gas reticulation for the new laboratory building at the CSIRO’s Black Mountain facilities. Haden’s construction team in Western Australia was also awarded the contract for the Department of Defence/HMAS Sterling chiller upgrade.
During the year, Haden implemented a new structure to provide a more seamless, networked approach to servicing clients. This resulted in the creation of Haden’s national construction division, bringing together the ‘Major Construction Group’ and ‘Installations’. The division aims to optimise existing engineering and construction capability and experience, and to offer greater development opportunities for employees.
It is also designed to provide more personalised customer relationships at a regional and national level and a more attractive cost structure resulting from the innovative use of technology and processes.
Another major initiative this year was a Memorandum of Understanding (MOU) Norfolk signed with Jones Lang LaSalle to expand operations in Australia, New Zealand and India.
Under the terms of the MOU, the Mechanical division will be one of the preferred suppliers in Australia and New Zealand to Jones Lang LaSalle, which is the world’s largest commercial real estate services company.
The agreement expands Norfolk’s existing business with Jones Lang LaSalle, while potentially providing international expansion opportunities in India and other Asian countries
As the leading provider in the Australian non-residential HVAC market, the Mechanical division is well positioned to capitalise on the continuing growth in the resources market and also the growth in commercial construction in Australia. Increasingly the Mechanical division will focus on environmental sustainable solutions in the HVAC business in response to the needs of customers, market trends and the legislative agenda. The Mechanical division is fast establishing itself as early adopters of environmental and sustainable design initiatives through our sponsorship of research bodies and support of engineers as they upgrade their qualifications through the Australian Building Greenhouse Rating (ABGR) and the Green Building Council of Australia.
The Mechanical division has established an in-house building management and controls team within Haden to focus on this area, which will be important to building our business in this sector.
Meanwhile, the Mechanical division has already made significant progress in this area with the Australian Tax Office building in Canberra being a good example. This was the first 4.5 Star Australian Building Greenhouse Rated (ABGR) and Green Star building project where Haden had responsibility for both design and construction of the HVAC system.
The Mechanical division is well placed to build on the significant progress achieved this year to grow its earnings base in the coming year. |
