Contracting changes

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On its third anniversary of making the move into the Middle East market, Australian MEP contractor Hastie International is continuing to grow at an exceptional pace. MD Ian McGregor explains to Alison Luke what's next on the horizon for the firm.

When one of the largest MEP contractors in Australia took the decision to open a Middle East branch in Dubai, questions were inevitably raised as to the potential success of the venture.

Would the market accept the methods used by a firm that was new to the region? And could Hastie adapt to the faster pace of construction and differing tender processes used in Dubai and the wider Gulf?

Three years down the line, the firm has answered all the sceptics with a resounding ‘yes'. It has already won the design and build MEP contracts for several major projects - including three within Dubai Festival City and Acico's JAL and MUT Towers on Sheikh Zayed Road - and is currently awaiting the results of further tenders.

"The firm was set up in September 2005 at zero revenue; we grew by 50 million [Dirhams] last year, we tripled that figure this year and we [expect to] more than double this turnover over the next twelve months," reports md Ian McGregor.

Beyond that we foresee a steady growth. It sounds large, but we are a growing company and feel that level of growth is controlled," he adds. With the local construction market continuing to boom and new projects being launched on a regular basis, this prediction seems far from unreasonable.

Expansion plans

With a firm footing now having been made in the Dubai market, Hastie's plans for expansion in the Gulf are spreading further afield. The firm has already begun work in Abu Dhabi, with the Dalma Mall project in Musaffah being amongst the largest it currently has underway, the MEP contract being valued at US $73.5 million (AED270 million). "We are looking at other areas and we have been approached by a number of contractors to look at Oman, Bahrain and other areas," reports McGregor.

"A lot of contractors and clients in the UAE have developments in these areas, they have got to know and trust us over the last few years and are looking for us to support them in these areas and I think it would work well for us. I think that you will see us moving into at least one of these areas by the end of the 2008-09 financial year next June," he adds.

Opening further offices will be dependent on the sustainability of work volumes in each individual region. The firm's plans involve first winning a project, before considering whether a local office is necessary or indeed viable.

The minimum project value considered worthwhile for a new office venture would be around $27 million (AED100 million) reports McGregor. "[Project values] below that [would make opening a regional office] possibly not too worthwhile, but it depends on the sustainability of the area. If we can see five or six years' work ahead in the area it's worth considering," states McGregor.

"We are looking for structured growth. We aren't looking to rush around, but when an opportunity presents itself or when we can find an opportunity we are looking to follow it on a structured basis," he stresses.

The growing development of Abu Dhabi is almost certain to prompt the firm to expand its operations in the Emirate. "We have an office in Abu Dhabi, but we don't have much of a presence in terms of management - that will change," reports McGregor.

I see Abu Dhabi becoming equal to or even greater than Dubai [in terms of growth] over the next five years. With the interesting projects underway there, if we secured another one then our office would expand from what it is today, which is a support office, to an area management office," he predicts.

Acquiring experience

One of the methods that Hastie plans to utilise in its expansion plans is that of acquisitions. Its latest move in this field was the acquisition of MEP contractor Rotary Middle East in April 2008. "This was a strategic move to take [the firm] into the northern hemisphere...that really took us from being a southern hemisphere company to being a worldwide group," explains McGregor.

As a southern hemisphere-based firm, the buyout of the UK-headquartered Rotary has strengthened both its available expertise in the rest of the world and opened up new opportunities for work.

The last thing that will happen as a result of the move is for Rotary or other firm's acquired to vanish from the MEP contracting world assures McGregor. "Hastie has taken over many companies: their model is to take over the company, but they don't change it and swallow it up into Hastie, they run it as a separate business and maintain its old name," he explains.

"Hastie's view is you've taken over, say Rotary, it is a renowned company and has a good reputation and we want to maintain that. Here we have Rotary and Hastie, but we offer them as two separate companies and that is the intention of how it will continue," he stresses.

In addition to the wider project experience, benefits from the Rotary acquisition come in the ability to share facilities like pre-fabrication workshops and to work in partnership agreements on large-scale projects where the firms' combined expertise would be of advantage.

"Some of the projects here now are enormous, and if we had a limitation at a particular point in time it's would be very easy to switch to a joint venture with Rotary," states McGregor.

The big plus is that people are sometimes nervous about joint ventures because there are different companies coming together and sometimes they fall out...but there is never going to be a serious dispute between us and Rotary because at the end of the day [the payment] all goes back to the same pocket. I think this is a considerable benefit to the client," he adds.

Labourforce experience is another area in which the joint venture can help projects explains McGregor: "Rotary tends to have a bias towards Philipino labour and [Hastie] tends to have a bias towards Indian labour, therefore you mix those together and it gives you a very strong capability on larger projects to deliver seamlessly. That's a major benefit for us and is seen to be a major benefit in the market."

The firms currently have joint venture tenders submitted for a number of projects and expect to be successful in the near future. McGregor is quick to stress that Hastie will also continue to tender for projects as an individual entity, but that it will consider both options where appropriate.

"If there is an opportunity to joint venture with somebody and both partners bring an added value to the joint venture then why not? We are flexible in the way we work," he stresses.

We are looking to deliver quality products on time and make a return for our company. The model that you use to do that in this part of the world has to be flexible," he stresses.

International advantages

Hastie itself is set up in the UAE as a branch of Hastie International Australia. "A big distinguishing factor of Hastie is we are fully supported from an international base. If you look round the market there are not many truly international contractors here," states McGregor.

The firm has a separate management structure and day-to-day operations are fully independent from the Australian headquarters, but it does receive certain support from its owner group. One area in which this is of particular use is in the supply of labour, with the Australian division able to provide top-up expertise if needed.

"It's an important faction: in the contracting business you may need 100 men one day, then you need 130 men the next day, then it's back to 100 the day after. It's good to have the support of a major group [in such cases]," he states. "There is a massive shortage in resources and if you can bring them in from outside the country even on a short-term basis it helps us considerably."

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