Power sector pays dividends for ConnellSponsored
More than a decade has past since the Global Financial Crisis, but for Dave Connell, sometimes it can feel like yesterday. Mention the GFC, and there’s an immediate shaking of the head. But it comes with a long, relieved sigh. Dave was one of the lucky ones who made it through.
Fast forward 10 years and Connell’s business has reached new heights – higher still if you count the views of Lake Karapiro and the greater Waikato from the cockpit of Connell’s helicopter. He takes to the skies with a smile on his face; everything’s turned out ok. But that doesn’t mean it’s been easy, nor are the hard yards over.
Connell Contractors was established in 1985 by Dave and Margo Connell. Family owned and operated, sub-contracting was Connell’s bread and butter.
Twenty years on, the GFC hit and contracting opportunities were hard to come by. The Christchurch earthquake of 2011 followed and the Connells took their business south, but the post-earthquake rebuild wasn’t as lucrative as first thought. Dave and Margo found themselves borrowing hugely against their assets to turn survival into profit.
Hard times, great learnings
The tough times have brought with them some great learnings, and it was those learnings that Dave and Margo applied in 2016. Faced with the realisation that their current business model wasn’t sustainable, the Connells sat down with fellow directors Wayne Collinson (Connell’s Operations Manager) and Lester Foxall (Connell’s CEO) to make a plan.
“It had become obvious that we required another income stream,” says Dave. “We were successfully operating as a SME in the contracting industry and, in many of our contracts, we were lead contractor. That’s how we like it, but it’s not always guaranteed. We’d had a tough 10 years with the GFC, the Christchurch rebuild, and we’d also come close to selling the business at one point too.”
By this stage, Connell boasted an impressive track record. From its headquarters in Hamilton, and satellite yards in Auckland and New Plymouth, key clients included many a city and district council, including Auckland, Waikato, Hamilton, Tauranga and Gisborne. Watercare was a client, so too was Mighty River Power, and Connell had great relationships with larger civil construction firms such as Fulton Hogan and Downer to which they sub-contracted.
But New Zealand’s construction industry was changing and becoming ever-more competitive by the day. Dave and Margo were becoming increasingly frustrated at the continual emphasis placed on winning at all costs, or at least the lowest cost, during tender processes.
“We agreed very early on in our business days that we wouldn’t compete on tenders that were only awarded on price alone,” says Margo, who over the years has worn many hats from operations to finance, HR to processes. “But the move within the industry towards quality rather than the lowest price has been a gradual one and we couldn’t wait. We knew diversification was important for business sustainability and it needed to occur sooner rather than later.”
Dave agreed. “As leaders, we needed to be thinking about the vision and strategy of Connell. We were – and are – a successful business. We have a staff of 50, though we’d love to double that; we have good industry networks across the sector, though we’re always looking to develop more; and we’re in a place where clients ask us to tender for work. That’s the result of 30 plus years of delivering quality results and establishing a solid reputation but, as directors, we knew it was guaranteed. Nothing in business ever is.”
A network powerhouse
Lester Foxall had joined the business in 2015, bringing with him extensive experience and networks in the power sector. Formerly general manager of Tasman Design and Civil, Foxall’s knowledge of the energy sector made it the most obvious industry for Connell’s to diversify into.
“Power aligned with the expertise and experience Connell had built up,” says Foxall. “We had the equipment, we had the people and we had the trust within the industry to make it work. We gained a lot of traction in a short space of time.”
One of the first jobs Connell embarked on in the power sector was the Tangiwai Substation. The 2016 project saw Connell construct a new ODID building and Switchyard extension, directly for Transpower. Phase 2 of the project involved new foundation pads, cable trenching and metalling works for Broad Spectrum.
Another project that confirmed Connell’s reputation in the power sector was the Henderson SubStation, where an existing 33kV switchyard was replaced with indoor gas insulated switchgear housed in a new ODID building.
“That project had a number of restrictions, but our scope ranged from construction of the new switchroom building to excavating and backfilling trenches, installing stormwater drainage and re-metalling the existing switchyard. It was a project that reinforced we are a one stop shop here at Connell, that we have the skills and expertise to do the full spectrum of work required.”
The intricacies of the job were also a highlight for Connell. “Our team thrive on projects that challenge them,” says Foxall. “We’re not as risk adverse as other contractors and the tricky projects always have an angle that will benefit us. They also challenge our staff and that’s important with their development. We want to work on projects that enhance our team’s career, enables them to learn and feel rewarded personally as well as professionally.”
A more recent project is the Kawerau Substation, an eight month project that sees Connell carrying out extensive civil works for Northpower. The project comprises demolition of existing spare transformer pads and drainage tanks, installing an oil containment system, and the construction of two transformer pads, as well as the installation of pre-cast cable troughs, cable trenching and association foundation pads and security fencing.
Power from its people
Connell’s focus hasn’t just been on establishing itself in the power sector; the directors have also made it a priority to empower its people. “We have always stood true to our tagline, ‘Right People, Right Result’,” says Margo. “We are a family business and those family values are important to us. Our core values are honesty, integrity and commitment. It’s who we are, but it also paves the way for other companies we want to work with. If those same values are as important to them as they are to us, then it’s a great working relationship.”
It was those values, alongside business and industry opportunities, that attracted Foxall to Connell in the first place. “It was evident from the get-go that the directors shared the same vision and values,” he says. “Connell are all about empowering their people. There are no jobs here at Connell, we offer careers, and I think that’s a real point of difference, particularly in the industry we work in.”
Such is the importance placed on staff, Connell operate by a rule of thirds: 30% of all profits are reinvested into the business, 30% goes into bonus payments for all staff, and 30% is paid as dividends to shareholders.
“It’s not just us as directors that have done the hard yards,” says Dave. “Our staff have too. Many of our staff experienced the GFC with us and others shared our hopes for the work to come out of Christchurch which never did. Now, they’re enjoying the work that our diversification into the power sector has offered. It’s new, it’s challenging, it’s different. It’s teaching them new skills, it’s enabling them to learn about the energy sector, and it’s opening their eyes to the opportunities that this aspect of our work offers. It’s exciting!”
Right people results in supreme win
That excitement was evident on one Friday evening in November 2019, when Connell Contractors was named 2019 Westpac Waikato Business Awards Supreme Winner. No stranger to picking up an award (Connell have won industry awards throughout the year including NZCF National Construction Awards in 1993, 2004, 2014 and 2015), never before has the company won a business award.
Dave puts that success down to their strategic approach over the past four years. “Our independent directors said, ‘this is your business plan, don’t get distracted’. And we didn’t, but in the last five years I’d say there have been three years of pain.”
It seems that old adage, ‘no pain, no gain’ rings true for the Connells. Though fortunately, the gains are worth it, both for the bottom line and for their personal satisfaction. “We’re not taking anything for granted though,” says Dave. “The GFC certainly taught us that! And there are continual changes within the industry that we need to ensure we stay ahead of. We need to be on top of our game to ensure those changes work for us,” he says.
A further change the Connell team are working towards is the growth within the hydro sector. “New Zealand has aging infrastructure with regards to its hydro dams, most are largely dilapidated and are in need of upgrading,” says Foxall. But, New Zealand’s power sector extends beyond hydro as well.
“There’s a lot happening within renewable energy so we see a real opportunity for us to diversify into that area too,” says Foxall. It’s a reflection of where the world is going so I believe we’re going to see a lot more demand for projects of that nature. Our skills are certainly transferable and, as long as tenders for these projects aren’t awarded on lowest price, that area certainly fits with our strategic plan.”
ABOUT CONNELL CONTRACTORS
Established in 1985 by Dave and Margo Connell, Connell Contractors is a leading civil infrastructure company, with headquarters in Hamilton. The company services a range of local and central government clients from its head office in Hamilton and branches in Auckland and New Plymouth. Dave and Margo Connell are joined by shareholders and directors, Wayne Collinson and Lester Foxall.