The construction industry is only at ‘quarter time’ on its COVID-19 recovery

It will be a slow journey back to ‘business as usual’ for construction companies, but there are green shoots emerging.

This week the Morrison government extended its support to the industry, which welcomed the moves while recognising that it isn’t out of the woods just yet.

Denita Wawn, chief exec of Master Builders Australia, said the government’s actions had saved thousands of businesses and jobs but yesterday’s statement was just the “quarter time siren”.

“They will need to stay focussed on ‘Best on Ground’ performances to underpin economic recovery,” she said.

“Measures such as JobKeeper, HomeBuilder and JobTrainer are proving to be extremely effective but there is no doubt that more is going to be needed before we emerge from the economic wreckage of the pandemic.”

Construction is big business

Australia’s construction industry provides the most full time jobs in Australia and has the most businesses on JobKeeper.

Additionally, 98 per cent of the industry’s businesses are SMEs, more than any other industry.

But the industry is bracing for a hefty fall in investment — 6 per cent in 2019/20 and 12.5 per cent in 2020/21.

Wawn welcomed the extension of stimulus but said more had to be done to stimulate investment including tax reform and up skilling of workers.

“With the second largest economic multiplier effect in the economy, stimulating the building and construction industry is a no-brainer,” she declared.

How are construction small caps performing?

Like most sectors the industry has bounced back from its March lows but growth has continued into June and July with a number of stocks seeing significant windfalls.

While most pure play construction companies are large caps – two examples are Brickworks (ASX:BKW) and Adelaide Brighton (ASX:ABC); there are a handful of small caps.

One example is FBR (ASX:FBR) which makes robots that build homes. After the share price lagged for several months with cash burn concerns it has nearly tripled since early June.

The catalysts for growth have been the signature of a West Australian display home builder as a client and news that its robots had reached commercial layspeed.

This gain came despite the hiccup a month ago when its joint venture with Brickworks was discontinued.

SRG Global (ASX:SRG) has seen a gain of 35 per cent since May off the back of major contract wins. These included the new Victorian Heart Hospital and the Yara Pilbara fertilisation plant.

Yesterday SRG told shareholders it had secured over $110 million in works since the start of the financial year.

Scaffolding provider Acrow Formwork & Construction Services (ASX:ACF) is another winner on contract wins, up 20 per cent in the last two months.

BKW, ABC, FBR, SRG & ACF share price charts