Raising the game
Daniel Smith Industries is a medium sized, civil engineering and crane rental company based in Rangiora, owned and operated by Daniel Smith and his wife Annette. The pair have enjoyed an interesting career over the years, growing the business from scratch to the multi-million-dollar enterprise it is today – but it hasn’t all been plain sailing.
Daniel Smith was raised in Rangiora, along with his seven brothers and sisters, by his parents Ann and John, who owned and operated a bridge building construction company.
Not the best student, he chose to leave school at the age of 15 and spent a couple of years in Otago and Balclutha doing agricultural work, then moved to the warmth of Nelson and worked on a large hop farm for five years.
“Winter work on the hop farms was limited, so from April to August each year I went to Queensland where I worked building culverts and bridges on the Mormbarh to Haypoint coal rail line.
“I also worked up in Darwin building the Elizabeth River Bridge,” he says.
In the mid 80s Smith returned from Australia and started working for the family company – John C Smith Contractors.
There he tendered for, managed and constructed many foundation piling projects for the mid 80s office building boom in Christchurch.
In 1992 Smith tendered for and won the contract to build the Ngakawau Bridge, north of Westport. Looking back, he notes that the tender schedule was hand written with a single page covering letter.
“These were the good old days when bureaucracy wasn’t part of the tendering like it is now, which requires you to have a publishing company just to put a tender submission together,” he says.
Daniel and his wife Annette rented a house in Granity for the duration of the project, and had five single men living with them. Annette took care of all construction administration, wages, accounts and did all the cooking and washing. The men built the bridge!
The pair were now self employed and Daniel Smith Industries (DSI) commenced trading with four staff, two cranes, a digger and a truck.
Dealing with Japan
Over a period of 15 years DSI imported millions of dollars of used and new cranes and piling equipment from Japan and doing business with the Japanese was a significant part of DSI’s success.
“I remember on one of my earlier visits I was inspecting cranes at a yard where 50 – 80 cranes were available for sale. I only had the money for two and had the time to scrutinise the complete stock. But as this was in the days before emailing and digital cameras, my method was a note book in which I recorded a crane’s serial number, hours and a brief condition report.
“The guy I was dealing with thought I was a bit of a tyre kicker and he wanted to test me. So he said I could buy a Hitachi TH55 with an earth drill attachment for six million yen which was equivalent to $75,000 (this was cheap) but an instant decision order was required otherwise the crane was going to another buyer. I bought the crane, phoned Annette back in New Zealand and she organised an immediate bank transfer. Buying this crane and paying immediately built his confidence in me. I still do business with him today.”
Unlike today the stock of cranes in Japan was incredible. There were literally thousands of machines available and generally of good quality.
“I remember in 2000, when I started the Christchurch Jade Stadium crane contract, I was in a meeting with the client who had requested a second 150 ton crawler crane on site. At a site meeting I rang a good mate in Japan, told him what I was looking for and he phoned me back within 15 minutes advising he had a IHI 150 crane at Yokohama Port and that it could be on a ship to Timaru within the week. The deal was done and the crane arrived in perfect condition 20 days later. This would be impossible today because cranes just aren’t available, new or used.”
Verticon buy DSI
Daniel Smith first came across Verticon in early 2005, when one of its staff expressed interest in the building hoists of Chinese manufacture that DSI were operating in Christchurch.
“He shared with me how he sold his tower crane rental business to the newly Australian public listed Verticon Group,” says Smith. “He returned to Australia and reported our meeting to Verticon management. It didn’t take long and Verticon Melbourne were phoning me. Basically they were in acquisition mode and they were very interested in the DSI business.
“Annette and I entered into formal sale negotiations with Verticon in May 2005. DSI had grown substantially, and I could see future growth opportunities, but I didn’t have the required capital. Annette and I could also see for DSI to take the next step from a mum-and-dad operation to a corporate company, we needed assistance in the accounting, legal and project management areas.”
After a lengthy due diligence process, the Smiths sold the crane rental division of DSI to Verticon.
The bottom line purchase price of NZ$34 million was be paid on day of sale, and the earnout (depending on the earnings before interest, tax, deprecation and add-backs of the first year’s trading) was to be paid after a year.
“It was a rather emotional day. Getting a cheque for $33.4 million, clearing our debt and having money in the bank, along with the likelihood of getting an additional $10 million in 12 months time is a big deal,” says Smith. “We were exhausted and happy.”
But there was work to do. For the first time in 20 years Smith was back on a wage, and had a boss to report to.
In March 2006, the Verticon managing director resigned, and very quickly the people that Smith had done the sale deal with also left the company.
The share price also changed dramatically: From float in at $1.20 per share in November 2004 the price is now $0.028 cents per share.
On December 7, 2007, two years after Verticon purchased the DSI crane rental fleet, Verticon sold it’s New Zealand tower crane and hoist operation without advising or consulting Smith – one of the company directors and five percent shareholder.
Smith was devestated.
The future, and in particular, what Verticon intended to do with the remaining crawler and mobile cranes in New Zealand was very unclear.
“In late December 2007, it became obvious to me that Verticon were intending to exit the New Zealand market and I had it on good information that it was in negotiations with a competitor.
“Selling to the opposition would have damaging effects and complications for DSI so I negotiated a ‘buy back’ heads of agreement just before Christmas and on January 30, 2008 Annette and I purchased back the New Zealand crawler and mobile crane fleet from Verticon.”
A very educating, interesting and emotional 25 months had passed.
“We were back to owning and operating the mum-and-dad crane business,” says Smith. “DSI had some interesting projects lined up, which I could now manage my way.”
Smith hopes his success can be an inspiration to the younger generation in the industry.
“It goes to show that anyone can succeed in this business if they’re prepared to work hard and take on a bit of risk,” he says. “You don’t necessarily need to have a university education, just a passion for the industry and a real desire to get ahead.”
• This article has been taken from Daniel Smith’s keynote speech to the 2008 Crane Association conference.
Contractor Vol.32 No.8 September 2008
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