Yet another Australian building firm goes bust as the construction industry faces an unprecedented crisis putting hundreds of homes and projects at risk
- Three more Australian building companies have now entered liquidation
- Langford Jones Homes, Wulfrun and Westernpoint have all ceased trading
- Firms believed to have millions of work and dozens of jobs left unfinished
- Fire Services Australia Group entered voluntary administration last week
- Company offered contracting services to number of construction projects
- Construction giants ProBuild and Condev fell in March, followed by others
Three more Australian building companies have collapsed with millions of dollars in projects abruptly stopped and homeowners left in the dark amid an industry-wide crisis.
Victorian builder Langford Jones Homes was the latest to go under, ceasing trading last Thursday owing creditors more than $10million.
The collapse of the almost 50-year-old company followed that of fellow Victorian firms Wulfrun Construction and Westernpoint Construction Pty Ltd which both went into liquidation last Wednesday, with administrators already appointed.
Langford Jones Homes had around 65 building developments at various stages of completion, and more than 250 creditors.
Victorian firms Wulfrun Construction, Westernpoint Construction Pty Ltd and Langford Jones Homes have all gone into liquidation (stock image)
The firms join a long list of businesses to have folded on the heels of the pandemic with many struggling to find staff and facing problems sourcing and paying for materials due to a worldwide shortage.
Richard Stone, of liquidators RSM Australia, said the family-owned Langford Jones ‘recently experienced a significant cyber-attack, higher costs for labour, supplies and materials, supply chain delays and skilled labour shortages and all of this has resulted in substantial financial losses to the business’.
‘This perfect storm of supply and labour shortages and high costs are a common theme across the building and construction industry at the moment and unfortunately, it’s become unsustainable for Langford Jones.
‘Our task now is to co-ordinate the handover of the building projects to the homeowners and look to realise the value of any business assets.’
Three more Australian building companies have collapsed with millions of dollars in projects abruptly stopped and homeowners left in the dark – including a father-of-two’s home (pictured)
A father-of-two told News he has lost $300,000 because of Wulfrun going under, and believes there could be dozens of other families who are put under immense financial pressure like his, which is had been trying to refurbish his long-held home.
‘The underlying feeling is that fear of losing your home, that piece of land that has been in my family since the 1980s, where you grew up and spent your childhood,’ the man named Mark said.
Matthew Mackey, the Executive Director at engineering giant Arcadis, said the government need to get more involved or face a total collapse of the residential construction industry.
‘There has to be more collaboration at all levels to make sure it moves forward. We’re not going to be talking about builders going under but a complete lack of jobs,’ he told Daily Mail Australia.
BDO Australia are in charge of overseeing the liquidation of Wulfrun Construction, but refused to comment on the amount of outstanding debt the firm still owes (pictured: Wulfrun workers)
Spiralling material costs, choked supply chains, fuel and vehicle price hikes, difficulty finding staff, and high wages were all combining to destroy the viability of businesses.
Over the past year 85 per cent of tradespeople have increased prices with more than half forced to do so in the past three months, according to a report by jobs website Hipages.
With timber prices up by at least 20 per cent and metal prices rising 15 per cent in the past years, workers said raw materials are the major factor pushing up costs.
BDO Australia are in charge of overseeing the liquidation of Wulfrun Construction, but refused to comment on the amount of outstanding debt the firm still owes.
‘The liquidators are gathering background information regarding the company’s affairs and have liaised with the building insurer regarding the company’s outstanding projects,’ a spokesperson said.
‘An update will be provided to creditors in the first report on 8 June 2022. We are unable to make any further comment at this stage.’
Wulfrun collapsed with work still to be completed on several houses, including father-of-two Mark who will have to spend another $600,000 to find a company to finish the home
Mark says his home, which saw framing installed before work was stopped last year, requires $560,000 extra to finish plus he needs to raise $60,000 to pay rent for two years.
Westernpoint Construction Pty Ltd will be managed by Pitcher Partners during its own liquidation, with a spokesman for the firm saying they are already working with one devastated homeowner.
‘We are aware of one homeowner who has been significantly impacted by the company’s failure,’ the spokesman said.
‘The homeowner was required to pursue the company through the Victorian Civil & Administrative Tribunal for compensation before proceeding to wind up the company.
‘We will now be investigating any other potential creditors and the level of outstanding debt.’
Costs of metal ores, plastics, and timber have been consistently rising for years, but particularly through the pandemic as factories overseas were forced to shut down for extended periods.
‘I don’t think a lot of companies are taking the cost increases seriously. It’s a perfect storm,’ Matthew Mackey, executive director of engineering company Arcadis, said.
‘Smaller businesses don’t have the cash flow, they don’t have the same safety net. They’re going to feel the pain a lot sooner and a lot more harshly.’
‘Currency effects aside, for most of 2021 the Australian construction industry was affected by project uncertainty linked to Covid, which had a dampening effect on demand in most cities. This fed into competitive pressure, and we saw construction firms and their contractors absorb cost increases rather than pass them on fully,’ he said.
Analysis performed by Arcadis suggests major cities have all seen increases in building costs, with Brisbane the most significant.
‘The exception is Brisbane, which was largely unaffected by lockdowns but did suffer from extended border closures. Our analysis indicates that Brisbane recorded a 12.1% increase in building costs in 2021,’ Mr Mackey said.
‘By contrast, Sydney recorded only a 1.5% increase and Melbourne 2.3% – neither of these cities suffered from extended border closures to the same extent as Brisbane.
‘We saw stronger evidence of cost increases being passed through late in 2021 and we expect that to fuel significantly higher construction tender price inflation in 2022. Indeed, that is already happening in many capital-city markets as materials, commodities and labour cost pressures bite.’
Skyrocketing prices of commodities have left Aussie tradies struggling to make ends meet with thousands of businesses at risk of going bust
Materials, including steel and timber, had the most significant price surge due to international demand and lack of supply. Electrical products, PVC, and roofing materials are also getting more expensive.
Prices of lumber reached dizzying highs in March, however worldwide increases to interest rates saw a rapid decline in new homes being built – with timber crashing 52 per cent over the April-July quarter.
In April, only 12 per cent of companies reported timber shortages – down from 61 per cent in April, 2021. But firms are now being forced into slashing the prices of wood due to excessive levels of stock and losing money on the materials.
‘The industry overall is slow to react. Some of that is naivety, ‘she’ll be right’, this will be shortchanged. There’s always a half glass full approach to the industry which isn’t helping,’ the Arcadis Executive Director said.
‘Australia has always been in its own bubble. There was a GFC but it never compared to the UK and US. Even with Covid, very small drop and very swift recovery.
‘The industry is working on the basis this will sort itself out at some point but but we don’t really know.’
Precast concrete, normally a cheaper option to regular concrete because it has mostly been handled in factory settings, is now more expensive than the alternative in another sign of an out-of-control volatile market.
‘There’s more of that at major builder levels, the domestic market is more timber. We’ve had a massive house build resurgence in the last two years with the New Home Grant,’ Mr Mackey told Daily Mail Australia.
‘We’re suffering a hangover from that now – labour shortages, cost material increases, material shortages.
‘It’s created this perfect storm. It’s really really hurting the industry at the moment and no one knows where its going to end up.’
Prices of materials have been rising steadily since the start of the pandemic, but exploded in April and May last year (average prices of commodities – Arcardis statistics)
While large companies manage big orders, small to medium businesses are struggling – with extended waiting periods for materials impacting jobs.
Margins are also significantly decreasing, with the construction industry generally only earning profits between two and four per cent.
Ordinarily businesses pass on their higher costs to the end consumer, but Mr Mackey said contractors locked themselves into quotes nonths before the cost of materials rose, so they had to bear the weight of the difference and make only razor-thin profits if not total losses.
‘Some people are blaming the pandemic, some are blaming material cost increases, but there’s a bigger issue, and it’ll affect just as much as the bigger companies as the smaller businesses,’ Mr Mackey said.
‘The market is trying to respond to the volatility. It’s less now about supply availability, but energy costs are going through the roof, commodity prices continue to rise, material costs are still increasing.
‘Contractors, particularly trades, are going to be struggling. If they’ve already signed a contract that doesn’t allow for fluctuations in materials, they’re going to be stuck with those prices.
‘If costs have gone up in six months, they’re going to have to wear those costs, and that’s the issue.’
Mr Mackey said the rising cost of structural steel had wide-ranging impacts on the market and meant inflation was trickling down to Australian tradies.
‘If iron ore goes up, that has a direct impact on the cost of steel. That is passed down to the person who’s providing the materials and that is passed to the contractor,’ he said.
He said he wouldn’t be surprised if there are more major and small businesses that go under with no pipeline for when the current issues could be resolved.
‘We will see more contractors end up in dire straits because of the amount of risk that is out there, if there contracts are in line with the risks and if clients are happy to comply with those risks,’ the Arcadis director said.
‘The government need to lead on it, not just with legislation but by taking the lead. Financiers are very risk adverse, builders cant manage the risk any more so funders are turning the screw, but they have to be at the table just as much as clients and contractors.
Geelong-based carpenter Donald Conway says he is doing his best to hold his prices down but the skyrocketing price of basic materials is hitting is his bottom line
Geelong carpenter Donald Conway said material costs are the major hurdle to keeping his quotes down as his company look to navigate the post-pandemic building landscape.
‘For us, the cost of materials in the past four to five months has had the biggest impact,’ Mr Conway said.
‘The costs have been rising across the board from fuel to the flooding in Queensland affecting supply of certain types of timber.
‘With timber going up even by say $2 per linear metre, a decking project can start to really add up quickly.’
THE FIVE FACTORS MAKING LIFE HARD FOR TRADIES
1) Rising material costs
2) Choked supply chains
3) Fuel and vehicle price hikes
4) Difficulty finding staff
5) High wages
Justin Tanios, Director of Levelline Renovations & Plumbing in Sydney, said with the cost of raw materials going ‘through the roof’ he was making every effort not to pass those on.
‘While most people are pretty understanding of the cost pressures, there are people who aren’t in a position to pay higher prices,’ Mr Tanios said.
One strategy he had adopted was only taking jobs in a 15-20km local radius to reduce unnecessary spending.
‘Working local helps to keep down costs like fuel, tolls and car maintenance,’ Mr Tanios said.
Mr Conway said he had adopted a similar strategy for his business Doncon Carpentry, which the 24-year-old started two years ago.
He said initially he resisted the opportunity to increase costs out of empathy for people wanting to build new homes, but was quickly forced into making changes because of his own skyrocketing bills.
‘At first, I tried not to put prices up, as I really felt for anyone who worked hard to save for an exciting new home improvement project, only to have that taken out from under them due to circumstances beyond their control,’ he said.
‘However, when I started losing money on jobs, I realised that I needed to raise prices simply because that is what the work is now worth.
‘To counter this, I’ve been more selective about the jobs that I take on and focused on those closer to home in Geelong.
‘Personally, the most important thing throughout this time has been honesty.
‘If I have needed to put up prices, I’ve always strived to do the right thing by my customers and be transparent about the reasoning behind it.’
Mr Tanios said a strategy he was using to keep costs down was to only do jobs in a 15-20km local radius
Fire Services Australia (FSA) Group, which offers contracting services to construction projects, also entered voluntary administration last Wednesday after operating for 27 years and with $10.6million owing to contractors.
The business, which has offices in NSW, QLD, WA, and the ACT, was contracted on a number of live projects, working in fire safety, electrical maintenance and mechanical services.
With the latest collapse, 123 workers across the country have been left without jobs, many of whom are reeling in shock over the company’s demise.
‘A sad day for all at FSA. Last Wednesday was a day not too many saw coming,’ QLD FSA Services Projects Supervisor Curtis Lindsay wrote online.
‘Of all the companies I have worked for this one really felt like home. From the people on the ground to the office staff, everyone had time for one another.
‘Thanks for the opportunity to work with so many likeminded people.’
Building contractor FSA Services Group has collapsed after operating for 27 years
Sydney-based firm Taylor’s Insolvency has been appointed as the company’s administrator and is seeking a buyer to take over the group.
Managing Director Josh Taylor said 264 creditors have been identified so far, which include employees, the Australian Taxation Office and other contractors.
He said the company – which owes $10.6million – gained 60 per cent of its revenue from its operations in QLD, which were crippled by the floods in March.
‘Generally speaking it was Covid and the floods that hit them really hard because they can’t work when it’s raining and when it’s flooded,’ he told news.com.au.
Mr Taylor said shareholders examined ways to save costs and injected more cash in a bid to keep the business afloat, but their efforts proved fruitless.
‘The profitless boom is pretty accurate. They were winning a lot of clients but weren’t making a lot of money out of their contracts and costs of deliverables were higher than what was coming in.
‘And we are seeing that throughout a lot of other companies. Insolvency is finally starting to wake up again after having a very sleepy last few years, it started turning about four months ago.’
Devastated staff members have flocked to LinkedIn to share the news and reflect on their time with the company.
A state manager from the NSW office said he had only been in the role for 18 months.
The company provided services such as electrical needs, mechanical installations and fire protection for construction projects
‘Having taken the risk, moved to another state and undertaken the next step in my career, experiencing a lot, learnt plenty, found a great bunch of people to join the team, it has come to a rather abrupt end,’ he wrote.
‘Never in my wildest dreams would I thought I would go through this process, however, what it highlights is what this industry can do for others.
‘The outreaching of many with their thoughts of concerns coupled with how fast offers of employment went out to my technicians … helping relieve many of my concerns.’
An electrician, who worked for the business for 11 months, said it was a ‘sad day’ to see FSA Group ‘closing their doors’.
‘Something I didn’t imagine experiencing in my career is being made redundant,’ he said.
‘Just want to thank all fellow employees, clients and share holders for such a great experience for myself to work within the company!’
According to the company’s website, the group worked in several major sector’s including health and aged care, education, entertainment, government, defence and justice and financial institutions.
Saddened employees have flocked online to reflect on their time with the company
The range of services provided included electrical and fire protection installation and maintenance, heating, ventilation and air-conditioning, and safety audits.
The liquidation comes after a tumultuous year for the construction industry, with a number of high-profile companies collapsing within the past few months.
Construction giant Pro-build went under in March owing more than $14million to 784 workers, while Gold Coast-based Condev appointed liquidators weeks later leaving creditors out of pocket $31million.
More recently, Victorian builder Waterford Homes went bust last week, owing at least $600,000 to 60 creditors.
The demise of the Geelong-based company has left 10 homeowners with unfinished residences.
A string of smaller business have also joined the growing list of bankruptcies, including Hotondo Homes Hobart, Home Innovation Builders and New Sensations Homes – both in Perth – and Sydney company, Next.
Probuild shocked the construction industry when the building giant announced its collapse in March
The trend also extended into Queensland, which Pivotal Homes and Solido Builders both shutting shop at the end of May.
Meanwhile, several other firms have spent the past few months teetering on the brink of collapse as economic issues wreak havoc on the industry.
Melbourne-based construction giant Metricon – one of the nation’s largest companies – last month sparked rumours it was trouble after holding crisis talks with clients and meeting with the Victoria Treasurer.
The owners injected $30million into the embattled company, although bosses have denied it is at risk of entering liquidation.
In Victoria, Snowdon Development PTY Ltd could be facing insolvency after racking up $2.5million worth of debt with 15 creditors as the firm’s projects stall for months.
Creditors are now calling on the Supreme Court of Victoria to take action by forcing the company to go into liquidation.
Australia’s $730M ghost hotel: Construction completely STOPS on luxury complex as ‘unprecedented’ crisis rocks the building industry – with one of the biggest companies on the ‘brink of collapse’ after founder’s sudden death: ‘A perfect storm’
By Sam McPhee for Daily Mail Australia
A $730million luxury hotel boasting an elegant restaurant and cocktail bar with an infinity pool overlooking Sydney Harbour has become an empty 25-storey eyesore after falling victim to the collapse of a major construction firm.
W Sydney, dubbed ‘The Ribbon’ of the hotel chain, was set to open in 2020 before a series of delays that included the pandemic and financing issues saw it repeatedly pushed back.
Home to the upgraded IMAX theatre, the world’s largest cinema screen, the W Sydney was pinned as Darling Harbour’s new culture hub – but instead, it remains an empty shell following the demise of ProBuild.
The construction company building it, one of the largest in Australia, saw 750 workers and thousands of contractors out of a job, more than $14million owed to employees and $5billion in projects left unfinished after going into receivership in February.
Deloitte’s Sal Algeri, who has been appointed as administrator to Probuild, told Reuters he would assess the company’s financial position and begin working toward finding a new owner.
The $730million luxury W Sydney hotel was set to open in 2020, offering a lavish restaurant and cocktail bar with an infinity pool overlooking Sydney Harbour and the new IMAX theatre
Instead W Sydney is an unfinished shell, featuring dirty windows, scaffolding and rooms filled with buckets, slabs of concrete and building equipment
Marriott, the owner of the hotel, must find another construction company to finish the work.
In a statement to Daily Mail Australia, a spokesperson for the hotel said: ‘We will shortly be able to share an update on the project, it will be well worth the wait.’
However finding a construction company to complete the project is set to be a struggle for Marriot,as major construction firms and tradies go broke in the face of surging commodity prices and 24 months of intermittent lockdowns.
In May, construction giant Metricon held crisis talks amid cashflow pressures in the building industry as it reels from the ‘sudden and unexpected’ death of its founder.
It followed the death of Mario Biasin, 71, who established the company in Melbourne in 1976 and built it into one of the largest home builders in the country – with operations expanding into NSW, Queensland and SA.
Metricon employs about 2,500 people Australia-wide and has thousands of projects on its books – being ranked the biggest home builder in the country in 2021.
Marriott, the owner of the hotel, must find another construction company to finish the work
In March, Queensland builder Condev folded with 18 projects across southeast Queensland and northern NSW under construction.
Two Perth construction firms also recently folded – Home Innovation Builders and New Sensation Homes.
In the December quarter of last year, 328 construction firms went into administration, compared with 178 in the food and accommodation services sector, Australian Securities and Investments Commission data showed.
Michaela Lihou from the Masters Builders Association of Victoria, elaborated on the ‘crisis’ impacting construction in Australia.
‘We have got supply shortages, skills shortages and at the moment, it’s a perfect storm,’ she said.
Matthew Mackey, executive director of engineering company Arcadis, said smaller businesses are more likely to go broke because they can’t absorb the cost increases like their larger counterparts.
‘Smaller businesses don’t have the cash flow, they don’t have the same safety net,’ he explained.
‘They’re going to feel the pain a lot sooner and a lot more harshly.’
Australia’s struggling construction industry
The firm are facing a similar fate after reports emerged skyrocketing prices of materials saw the company warn staff it’s ‘crunch time’.
WIth more than 2,500 employees and an estimated 4,000 projects in the works, a Metricon collapse would have huge rammifications for a lot of homeowners.
Acting CEO Peter Langfelder denied they are facing any issues of insolvency and maintained Metricon remains a viable business.
‘There is simply no basis to these rumours. Metricon is a strong viable business without any solvency problem,’ he said.
‘The biggest challenge Australia faces is to get more homes built for more Australian families and as the biggest home builder in the country we are the ones to deliver.
‘We are dealing with ‘business as usual’ issues sensitively because of Mario’s sudden and untimely death.
Metricon is meeting with government officials for showdown talks over its future.
The company poured $3million into a Gold Coast cryptocurrency and more than half a million to a Christian charity in a last ditch effort before it went under.
Privium group, a conglomerate of companies best known for home building, went into liquidation in December, with a report conducted into their finances finding they had likely been trading while insolvent.
Hundreds of properties have been left unfinished due to Privium going bust, with founder and CEO Rob Harder saying they are ‘deeply sorry’.
Privium, which is based in Brisbane and includes property developer Impact Homes, has built houses in Queensland, New South Wales and Victoria.
The pandemic hurt the group’s business, with building sites shut down around the country but particularly in Victoria due to the state’s lengthy lockdown in 2020.
Administrators, however, believe it was a series of investments that were responsible for its downfall rather than Covid, citing the $3million crypto punt.
It turned the cash into Bartercard dollars which were then converted in Qoin coin, a Gold Coast-based currency.
They also noted a $530,000 donation to Christian charity Love Your World, who counts Privium founder Mr Harder’s wife Rachel as one of its directors.
The sum was paid over four payments in 2021, while a special dividend of $50,000 was also paid to Love Your World in 2019.
These payments could also be in breach of directors duties.
The Sydney-based company went under in April, blaming the pandemic, rising material costs and even the floods for its demise.
Next, which specialises in affordable housing for aged care and students, collapsed owing $5million to creditors including $400,000 to employees.
It’s biggest project, a $35million student apartment complex in Kensington, next to UNSW, is now in doubt.
The Gold Coast firm collapsed in January, a month before ProBuild, with $1billion in projects on Queensland’s waterfront in the works.
Condev founders Steve and Tracy Marais unsuccessfully attempted to achieve a $25million bailout from developers, with Mrs Marais saying he believed other firms would suffer the same fate.
They have been forced to abandon a series of brand new developments including a new complex on the Cannes Waterfront in Surfers Paradise.