Business failures spike as owners hit by ‘sheer exhaustion’

The number of Qld companies going bust in 2022 spiked almost 50 per cent with one industry hit particularly hard. And experts fear things will only get worse. SEE LIST OF COMPANIES

A massive spike in the number of companies hitting the wall in 2022 cost creditors hundreds of millions of dollars as business owners succumbed to “sheer exhaustion”.

A total of 970 Queensland companies went bust during the year, up 47.9 per cent from 656 in 2021. December was a horror month for insolvencies with 144 Queensland companies hitting the wall, up 157 per cent on the number in December 2021 (56) and almost 148 per cent up on November 2022’s figure (58).

Revive Financial director Jarvis Archer said the Australian Taxation Office’s return to recovering tax debts after a two-year hiatus drove a lot of the increase in insolvencies.

“Director warning letters and director penalty notices triggered company directors to deal with their hefty tax debts that accrued during the pandemic,” said Mr Archer.

“What we’re seeing from struggling business owners at the moment is their sheer exhaustion. Often they’ve battled through the last two difficult years just to end up in trading conditions even more hostile than the ones they’ve survived.”

Mr Archer said that as well as the ATO, landlords had become less patient with businesses trying to recover from pandemic lockdowns and other government restrictions.

“A number of local businesses in my local Sunshine Coast area have had locks changed on them, or have closed the doors and walked away,” he said.

WCT Advisory managing partner Andrew Weatherley said the greatest number of insolvency appointments were within the construction industry, followed by accommodation and food services, retail and professional services.

Revive Financial partner Jarvis Archer said the Australian Taxation Office’s return to recovering tax debts after a two-year hiatus drove a lot of the increase in insolvencies.

Mr Weatherley said the collapse of several cryptocurrency platforms also had caught a significant number of people by surprise.

“The value of crypto currencies themselves have been falling for several months and are volatile in general,” Mr Weatherley said.

“I think part of the problem seems to be how those entities have been operated and the steamroll effect on confidence in the industry.”

Mr Weatherley said he expected a steady increase in insolvency appointments in 2023 due to higher interest rates, inflation and energy prices. In addition. supply chain issues, staff shortages and wage growth also will impact.

Mr Archer predicted more pain for the troubled construction sector in the coming year. Construction-related companies still represent one in four company insolvencies, compared to one in five pre-pandemic.

“There’s still a lot of stress in this space which is expected to crystallise in increased insolvencies in early 2023,” he said.

“The current state of the construction industry has been characterised by some as a house of cards. The two key factors that are expected to play havoc for the industry in coming months are cashflow and licensing.”

While builders had started to pass on the price increases to clients, delays were still drawing out build times, and labour pricing is through the roof.

“Consequently, there’s still very little margin in projects for builders who are calling this the profitless boom,” Mr Archer said.

COMPANIES THAT OWED MILLIONS TO CREDITORS IN 2022

Condev – $30m

Gold Coast building giant Condev collapsed in March owing more than $30m.

The firm, founded in 2002 by Steve and Tracy Marais, closed its doors after talks with developers about a $25m cash boost broke down and the directors considered liquidation was the only option for the company.

Condev, which helped build much of the 2018 Commonwealth Games infrastructure, had 18 projects under construction in southeast Queensland, with 14 on the Gold Coast.

A Condev building site on the Gold Coast.

Oracle Homes – $14M

Almost 300 subbies and suppliers were left about $14m out of pocket following the collapse of Oracle Homes in August.

The failure of the firm also left 300 homes unfinished across Queensland and NSW and millions owed to an army of subcontractors including plumbers, carpenters and bricklayers.

The Underwood-based company – which traded under a number of names including Oracle Platinum Homes and Oracle Hunter Homes – made headlines earlier in the year when it sought tens of thousands of extra dollars from clients to complete their homes amid the deepening financial crisis in the construction sector.

Home under construction with Oracle Platinum Homes.

Trigonx – $73m

TrigonX, a key sponsor of the Gold Coast Titans, owes creditors more than $73m it was revealed after the cryptocurrency platform appointed administrators in December.

Trigon, which was the latest Queensland crypto trading firm to hit the wall following the collapse of global giant FTX, collapsed amid the growing chaos in the market for bitcoin and other virtual currencies. It trades as TrigonX.

According to documents lodged with ASIC by administrators William Robson and William Cotter, King River Digital Assets is owed $31m, Pacifika Consortium $26m and ADG Digital $16m.

Brazilian Beauty stores – $4m

Francesca Webster

Brazilian Beauty founder Francesca Webster put two of her companies into administration owing creditors more than $4m.

Documents lodged with ASIC by the administrators show Brazilian Beauty (Australia) and Brazilian Beauty Stores combined owe creditors more than $4m including $1.2m to the Australian Taxation Office, $247,000 to the Queensland Rural and Industry Development Authority and Office of State Revenue $128,000.

The administration appointment comes two years after all the franchisees of the 18-year-old firm left to start their own brand after protracted negotiations in late 2020.

A company controlled by Ms Webster sold nine clinics to her daughter for zero dollars.

Lanskey Constructions – $11m

Administrators were appointed to Melbourne Cup winner Paul Lanskey’s construction business owing subbies and other creditors more than $11m.

A report lodged by liquidators FTI Consulting with the Australian Securities and Investments Commission (ASIC) Tuesday reveals Lanskey Constructions Qld Pty Ltd’s 282 unsecured creditors including the Australian Taxation Office, suppliers and subcontractors are owed $11.2m.

Lanskey, founded in 1986 by Melbourne Cup winner Paul Lanskey and Ross Williams, is involved in large commercial projects across Australasia with offices in Brisbane, Sydney, Melbourne, Perth and Auckland.

Paul Lanskey.

Tikun Oceania – $7m

One of the first companies in Australia licensed to cultivate medicinal cannabis appointed liquidators after racking up losses of more than $7m.

Administrators Cor Cordis were appointed in August to Sunshine Coast Tikun Oceania, formerly known as Medifarm, after the company failed to make inroads into the fledgling medicinal cannabis market, whose supporters include the late Olivia Newton-John.

The company, which owes creditors up to $4m, was founded in 2015 by medical entrepreneurs motivated by an eight-year-old cancer sufferer whose parents had to illicitly obtain cannabis oil to relieve the symptoms of chemotherapy. The boy died of the illness but not before being helped by the medicine.

The company changed its name to Tikun Oceania in 2020 to reflect its partnership with Israel’s Tikun Olam, which pumped $10m into the business.

VAC Group – $30m

Queensland civil contractor VAC Group collapsed owing more than $30m and putting 200 employees out of work just weeks out from Christmas.

AC Group. which provided excavation work and mapping services for major construction projects, fell over after a combination of wet weather and pandemic lockdowns hit its bottom line. Staff were informed on Monday they no longer had jobs, only two years after the group emerged from an earlier administration owing creditors more than $9m.

Stephen Earel, Neil Cussen and Michael Hird of Cor Cordis were appointed voluntary administrators earlier this week of various companies in the group including Vac Group Holdings, Vac Group Operations and Beacos

Based in Yatala, the group claims to operate the largest fleet of vacuum excavation suckers trucks in Australia and other underground asset location and mapping services for small business projects, civil and building works for government and major infrastructure projects.

It also operated sites in Rockhampton, Gladstone, Sydney, Melbourne and Adelaide.

Vac Group depot in Rockhampton

Nerang St – $80m

The development company behind a $500m masterplanned project on the Gold Coast called in administrators in September, leaving creditors including some of Queensland’s biggest builders owed about $80m.

Nerang Street Pty Ltd, which was developing the Queen Street Village at South Port, had been hit by funding problems as well as the impact of the pandemic on the building industry.

Robson Cotter Insolvency Group, in a report to creditors lodged with ASIC, said Nerang St originally owned nine lots within the project but five blocks had been sold prior to his appointment.

Unsecured creditors of the company are estimated at $40.8m, including Brisbane construction firm Tomkin which is owed $16.2m.