Revealed: Geelong construction businesses which have entered liquidation
More than 50 construction businesses in Geelong have become insolvent this year, making it one of the most tumultuous times for the industry.
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More than 50 construction businesses in Geelong have become insolvent this year, making it one of the most tumultuous times for the industry.
Master Builders Victoria (MBV) say unprofitable, outdated and overly complex building contracts and a wealth of other issues are contributing to the collapse.
This year alone, there have been 53 construction companies that have gone bust, compared to 55 from July 2021 to November 2023.
A spokesman from MBV said labour shortages, material cost inflation, inefficient regulation, industrial relation challenges and the overall increase in construction costs had crippled many.
Mark Ruseler’s business, Formwork Plus Pty Ltd - a commercial concreting business in Moolap - went into liquidation in July.
He said pricing was a major issue which impacted his business.
“Not only are you competing against other commercial concreters but you are also competing against non-commercial concreters, particularly for those smaller type jobs,” Mr Ruseler said.
“From a competition perspective we are competing against people who have got labour costs of $50 an hour, whereas ours are $90 an hour.
“So in that sort of competitive environment, you never make enough margin to cover the risks that you’re actually taking on.”
Market conditions were also impacting the industry, with banks cautious with lending practices.
“Overall consumers are getting less for their budget than in 2020...the projects going ahead
are often being redesigned/reduced in size to meet the budget,” the MBV spokesman said.
“Developers are not proceeding with projects because the feasibility doesn’t stack up...the
price of an apartment to cover the higher input costs is higher than the market will pay for it
so the project doesn’t go ahead.”
Aaron Anstis, the director of Geelong Building Solutions, whose business was recently placed into liquidation, said he thinks the industry needs a shake up in terms of how clients can get better protection.
“We don’t have enough inspections during our construction period in terms of consumer protection.
“You get three inspections. They get their foundations inspected, they get their frames inspected, and then someone comes through and goes, ‘you’ve got a roof and you’ve got running water so this house is habitable’.
“But has anyone actually checked if the house has been built compliant throughout the building process? A building surveyor doesn’t see half of the stuff that goes on”.
Mr Anstis said in terms of builders being protected, there needs to be more control from a licensing standpoint.
“When we renew our licences, all we have to do is fill out a form, and there’s no questions about whether or not we understand any new regulations or any of that sort of stuff,” he said.
“Speaking to builders, there’s still a huge lack of knowledge around the new regulations that have come in that are now active.
“Some builders actually don’t know about the new regulations, and it’s like, well, that’s a huge issue from a licensing standpoint.”
He said builders are exposed to economic downturns and consumers needed to be protected from price escalations.
“I think it’s a very nuanced problem that’s going to take some thinking outside the box to ensure that consumers continue to be protected.”
Construction business that have been placed in liquidation
Norris Construction Group
The locally owned company had operated for more than 50 years before liquidators were called in as a result of a $27m debt, while also owing $3.2m to around 140 staff.
The Geelong-based company, which included seven associated companies, went under in March 2022 with Korda Mentha appointed to handle the liquidation.
In its report to creditors, which was filed with the Australian Securities and Investments Commission, it revealed the range of reasons for the company’s failure.
It included the “misprising of projects” and a “crisis of confidence” experienced by the business during lockdowns in Victoria between March and October 2020 resulting in projects being tendered at “very low prices”.
This resulted in “heavy losses” on a very large number of projects, the report said.
MMD Concrete Construction Pty Ltd
The Batesford concreting business collapsed after leaving employees out of pocket more than $240,000 and tax debts of at least $230,000.
According to a report by liquidator Scott Andersen of Worrells, he estimated that the company may have left a hole worth more than $1.28m, when all types of creditors are considered.
MMD Concrete Construction director, Nick Burnet, told the Geelong Advertiser late last year, that every worker would be compensated.
According to the report, Mr Burnett blamed factors, including the Covid-19 pandemic and “increasing taxation debt”, for the company’s financial woes.
Creditors whose debts or claims have not already been admitted are required on or before October 16 formally to prove their debts or claims.
Cavalier Homes Geelong
The construction firm, which operated under the company name Station 293 Pty Ltd, went into liquidation with an overall possible claim amount exceeding $1m and ceased trading in February this year.
According to a statutory report by liquidator Cliff John Sanderson of Dissolve,
Cavalier Homes Geelong owed the Australian Taxation Office $72,186, six secured creditors
$120,186 and 49 unsecured creditors $983,239.
Mr Sanderson said so far more than 40 creditors had contacted his office.
The company blamed market conditions and the failure to receive more bank lending as reasons for its failure.
Cross Laminated Offsite Solutions (CLOS)
CLOS, a Norlane business which builds multi-use modulars which are used for housing, day spa and Airbnb cabins and temporary accommodation was placed into liquidation earlier this year after owing millions of dollars to creditors.
An investigation into CLOS’s finances commenced after it entered administration in late May due to what sole director and majority owner John Fitzgibbon said was a major cash crunch.
According to the administrators report, the director of CLOS, John Fitzgibbon, attributed the failure of the company to a number of causes.
“A primary contributor was to the failure of the business included “false starts” resulting from the Geelong council headquarters project, the COVID-19 pandemic and the loss of the NDIS homes project,” the report said.
Cashflow shortages, unprofitable contracts resulting from project delays, under quoting and the engagement of subcontractors which didn’t follow due process or were not necessarily in the Company’s best interests were also attributed to the failure.
Formwork Plus
Moolap concreting business, Formwork Plus, appointed a liquidator after experiencing financial difficulties, with the company owing $620,000 to creditors.
Sole director Mark Ruseler said the business encountered financial difficulties in the first half of last year after commencing work on a water sewerage treatment plant in Warnambool.
“The job proved a little more difficult than we anticipated and as a result we have had to take the difficult position to put the company into liquidation,” Mr Ruseler said.
Mr Ruseler said Formwork Plus had contributed about $50m to the local economy.
Geelong Building Solutions
The construction company in Ocean Grove focused on building new residential homes had a liquidator appointed after owing nearly $900,000 to creditors.
Aaron Anstis, the director of Geelong Building Solutions, said the business had experienced financial difficulties over the past few years.
“Around the end of 2020 and into 2021 with Covid and the fixed price contracts and costs skyrocketing, we got into some financial difficulty and then borrowed money to try and get us through that period of time,” Mr Anstis said.
“It just got to the point where with the economic downturn and not as much construction happening, we just didn’t have the new builds to continue with cash flow and an income to repay the debts for the banks.
satria.dyer-darmawan@news.com.au
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