Revolution Roofing racked up close to $30m in losses before collapse

Revolution Roofing racked up close to $30m in losses leading up to its collapse, sparking claims the company may have been trading while insolvent.

Revolution Roofing racked up close to $30m in losses in the three and a half years leading up to its collapse, according to a report from administrators, who claim the company may have been trading while insolvent.

The report to creditors of the steel products supplier shows the company made losses of between $8m and $10m in each of the three financial years up to 2021-22, and a further $2.3m in the five months before administrators were called in on December 6.

With debts mounting, the company entered into a series of payment plans with the ATO and trade creditors, and by June 2022 more than a quarter of its debts to trade creditors were more than 120 days overdue, the report shows.

In his report, administrator Glenn Franklin from PKF suggests the company’s deteriorating financial position meant it was likely to have been trading while insolvent from June 2022.

“It is the administrators’ view that it is likely the company traded whilst insolvent from June 2022, being the time in which the company was experiencing significant monthly losses as well as increasing debts owed to trade creditors and statutory creditors,” the report says.

Revolution Roofing founder John Easling. Picture: Matt Loxton

Under the Corporations Act, a director can be held personally liable for debts incurred by a company during a period in which it’s deemed to be trading while insolvent.

Administrators estimate that Revolution Roofing’s debts increased by about $3.1m from June 2022 to the time of their appointment.

Mr Franklin’s report says preliminary investigations have also uncovered several potential unfair preference payments that could potentially be recovered if the company is placed in liquidation.

They include close to $2m in payments to the ATO and other payments made to creditors in the six months leading up to the company’s collapse.

In February receivers from Grant Thornton struck a deal to sell the Revolution Roofing business to Victoria’s Design Group, effectively bringing to an end attempts by founder and director John Easling to claw back control of the company through a deed of company arrangement (DOCA).

He had been seeking the support of ‘special situations’ investment firm Arbitrium Capital Partners to back the DOCA proposal, which involved a plan to contribute $19m towards the repayment of creditors.

Grant Thornton has requested that a second creditors meeting, set down for April 26, be adjourned to give it more time to close the sale deal, which was conditional on the agreement of landlords to transfer leases to Design Group.

It is understood the sale date has been pushed back several times, but Grant Thornton’s David Hodgson said the sale was now unconditional, and settlement was likely within two weeks.

The $88m collapse of Revolution Roofing and sister company Nexteel was the largest corporate insolvency in South Australia since the collapse of York Civil in 2018.

Administrators were appointed to the Regency Park-based businesses amid soaring steel prices and ongoing supply chain issues.

Receivers were later appointed to take control of the company’s affairs by ASX-listed finance company and secured creditor Earlypay in a bid to recover close to $29m owed to it.

The sale to Design Group is expected to secure the jobs of about 170 workers, mostly in South Australia.

As part of the deal Design Group will acquire the Nexteel brand but its operations have been shut down leading to the loss of close to 20 staff, mostly in Newcastle, NSW.