Tasmanian businesses: Energy Street Pty Ltd in external administration
A northern multi-trade construction firm whose money woes were slowly mounting finally saw the light – but despite nabbing a plum contract, an unforeseen event tipped them over the edge, they say.
Tasmania
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A northern multi-trade construction firm whose money woes were slowly mounting finally saw the light – but despite nabbing a plum contract, the collapse of one of their largest clients sent them off the deep end, they say.
Energy Street Pty Ltd, based in Prospect Vale, has been headed by Rodney Patterson and Wayne Mitchell since 2017.
The company entered external administration in late August, with David Mansfield and Travis Anderson appointed as joint administrators.
In their report to creditors, they noted the company may have been insolvent as early as June 30, 2021, and had trading losses in each financial year up until 2023, as well as negative working capital.
“ … By default we must recommend to creditors that the company be placed into liquidation,” they stated in their report.
The report identified Energy Street had been experiencing cash issues before the administration – with the owners attributing much of their financial woes to the collapse of Multi-Res Builders Pty Ltd.
“ … Owing [Energy Street] approximately $380,000 in outstanding debts and unbilled WIP,” the report stated.
And despite Energy Street’s best efforts to improve their profitability, including an 18 per cent price increase with a major contractor, [Community Housing Limited (Tas) Ltd] CHL, and reducing its wages and other expenses – it was not enough for them to pay their debts in full and continue to operate as a going concern.
The directors in the report attributed their cash woes in part to Multi-Res’ collapse.
“It is very apparent that we were under capitalised from the beginning,” they said.
“And, due to our growth, we needed to finance that growth from NAB.
“It has been a cumbersome business until the last six months when we won a contract with CHL, forcing us to streamline our processes and systems which was done successfully. Whilst doing this, a major customer, [Multi-Res] collapsed and owed us significant monies.”
NAB is listed as a secured creditor who advised in the report that the company owed $1,065,326.20.
Energy Street’s total liabilities are estimated to be $2.19m.
Despite their revenue growing each financial year, including from $3,096,469 in the 2022 financial year to $5,338,653 in FY23, the increase of costs of goods sold [COGS] at a rate greater than the increase in revenue, coupled with increased operating expenses, meant they had actually traded at a net loss from FY21 to FY23.
Their COGS increased by 72.3 per cent between FY21 and FY22, and then to 112.4 per cent between FY22 and FY23.
During that time, their operating expenses increased by 32.2 per cent between FY21 and FY22 and then to 21.6 per cent in FY22 and FY23.
The administrators said in their opinion that in addition to the loss of “key customer” Multi-Res, Energy Street’s financial rough waters were also due to the company incurring trading losses in each of the three years leading up to its administration.
They said it was their opinion that the company should be wound up.
A first meeting of creditors was held on September 8, and a second meeting of creditors was adjourned in order to allow for a possible sale for the business, and the potential of a DOCA proposal.