President’s Award

06/12/2012 by Michael Jones

 

Business Recovery Specialists Jones Partners Receives Prestigious President’s Award From Civil Contractors Federation of Australia (NSW) Branch

On the 16th November, 2012 I received a coveted award from the Civil Contractors Federation of Australia (NSW) Branch.  The “President’s Award” was presented in recognition of Jones Partners’ commitment to educating and consulting with the Civil Contractors Federation and the industry in general.  Business recovery specialists, Jones Partners understand the trauma business owners suffer in the face of financial adversity. The award also signifies Jones Partners’ dedication to serving businesses facing difficulties due to the collapse of major corporate entities in the industry such as Reid Constructions and St. Hilliars.

The Multiplier Effect of Infrastructural Development Expenditure

The prestigious award was presented at the Federation’s Grand Gala Ball held at the Sydney Town Hall. The event was attended by the Minister Mr Greg Pearce, department heads and industry leaders.  In accepting the award I pointed out the contribution of the Civil Contracting Industry to the Australian economy.  In particular, I referred to the economic multiplier effect of expenditure by governments on infrastructural development activities such as roads and bridges. I explained how the benefits of this expenditure extend beyond the main cities to regional and rural areas.  Another significant benefit the industry provides is the enduring assets left behind when Civil Engineering endeavours are completed.

The Financial Pain of Major Players in Civil Contracting

The Civil Construction industry has been under considerable financial pressure over the last few years and the pressure has been particularly evident by the recent major players such as Reid Construction and St. Hilliars.

Reid Construction went into voluntary administration on the 15th June, 2012.  At the first meeting over 250 creditors attended.  Unfortunately, the administrator was unable to convince the Court there was a viable proposal to put forward to creditors. As a consequence, Reid was wound up by the Court on the 19th July, 2012.  It appears almost $50 Million dollars is owed to the company on various government projects. Claims by contractors and other creditors exceed $200 Million dollars.  The original estimate by the administrator was that if a Deed of Company Arrangement could be attained, a dividend of between 4.1 and 5.6 cents in the dollar would be paid rather than a dividend of just 2.5 cents in the dollar if the company went into liquidation.

It now appears more likely that very little will be paid to creditors by the liquidator.

Little Comfort for Sub-Contractors

The silver lining to the outcome in relation to St. Hilliars is that creditors have now voted to accept a Deed of Company Arrangement which will at least enable the company to continue.  The proposal however, will result in funds of between $1 and $4.5 million dollars being distributed to creditors.  Sub-contractors are expected to make claims of between $10 and $20 million dollars and there are additional claims of up to another $30 million dollars.  These figures seem to indicate that the final distribution will still be very small.

The story with other collapses such as Kell & Rigby, the Hastie Group and Southern Cross is similar. The bad news is that the situation is likely to get worse for sub-contractors.

The New South Wales government is conducting an enquiry into the construction industry insolvencies in a move to provide a better protection for creditors and sub-contractors. Despite its best intentions, this is little comfort to those businesses already affected by the situation.

Early Intervention – The Key to Improving Chances of a Business Recovery

The education program conducted by Jones Partners was primarily aimed at assisting members of the CCF affected by these collapses to avoid or minimise the flow on effect, and in the worse cases, outline possible ways of reducing the worst results.

One of the issues faced by the many businesses in the consequences of failure is that usually the directors are found to be individually liable in relation to many of them personally guaranteeing creditors.  This means owners of businesses often face the loss of their personal assets such as their car and home. In the worst case scenario, they may face personal bankruptcy unless a viable alternative solution can be put in place to relieve the situation.

One important message that became a recurring theme throughout all the presentations is the importance of early intervention to assist business recovery. If there’s one important message we have for businesses staring in the face of a financial catastrophe it is to act fast. Potential alternative solutions diminish with time, and if help is deferred, it may already be too late to save the business or its directors.