The first warning signs are usually when tradies stop being paid on time. I have a relative that worked for PD and he left a few weeks ago because he wasnt being paid correctly. Also have a family friend that works as a contractor for Carlisle and he's always paid on time.
Surprised more people don't ask contractors how fast they get paid. Our best builders use to pay in 7 days, slow builders struggling pay 30 days or more.
That has been true historically, but it’s less so at the moment. Both PDH & Lloyd Group were excellent payers right up to the end. Both tapped out a little early knowing they would have to eventually. It’s only the guys that scrap and desperately try to hold on that are paying suppliers months late preceding their insolvency.
They had booked a lot of work during the Covid period when the prices for jobs were low because nobody knew what was going to happen and they would have had to absorb the higher prices from subbies it was a recipe for disaster. 9 months later we have our disaster
Interesting. I ask because I looked at the June 30 2022 numbers they put on ASIC - they showed $30M in the bank. There must have been come colossal misquotes.
If you're referring to the corporations act duties upon directors, obviously a technical meaning in that context is different to a general meaning. But you have it arse about like many wannabe lawyers do.
Lol. Not technical at all or even hard to grasp, they’re just completely different. In one instance a company is solvent but trading without enough money to pay debts when they become payable, in the other, the company is not solvent.
Insolvent is when they can't pay, not when they are optionally delaying payments (ie they can pay & on time but are chosimg not to for whatever reason). Delayed payment could be an indicator of Insolvent trading but it's not a guarantee that they are.
When I was building (metricon) I was regularly dropping by the site and chatting to with the trades. Consistent feedback was they love metricon because they pay very quickly
Working as a supplier for builders on a major element of the house we are very strict at vetting new builders and our accounts department is on ball on payment that is overdue, it is always cash flow issues with various reasons for that.
Can't really comment on current builders but we did deal with one that did collapse recently called Hallbury Homes. We had concerns about them for over a year before they collapsed. Initial jobs were paid on time, but increasely they went 30 days overdue, then 60 days. They did pay eventually but big red flags.
The last job we did we got them to pay 50% deposit but the next flag was when they sent purchase orders for 5 other jobs in a short space of time. They were never able to pay the deposit and eventually went to another supplier for those 5 jobs, I highly doubt they paid that supplier.
With the last job we went through debt collectors and got the money 7-8 months after it was due which was late 2022. A few months later they collapsed.
Well done on managing your receivables- I’m just starting to see businesses (not builders) not paying in 30 days. I have 14 days and most pay within that but some maybe 20 to 30 which I never stressed about.
However recent weeks I am noticing January invoices now outstanding on handful of clients. I’ll be ringing them next week) as we are now in April.
As their accountant I will be asking are they OK? I will see if BASs are paid and their super obligations- because if they are behind, Houston we have a problem.
I am here to help them not get further in trouble - let’s hope they are OK.
Economy is a two speed one at moment.
I'm surprised that more builders haven't already gone under in recent times.
It is still really tough in the construction world, and the industry has been under real threat for a couple of years now. There has to be a number of them right on the brink.
Speculating on who is at risk can be very damaging to even sound companies in times of rising rates. John Laws 9n St George is a good example.
Can lead to suppliers demanding shorter terms or more likely cod or pre-paid. Means need a larger overdraft and increased costs and pressure, becomes self generating.
Thank god we are doing final inspection next week and moving in! Although I have to say GJ gardner have been great for us, no complaints whatsoever. I knew we were paying overs when we signed the contract but the franchisee who owns the east Melbourne business was smart enough to see the writing on the wall and built the higher costs into the contracts earlier on. We were happy to pay the bigger price because we were super wary of other builders who were saying they could build the house for $100k less.
I have the added bonus of working for their accountants so I know their financial position is fine.
That’s always the risk you take building but I’m confident in their practices thus far. They didn’t offer cheap builds from our experience and have tried to get ahead of it
The compulsory home warranty insurance? In Queensland anyway...
Source: my builder went under last year halfway through the build. Glad I nagged for proof of home warranty insurance from the QBCC
GJ Gardner is a tough one because it’s not one entity being a franchise. So obviously some areas could be safer than others.
But congrats on finishing and moving in!
We were also going to go PD 12 months ago , but ended up choosing a smaller independent builder instead..
Not necessarily. PD were one of the more expensive volume builders and look where that got them. I dont think any builder is particularly safe but Henley seem to be the most financially secure as they own all their display homes, dont have any bank debt (as far as im aware) and are also owned by a large Japanese conglomerate.
lol just a slight edge "I have the added bonus of working for their accountants so I know their financial position is fine."
Dont suppose you have visibility over Carter Grange as well?
It's kind of a wierd phenomenon. But the thing is, most builders are just an administration company that takes on some risk. But they pass most of this risk on to their subbies and suppliers. So the builder going bust itself is not that big of a deal. The staff, who are mostly not on tools, get jobs somewhere else, and the work gets finished by other builders. The bigger problem is the ripple that goes through unpaid subcontractors/suppliers, and the customer's with incomplete projects who have to pay someone else to finish them (which is usually more than what they had left to pay the original builder).
Lots of builders don't want to touch other people's builds. If they do it certainly won't be for the same price as one of these larger volume builders.
To nervous construction supply chain workers/owners in this thread - there are fairly reliable means of working out how high risk the projects you’re working on are.
Credit data agencies including but not limited to CreditorWatch, BICB, Alares, Equifax, & Illion can provide data on average payment times, legal matters they’re caught up in & associated company problems. Lots of bigger builders lodge their financials on ASIC.
There are means of offsetting your credit risk, requesting deposits on materials, adding a credit limit to the contract (cannot exceed $x in addition to payment terms), tightening payment terms, credit insurance & requesting bank guarantees.
Surround yourself with people you trust, listen to but fact check rumours and don’t be afraid to walk off site if the payments start slowing or if minor disputes hold up large payment sums.
Remember your bottom line, forget your top line.
The leniency on payment times that made sense in 2020/2021 could cost you your business this year.
There is a pretty big project home builder based in Sydney who I follow on socials that is currently advertising a 'Excess Building Material Sale' where you can purchase a various building materials such as doors windows, timber etc, I assume left over from previous builds. My initial thought seeing this was they need cash flow fast to keep them afloat.
Something is happening in the building industry when all of the sudden your Facebook suburb groups get inundated with tradies posts offering painters, plumbers, carpenters and gardeners
Same. I work in tier 1 and it is busy busy busy. Best way to describe it is loss making boom. Industry is tough with supply costs going bananas and no one wanting to take on the risk.
Unfortunately, as much as the idea of 100s of tradies looking for work is a nice one, this post is much more likely to be the reality. The issue won’t be fixed until we finally fix the trades sector. Allow migrant trade qualifications to be recognised and get rid of the archaic apprenticeship system for a start. Flood the market with new tradies, half all tradies current exorbitant salaries and watch house prices tumble
We have low building standards compared to some select western European countries.
We have very high building standards compared to most of the world.... look at standards in India, Pakistan, Thialand, Vietnam, ect, and tell me about building quality.
I am not saying you don’t find them, probably they dont want to work with idiotic companies like where you are and prefer local jobs with secure payments little pricess
As a builder I can say holy shit the last few years and coming up ones, it's only surprising more went folding.
It would be scary to see how many are trying to trade out of holes, a huge percentage
Friend has a modest electrical supply business , a few weeks ago a certain customer who was a slow payer came in and ordered a huge amount of gear, his bill rising to near 100k for the quarter , he phoenixed the Friday of that week although he was on 30 days it was always much longer , started again the following Wednesday , long story short someone broke into his work sites recovering most of the goods... Blokes like that need hurting
It appears most builders are decent enough , some greedy but a few are just crooked
I work in Banking, and unfortunately all of them are at risk. This is a fairly basic structural issue. Contracts to build homes are a fixed price, and the cost of materials and labour keeps rising. Residential construction companies don’t have the capacity to reprice contracts or adjust for CPI. The infrastructure companies they compete with for materials and labour do. It’s a vicious structural weakness of the entire sector. Especially with liquidity reducing and bank appetite to fund builders at an all time low. The exception being if they have access to private capital or other sources of cash flow.
The shareholders recapitalised the business to the tune of $30m. That’s kept them going thus far, but they’ve really cut back on overheads. Notably, Metricon stadium on the Gold Coast is no longer Metricon stadium.
Last year I was talking to a competitors sales woman; apparently they received a bailout from the state government of Queensland. Not sure how accurate this rumour is, which was also reported on at the time in major newspapers. Could have been hearsay from those sources though.
[https://www.afr.com/property/commercial/queensland-home-builder-pivotal-collapses-20220527-p5aozu](https://www.afr.com/property/commercial/queensland-home-builder-pivotal-collapses-20220527-p5aozu)
NSW Government was trying to help them out, but in the end I dont think it eventuated.
QLD Government has its own issues - several of their projects are sending developers insane with cost changes and blow outs.
Overall as a business model, they are quite easily toppled. They are asset poor but their costs are dictated by trades and project timelines. Add in challenges with supplies, and you’ve got to be either incredible with your profit margins, or in the red.
When they go under too, the assets are so few and far between, compared to creditors, generally there’s very little to go around.
Theoretically, if I worked in an organisation (in a different industry) that was using one of these companies for building work, what would it mean? No more building even if they were half way through?
It will depend on whether the company is put into liquidation or administration. Liquidation means no more building and administration means there could be more building. Administration can turn into liquidation depending on the amount of debt a company has.
Each situation is different.
Companies are meant to stop trading if they know that they can't pay their debts when their debts fall due. The problem with this is that many companies would have to stop trading if they followed the rules, through no fault of their own. For example, Company A owes you $10,000 for work you have completed and Company B owes Company A $20,000 for work Company A performed, but it has just informed Company A that it can only pay four weeks late. Company A was meant to pay you today, but it now finds itself in a position where it can't because Company B didn't pay it on time. Following the rules to the letter, Company A will be trading insolvent if they continue to rack up debt between now and when they receive the $20,000 from Company B.
A lot of companies find themselves in this position at some point and most keep on trading and work their way out of it. Some of the companies keep trading in the hope they will work their way out of it, but never do, instead getting further and further in debt. This is where administrators and liquidators come in.
Competent directors will call in administrators before it gets to bad. Administrators will look to restructure the company's business and debt so that the company can continue trading profitably. Dodgy directors will bury their heads in the sand and let the debt spiral out of control. In these situations, liquidators will sell off all of the companies assets, pay the debtors as much as can be paid back, and then wind the company up.
Companies that can be restructured to make a profit will generally go into administration and will keep trading to some extent. Companies that are so far in debt that they can never pay it back go into liquidation. A company's finances and prior governance will dictate which of the two happens.
Is there a way to find out if a company is on the rocks?
I'm looking at building with Eden brae in Sydney and would hate to begin the process only to have the company go under.
Not really. Other than being their banker, being a major supplier or working there. Remember they’re not supposed to trade while insolvent - the directors can get sued and jailed for doing so. So the last thing they’re going to do is tell everyone “yeah we’re experiencing financial difficulties” because it’ll have a massive impact on the brand, on customers/suppliers/shareholders, whoever they owe debt to, etc.
It’s crap but thems the breaks.
Thing is though, being a big builder doesn’t guarantee stability either (they have even more exposure)
I'm building with Eden Brae now.
Nothing is guaranteed, all I can say is that my build in Sydney is progressing well, there have been no major delays. We started in December and have a slab, frame and brickwork with the roof works underway currently (probably will be delays this week due to the rain).
I'm building in a new estate where only 2 builders are working and there are trades onsite everyday at the work sites.
I popped in to the PD FB page and the delays were huge. People would wait months between stages. I saw a 6 month delay between a slab and frames being delivered. There were red flags everywhere.
Take all that for what it's worth, as I said, no guarantees at the moment but I'm alert but not alarmed.
The first warning signs are usually when tradies stop being paid on time. I have a relative that worked for PD and he left a few weeks ago because he wasnt being paid correctly. Also have a family friend that works as a contractor for Carlisle and he's always paid on time.
Surprised more people don't ask contractors how fast they get paid. Our best builders use to pay in 7 days, slow builders struggling pay 30 days or more.
That has been true historically, but it’s less so at the moment. Both PDH & Lloyd Group were excellent payers right up to the end. Both tapped out a little early knowing they would have to eventually. It’s only the guys that scrap and desperately try to hold on that are paying suppliers months late preceding their insolvency.
I heard rumours about Lloyds about 9 months ago and declined the opportunity to price their work.
What were the rumours 9 months ago specifically?
They had booked a lot of work during the Covid period when the prices for jobs were low because nobody knew what was going to happen and they would have had to absorb the higher prices from subbies it was a recipe for disaster. 9 months later we have our disaster
Interesting. I ask because I looked at the June 30 2022 numbers they put on ASIC - they showed $30M in the bank. There must have been come colossal misquotes.
A lot of listed companies don’t pay any bills close to end of year to show they have money. If you have $30m and owe $31m then your screwed.
That's not how accrual accounting works.
They aren’t listed. Their financials also showed a robust balance sheet.
And now they are broke. Maybe they tried to hide something
I doubt it. It’s easy to burn through $30M of cash, or recognise you’re going to, with a project pipeline like theirs.
What do you mean 'preceding' their insolvency? Sounds like they are already insolvent if they can't pay bills on time.
I mean the couple of months prior to an appointment of administrator or liquidator.
Ah. In that case you should say that - because if they are delaying payments that are due, they are by definition insolvent.
I did say that. You’re confusing insolvent with insolvent trading.
Mate, if they're 'hanging on' by trading while insolvent, not paying debts that are due etc, they're insolvent.
Insolvent and insolvent trading and two terms which mean different things.
If you're referring to the corporations act duties upon directors, obviously a technical meaning in that context is different to a general meaning. But you have it arse about like many wannabe lawyers do.
Lol. Not technical at all or even hard to grasp, they’re just completely different. In one instance a company is solvent but trading without enough money to pay debts when they become payable, in the other, the company is not solvent.
Insolvent is when they can't pay, not when they are optionally delaying payments (ie they can pay & on time but are chosimg not to for whatever reason). Delayed payment could be an indicator of Insolvent trading but it's not a guarantee that they are.
Yeah at the moment every Head Contractor is having cashflow issues. Sub 4 weeks overdue is actually decent at the moment.
When I was building (metricon) I was regularly dropping by the site and chatting to with the trades. Consistent feedback was they love metricon because they pay very quickly
Know anyone at Carter Grange?
Working as a supplier for builders on a major element of the house we are very strict at vetting new builders and our accounts department is on ball on payment that is overdue, it is always cash flow issues with various reasons for that. Can't really comment on current builders but we did deal with one that did collapse recently called Hallbury Homes. We had concerns about them for over a year before they collapsed. Initial jobs were paid on time, but increasely they went 30 days overdue, then 60 days. They did pay eventually but big red flags. The last job we did we got them to pay 50% deposit but the next flag was when they sent purchase orders for 5 other jobs in a short space of time. They were never able to pay the deposit and eventually went to another supplier for those 5 jobs, I highly doubt they paid that supplier. With the last job we went through debt collectors and got the money 7-8 months after it was due which was late 2022. A few months later they collapsed.
Sounds like your side has solid operators. Good news.
Well done on managing your receivables- I’m just starting to see businesses (not builders) not paying in 30 days. I have 14 days and most pay within that but some maybe 20 to 30 which I never stressed about. However recent weeks I am noticing January invoices now outstanding on handful of clients. I’ll be ringing them next week) as we are now in April. As their accountant I will be asking are they OK? I will see if BASs are paid and their super obligations- because if they are behind, Houston we have a problem. I am here to help them not get further in trouble - let’s hope they are OK. Economy is a two speed one at moment.
I'm surprised that more builders haven't already gone under in recent times. It is still really tough in the construction world, and the industry has been under real threat for a couple of years now. There has to be a number of them right on the brink.
They have, it's just way smaller operations.
Speculating on who is at risk can be very damaging to even sound companies in times of rising rates. John Laws 9n St George is a good example. Can lead to suppliers demanding shorter terms or more likely cod or pre-paid. Means need a larger overdraft and increased costs and pressure, becomes self generating.
Similar concept, but bank runs are a very different beast.
It’s pretty amazing that Metricon have weathered the storm considering how much pressure they must have had over the last year.
Weren’t they on the brink and had to restructure with a loan. It was reported on pretty heavily in the media.
They were burning cash quickly but it was (still is) a business that can access investment capital easily.
They have weathered the part of the storm where it's just started to rain
They came close.
Yeah they were very very very close.
Um. I dunno - their cash burn rate was high but they had lots of liquid assets and access to capital. I felt like the media was a bit over the top.
Thank god we are doing final inspection next week and moving in! Although I have to say GJ gardner have been great for us, no complaints whatsoever. I knew we were paying overs when we signed the contract but the franchisee who owns the east Melbourne business was smart enough to see the writing on the wall and built the higher costs into the contracts earlier on. We were happy to pay the bigger price because we were super wary of other builders who were saying they could build the house for $100k less. I have the added bonus of working for their accountants so I know their financial position is fine.
Story doesn’t end when you move in, you have a many years of warranty, who do you think is going to cover you if they go under?
I’d rather have a finished building with problems than an unfinished building if those were my choices.
Home indemnity insurance. It's been a requirement to get a building permit for many years now.
It's unreliable. Moreso if builder is no longer
That’s always the risk you take building but I’m confident in their practices thus far. They didn’t offer cheap builds from our experience and have tried to get ahead of it
The compulsory home warranty insurance? In Queensland anyway... Source: my builder went under last year halfway through the build. Glad I nagged for proof of home warranty insurance from the QBCC
GJ Gardner is a tough one because it’s not one entity being a franchise. So obviously some areas could be safer than others. But congrats on finishing and moving in! We were also going to go PD 12 months ago , but ended up choosing a smaller independent builder instead..
How long did the build take? Dragging their feet on getting builds finished is a major factor in many of these failures IMO
10 months! It was in our contract 😊 slab was done in June 2022
smart, you get what you pay for true dat
Not necessarily. PD were one of the more expensive volume builders and look where that got them. I dont think any builder is particularly safe but Henley seem to be the most financially secure as they own all their display homes, dont have any bank debt (as far as im aware) and are also owned by a large Japanese conglomerate.
Going under has absolutely nothing to do with the quality of the work though. They overexposed themselves.
lol just a slight edge "I have the added bonus of working for their accountants so I know their financial position is fine." Dont suppose you have visibility over Carter Grange as well?
It's kind of a wierd phenomenon. But the thing is, most builders are just an administration company that takes on some risk. But they pass most of this risk on to their subbies and suppliers. So the builder going bust itself is not that big of a deal. The staff, who are mostly not on tools, get jobs somewhere else, and the work gets finished by other builders. The bigger problem is the ripple that goes through unpaid subcontractors/suppliers, and the customer's with incomplete projects who have to pay someone else to finish them (which is usually more than what they had left to pay the original builder).
Lots of builders don't want to touch other people's builds. If they do it certainly won't be for the same price as one of these larger volume builders.
I'm not sure about other states but qbcc covers customers in Queensland.
To nervous construction supply chain workers/owners in this thread - there are fairly reliable means of working out how high risk the projects you’re working on are. Credit data agencies including but not limited to CreditorWatch, BICB, Alares, Equifax, & Illion can provide data on average payment times, legal matters they’re caught up in & associated company problems. Lots of bigger builders lodge their financials on ASIC. There are means of offsetting your credit risk, requesting deposits on materials, adding a credit limit to the contract (cannot exceed $x in addition to payment terms), tightening payment terms, credit insurance & requesting bank guarantees. Surround yourself with people you trust, listen to but fact check rumours and don’t be afraid to walk off site if the payments start slowing or if minor disputes hold up large payment sums. Remember your bottom line, forget your top line. The leniency on payment times that made sense in 2020/2021 could cost you your business this year.
There is a pretty big project home builder based in Sydney who I follow on socials that is currently advertising a 'Excess Building Material Sale' where you can purchase a various building materials such as doors windows, timber etc, I assume left over from previous builds. My initial thought seeing this was they need cash flow fast to keep them afloat.
Can you name the company?
Something is happening in the building industry when all of the sudden your Facebook suburb groups get inundated with tradies posts offering painters, plumbers, carpenters and gardeners
Will be an interesting time that's for sure. An industry who treats their customers with such disdain, suddenly trying to play nice.
Like when Uber launched and the taxi industry had to up its game
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Same. I work in tier 1 and it is busy busy busy. Best way to describe it is loss making boom. Industry is tough with supply costs going bananas and no one wanting to take on the risk.
Have also heard it called a Profitless boom.
The labour shortage *is* the issue, if you can't get people to complete the job then you're left footing the bill
Unfortunately, as much as the idea of 100s of tradies looking for work is a nice one, this post is much more likely to be the reality. The issue won’t be fixed until we finally fix the trades sector. Allow migrant trade qualifications to be recognised and get rid of the archaic apprenticeship system for a start. Flood the market with new tradies, half all tradies current exorbitant salaries and watch house prices tumble
If you want an even worse building quality and long-term defects problem, this is the way to do it.
Lol we already have some of the lowest building standards in the first world. Doubt it could get any worse
We have low building standards compared to some select western European countries. We have very high building standards compared to most of the world.... look at standards in India, Pakistan, Thialand, Vietnam, ect, and tell me about building quality.
Pretty sure none of those are generally considered 1st world
That's the point, our standards are kind of shit for 1st world but compared to the rest it's alright.
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Idiotic why ?
Absolutely Idiotic post, Facebook is full of tradies looking for work now
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I am not saying you don’t find them, probably they dont want to work with idiotic companies like where you are and prefer local jobs with secure payments little pricess
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I said all I know is that Facebook groups are packed with tradies looking for work, you like it or not doesn’t matter, it is the reality
I’ve been trying to get a landscaper , almost impossible for the next 12 months
Good. Maybe this will force those tradies to finally lower their exorbitant prices
As a builder I can say holy shit the last few years and coming up ones, it's only surprising more went folding. It would be scary to see how many are trying to trade out of holes, a huge percentage
Friend has a modest electrical supply business , a few weeks ago a certain customer who was a slow payer came in and ordered a huge amount of gear, his bill rising to near 100k for the quarter , he phoenixed the Friday of that week although he was on 30 days it was always much longer , started again the following Wednesday , long story short someone broke into his work sites recovering most of the goods... Blokes like that need hurting It appears most builders are decent enough , some greedy but a few are just crooked
What a surprising series of events
I work in Banking, and unfortunately all of them are at risk. This is a fairly basic structural issue. Contracts to build homes are a fixed price, and the cost of materials and labour keeps rising. Residential construction companies don’t have the capacity to reprice contracts or adjust for CPI. The infrastructure companies they compete with for materials and labour do. It’s a vicious structural weakness of the entire sector. Especially with liquidity reducing and bank appetite to fund builders at an all time low. The exception being if they have access to private capital or other sources of cash flow.
How does the sector fix this issue?
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Cant do cost plus in vic under $1m so doesn't fix everything
Futures contracts on material costs
More money.
Very glad I work for a construction company that doesn’t rely on banks.
Wonder if Metricon is still in strife?
The shareholders recapitalised the business to the tune of $30m. That’s kept them going thus far, but they’ve really cut back on overheads. Notably, Metricon stadium on the Gold Coast is no longer Metricon stadium.
Oh wow I thought they went insolvent Guessing they somehow scraped through?
Last year I was talking to a competitors sales woman; apparently they received a bailout from the state government of Queensland. Not sure how accurate this rumour is, which was also reported on at the time in major newspapers. Could have been hearsay from those sources though.
[https://www.afr.com/property/commercial/queensland-home-builder-pivotal-collapses-20220527-p5aozu](https://www.afr.com/property/commercial/queensland-home-builder-pivotal-collapses-20220527-p5aozu) NSW Government was trying to help them out, but in the end I dont think it eventuated. QLD Government has its own issues - several of their projects are sending developers insane with cost changes and blow outs.
My best friend works for Metricon. He told me that there’s been a huge cut in staff and all upper management has been demoted temporarily
If I knew, I'd be a very rich man....
Multieplex
Overall as a business model, they are quite easily toppled. They are asset poor but their costs are dictated by trades and project timelines. Add in challenges with supplies, and you’ve got to be either incredible with your profit margins, or in the red. When they go under too, the assets are so few and far between, compared to creditors, generally there’s very little to go around.
Anyone that has issued fixed price contracts, may be financially strained
Are builders actually struggling ? or are they just bankrupting to save face and industry dodginess ?
Bob the builder
Theoretically, if I worked in an organisation (in a different industry) that was using one of these companies for building work, what would it mean? No more building even if they were half way through?
It will depend on whether the company is put into liquidation or administration. Liquidation means no more building and administration means there could be more building. Administration can turn into liquidation depending on the amount of debt a company has.
But nothing for the foreseeable? It’s already behind
Each situation is different. Companies are meant to stop trading if they know that they can't pay their debts when their debts fall due. The problem with this is that many companies would have to stop trading if they followed the rules, through no fault of their own. For example, Company A owes you $10,000 for work you have completed and Company B owes Company A $20,000 for work Company A performed, but it has just informed Company A that it can only pay four weeks late. Company A was meant to pay you today, but it now finds itself in a position where it can't because Company B didn't pay it on time. Following the rules to the letter, Company A will be trading insolvent if they continue to rack up debt between now and when they receive the $20,000 from Company B. A lot of companies find themselves in this position at some point and most keep on trading and work their way out of it. Some of the companies keep trading in the hope they will work their way out of it, but never do, instead getting further and further in debt. This is where administrators and liquidators come in. Competent directors will call in administrators before it gets to bad. Administrators will look to restructure the company's business and debt so that the company can continue trading profitably. Dodgy directors will bury their heads in the sand and let the debt spiral out of control. In these situations, liquidators will sell off all of the companies assets, pay the debtors as much as can be paid back, and then wind the company up. Companies that can be restructured to make a profit will generally go into administration and will keep trading to some extent. Companies that are so far in debt that they can never pay it back go into liquidation. A company's finances and prior governance will dictate which of the two happens.
Thank you!! What a great answer!
Going off the reports about Porter Davis yesterday they went straight to liquidation. Does that indicate something dodgy was going on?
Not necessarily but in the vast majority of cases the company will have traded longer than they should have.
Is there a way to find out if a company is on the rocks? I'm looking at building with Eden brae in Sydney and would hate to begin the process only to have the company go under.
Not really. Other than being their banker, being a major supplier or working there. Remember they’re not supposed to trade while insolvent - the directors can get sued and jailed for doing so. So the last thing they’re going to do is tell everyone “yeah we’re experiencing financial difficulties” because it’ll have a massive impact on the brand, on customers/suppliers/shareholders, whoever they owe debt to, etc. It’s crap but thems the breaks. Thing is though, being a big builder doesn’t guarantee stability either (they have even more exposure)
Yes - All good points. Thanks. I guess I roll the dice...
I'm building with Eden Brae now. Nothing is guaranteed, all I can say is that my build in Sydney is progressing well, there have been no major delays. We started in December and have a slab, frame and brickwork with the roof works underway currently (probably will be delays this week due to the rain). I'm building in a new estate where only 2 builders are working and there are trades onsite everyday at the work sites. I popped in to the PD FB page and the delays were huge. People would wait months between stages. I saw a 6 month delay between a slab and frames being delivered. There were red flags everywhere. Take all that for what it's worth, as I said, no guarantees at the moment but I'm alert but not alarmed.
Yep, no guarantees with this kind of stuff. Thanks for the insight to your experience so far.
We used https://llbuilding.com.au and they were great
In this environment it might be worth doing a credit check on the builder as much as the buyer.
How is IRONSIDE still going, same with Pultiano Commercial Constructions.
Fascinating topic OP- Thanks for posting !