Another builder which has been building homes for 50 years has entered liquidation, owing creditors more than $10 million.
A Victorian builder of almost 50 years has entered liquidation, owing creditors more than $10 million.
Family-owned Langford Jones Homes, which builds homes in Melbourne’s bayside, southeast and Phillip Island, ceased trading last Thursday.
There are about 65 building developments at various stages of completion, with more than 250 creditors owed more than $10 million, liquidators RSM Australia partners Jonathon Colbran and Richard Stone Partners said in a statement on the company’s website.
The builder’s shareholders injected extra funds to keep the business afloat for “some time” but the situation proved untenable due to market conditions, including rising labour and material costs and the impact of a recent cyberattack.
“The company recently experienced a significant cyber-attack, higher costs for labour, supplies and materials, supply chain delays and skilled labour shortages and all of this has resulted in substantial financial losses to the business,” Mr Stone said.
“This perfect storm of supply and labour shortages and high costs are a common theme across the building and construction industry at the moment and unfortunately, it’s become unsustainable for Langford Jones.
“Our task now is to co-ordinate the handover of the building projects to the homeowners and look to realise the value of any business assets.”
Australia’s building industry is in crisis, with many companies going into liquidation so far this year amid rising costs for construction materials and ongoing supply chain issues, putting them out of business.
CreditorWatch recently warned the situation facing the sector was “dire”.
Like the rest of the Australian economy, the construction industry was getting back on its feet after Covid-19, but it has been hit by a “perfect storm of staff shortages and cost blowouts as inflation surges globally” they said in a paper.
“Construction has the worst late payment of any industry,” CreditorWatch said.
“About 12 per cent of construction businesses are more than 60 days in arrears on their payment to suppliers.
“The risk is that construction collapses cascade down, creating a chain reaction of failed businesses. That could have a serious impact on Australia’s economic recovery.”
Another Victorian residential building company, Victorian construction firm Snowdon Developments Pty Ltd, collapsed last week, leaving 550 homes in limbo and 262 creditors cumulatively owed $17.8 million.
All 52 staff were terminated in an hour-long crisis meeting that day where the company’s directors announced they had appointed external administrators.
It came after months of building works stalling, suppliers and subcontractors chasing payments and employees not receiving their superannuation. Staff also claimed they had not received their fortnightly pay due on Monday.
News.com.au has spoken to one of the joint administrators, Shane Deane of Dye & Co, Solvency, who said: “When they [companies] stop paying super and when they stop paying the ATO, that’s usually a fairly strong sign that they’re trading while insolvent or [there is] significant cash flow issues.”
Snowdon Developments has allegedly not been paying staff superannuation since October, news.com.au understands.
Snowdon Developments entered a creditor’s voluntary administration on July 1.
Shane Deane and Nicholas Giasoumi of Dye & Co, Solvency and Turnaround, were appointed as administrators.
“The control of the company has reverted to administrators,” they informed creditors in a document emailed late on Friday.
“The company has ceased to trade with immediate effect,” they added later on in the email.
Mr Deane said “at last count” Snowdon’s debt had snowballed to $17.8 million between its 262 creditors. Of that, the largest debt is around $4 million, to the tax office. There are also three private creditors owed more than $1 million each.
There are also 252 customers who “paid their deposit and nothing happened” according to Mr Deane, saying they were in very preliminary stages of their building works.
A further 268 home buyers are in “various stages of completion”.
On top of that, Snowdon has $9 million it owes to “related creditors” which Mr Deane explained was “director-related entities putting money into Snowdon to keep it afloat”.
Snowdon’s sister company Pivot Construction Group Pty Ltd, which was a developer with the same office, staff and leadership team, is also involved in the administration proceedings.
It has 74 homes impacted and also 136 creditors — many of them also creditors of Snowdon’s — owed a total of $4.5 million, with the highest single debt being $600,000.
“The business was suffering from cashflow and supply issues as a result of the Covid pandemic which has significantly impacted the construction sector,” the administrators wrote in their preliminary report shared with creditors.
Despite first talking to administrators in April, the company continued functioning until July.
“The intention was to trade the company out of its difficulties,” the administrators report stated.
Originally published as Victorian builder Langford Jones Homes the latest to enter liquidation
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