Australia’s embattled construction sector has entered the post-holiday season insolvency danger zone with a thud.
In the industry’s first major blow for 2024, construction giant St Hilliers has gone into voluntary administration with work halted across its national pipeline of 21 active sites.
It has been revealed the Sydney-based group had injected more than $32 million of cash into its construction arm over the past seven months in a bid to avoid collapse.
At the weekend, it appointed Glenn Livingstone and Allan Walker, of WLP Restructuring, and alerted subcontractors to collect their tools.
“St Hilliers has today gone into voluntary administration,” it announced in a text message to subcontractors at its Berborough retirement village site in Brisbane’s inner-north Ascot.
“What I can advise you is we will allow persons to collect their tools under escort by St Hilliers, and materials fixed/unfixed cannot leave site.
“If you wish to redeploy your staff to alternative job sites that is certainly fine and the point of this message to you [is] so you have that opportunity.”
The administration relates to seven entities in its St Hilliers Contracting division while its property development and investment arm known as St Hilliers Property remains unaffected.
It is not unfamiliar territory for the group after it bounced back from its construction arm being placed into voluntary administration in May 2012 following the collapse of a joint venture to develop a $350-million prison in Victoria.
Eventually, the company was allowed to continue trading after its creditors agreed to a deed of company arrangement.
But since then times have changed and in an email to staff, St Hilliers executive director Tim Casey said challenging conditions across the sector during the past few years had impacted the business.
“Over $32,100,100 of cash has been injected into St Hilliers’ construction entities since June 2022,” he said.
“A significant amount of these funds have been utilised for the provision of bank guarantees, which were required for new work as a result of insurance bond providers exiting the industry or imposing more onerous terms and conditions. This constrained the cash available for working capital.”
February and March have emerged as a danger zone where there is an uptick in struggling undercapitalised building companies going under in Australia as they grapple with financial realities following the holiday break closure and lack of cashflow.
According to the latest data from the Australian Securities and Investments Commission (ASIC), a total of 1425 construction-related companies have entered administration or had a controller appointed in the seven months to January.
Last financial year St Hilliers recorded a loss of $8.9 million and deficit of $3.1 million the previous year.
On its website, it described itself as “one of Australia’s leading private, integrated property and construction groups”.
It adds: “We are cognisant of the tough market we operate in and are continually learning and improving our mature policies and procedures to ensure St Hilliers will be here for another 33 years and beyond”.
The group’s workbook of current projects also includes Thornton Central at Penrith, Central Coast Quarter at Gosford and 711 Hunter Street Newcastle West—all mixed-use developments.
As well, it has Department of Defence projects.
In a statement, WLP Restructuring said the administrators have secured and paused all works across St Hilliers’ 21 active construction sites while they undertook an urgent assessment of the business’s financial position and operations.
“As this assessment is completed, approximately 80 staff members will remain employed while 22 have unfortunately been made redundant,” it said.
WLP Restructuring’s Glenn Livingstone said the administrators were working closely with all stakeholders and staff in order to restart project works at the earliest opportunity.
“We are hopeful this can occur in the coming days and that the employment of as many people as possible is preserved,” he said.
The first creditors’ meeting is scheduled to be held on or before February 14.