There’s little relief in sight for the beleaguered building industry as the Reed and Hastie administrations descend into legal wrangling and building construction supplier Boral slashes its profit forecast.
The first creditors meeting of Reed Constructions Australia was held yesterday after it was placed in voluntary administration last month.
Creditors heard Reed’s debt bill was expected to top $182 million, including almost $79 million owed to 1,400 tradesmen and subcontractors, and $5 million in employee entitlements.
Angela Koutoulas, spokesperson for Reed, told SmartCompany, the owner of the Reed Group, Geoff Reed told creditors meeting of his plans to sue the NSW Government in excess $60 million.
“Geoff Reed turned up to the meeting and confirmed that the Reed Group intends to fund a court case against the NSW Government for the money he believes he is owed to Reed Constructions,” says Koutoulas.
Unions have warned the implications of Reed’s collapse are far reaching, with up to 500 of the construction giant’s subcontractors unlikely to be paid and at risk of being dragged under as well.
Meanwhile, the administration of the Hastie Group, which collapsed in May, is having to deal with chaos in the group’s Middle East arm, with Hastie management departing, others refusing to comply with the orders of administrators, and staff continuing to turn up to work.
According to a report in The Australian, investigations by the Hastie Group’s administrator, PPB Advisory, into the company’s Middle East operations have been severely hampered by missing management and non-compliant staff.
The Middle East operations have been partly blamed for the company’s collapse in May, owing an estimated $600 million and leaving thousands unemployed in Australia and across the world.
In an affidavit filed by Hastie administrators last week in the Federal Court, Craig Crosbie of PPB Advisory said it was impossible to accurately assess the Middle East operation because of mismanagement.
“The administrators’ investigations into the affairs of Hastie International have been limited by a lack of funds and the company’s former management’s departure from the Middle East,” the affidavit said.
Hastie also has been dogged by mismanagement issues, including an announcement in late May of a $20 million fraud that took down the company.
Hastie was contacted by SmartCompany but did not comment.
For those companies in the building sector who are still struggling on, the testing times continue with building materials supplier Boral slashing its profit forecast for the second time in three months.
Boral shares fell by 7.5% yesterday to a post-financial crisis low, after the company warned it would see its full-year net profit fall short of previous guidance by at least $28 million.
Boral now expects full-year net profit to be between $100 million and $110 million.
Ross Batstone, chief executive of Boral, said in a statement yesterday that the company was hit by slowing construction, with March quarterly housing starts in Australia released last week reporting a 25% decline over the prior year.
“A number of recent events have come together to weaken Boral’s trading performance in the fourth quarter which add to the impact of ongoing weakness in the Australian new housing construction market,” Batstone said in the statement.