Australian building giant Probuild has gone into voluntary administration after a problem-laden high-rise project drove the company into debt, meaning up to $5 billion in commercial and public sector projects are in jeopardy.
It was tools down on Wednesday night across the country, and 750 dismayed employees along with countless contractors have woken up today to the news the parent company Wilson Bayly Holmes-Ovcon Limited (WBHO) pulled the plug.
“We are caught up in a set of circumstances not of our making,” a Probuild spokesperson says.
“We are working closely with the administrator on a number of plans to protect our clients, subcontractors and employees.”
Get daily business news.
The latest stories, funding information, and expert advice. Free to sign up.
CreditorWatch CEO Patrick Coghlan told SmartCompany Probuild has become the latest victim of the pandemic’s “triple threat”.
“You’ve got big supply chain delays because raw materials aren’t available, you’ve got material price increases which is either part of the supply chain issue or the result of inflation (and that’s where it can get really dangerous, is if a builder doesn’t quote properly as it can substantially blow out their margin) and three, there are a lot of project delays due to labour shortages from COVID-19,” he says.
And when a company as large as Probuild collapses, Coghlan continues, it sends “ripples up and down the supply chain” of the deeply connected industry.
“There’s a significant number of contractors, multiple contractors for every project — you’re talking hundreds, if not thousands, of other businesses that are connected to Probuild and Probuild projects,” he says.
“All of those small businesses are reliant on that for school fees and groceries, that’s the human cost, if you break it right down to the individual it has a huge effect on the small business owners and their families.”
It all came crashing down for Probuild when South Africa-based parent company WBHO appointed Deloitte as administrators following the decision to withdraw financial support from the Australian Group.
“WBHO Australia can confirm that Deloitte has been appointed as administrator after being abruptly informed by parent company WBHO South Africa that all cash and securitisation support would cease for the Australian arm, which includes subsidiaries Probuild, WBHO Infrastructure and also Monaco Hickey, which is wholly owned by Probuild,” the company says in a statement.
In a statement, Deloitte Turnaround & Restructuring leader Sal Algeri acknowledged WBHO Australia’s contribution “to the construction sector and the broader economy, including as a direct and indirect employer,” but pointed to the last two years as a stumbling block.
“The COVID-19 pandemic has created challenging trading conditions for many businesses, and for WBHOA, which has also been impacted by certain loss-making projects,” he says.
Probuild’s portfolio of ongoing work across Australia is estimated to be worth $5 billion — including Greenland Centre, Sydney’s tallest residential building.
Algeri says the immediate focus will be to “undertake an urgent assessment of the entities’ financial positions and work with key stakeholders to stabilise the business and projects where possible”.
He says Deloitte will aim to preserve value and engage closely with “creditor groups and other stakeholders across the spectrum, including clients, employees, unions, suppliers, contractors and subcontractors”.
“We will also also be commencing a sale and recapitalisation process in order secure a new owner for the businesses.”
WBHO Australia was established in 1987 in Western Australia, but is now headquartered in Melbourne, with offices in Sydney, Brisbane and Perth with annual revenue of over $1.4 billion.
This morning’s news follows two other high-profile collapses in December — namely BA Murphy, which left almost $11 million owed to contractors, and Privium, which had $24.6 million in total liabilities.
“We have several options for raising the necessary capital to continue as a premium Australian building company,” Probuild’s spokesperson says.