Construction chaos in Australia: another builder collapses as sector faces 40th straight month in doldrums; 20-year-old Walton Construction handed over to administrators

James Thomson Editor

Construction chaos: another builder collapses as sector faces 40th straight month in doldrums

Published 04 October 2013 08:48, Updated 04 October 2013 10:09

The carnage in Australia’s building sector shows no signs of abating, with yet another major construction group placed in the hands of corporate undertakers yesterday. Craig Walton, managing director of Walton Construction, described Thursday as the toughest day of his life as he handed control of his 20-year-old construction group to administrators. ‘‘It is also the saddest day because of the impact on our employees and their families who have been so loyal and outstandingly professional over the whole journey,” Walton told Fairfax. The company, which at its peak turned over $360 million and had 340 employees, has been buffeted by the seemingly never-ending post-GFC construction sector hangover.Too many builders, fighting for too little work has seen a spate of builders fall over in the past five years. More than 20 per cent of corporate collapses in 2012 came from the construction and building sector, and the trend does not appear to have changed this year.

Walton, which was the company behind the $130 million refurbishment of the David Jones department store in Melbourne’s CBD, at least appears to have done the right thing by its clients and most of its staff.

Craig Walton said a number of projects have been transferred to competitors over the last few months, securing work for about 80 staff and contractors.

But the collapse of the business will see around 30 jobs lost. At least Walton, unlike many other failed construction groups, kept the payment of these workers’ wages and entitlements up to date.

The construction sector has been hit by a perfect storm since the GFC.

Falling property values have made banks nervous about lending against property projects, which has reduced the amount of work on offer. Banks are also naturally wary about providing funding to building and construction firms themselves.

The parlous state of federal and state government budgets has seen public sector work dry up, while cost pressures – particularly the cost of labour in a heavily unionised sector – have not eased.

Intense competition compounds these problems. Construction groups consistently undercut each other, despite margins being perilously thin. One poor project can put a business on the brink.

The Australian Industry Group’s Performance of Construction Index will be released in the next few days and is likely to show the industry has contracted for the 40th consecutive month.

For a new government hoping that the transition from a mining-led economy will be relatively smooth, these are not good signs.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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