Ground hog day...

Construction firm Hastie Group and 44 of its subsidiaries have been placed in voluntary administration, leaving thousands of jobs at risk after the business discovered "accounting irregularities" worth as much as $20 million.

But this is only the latest development in a string of bad announcements for the company, which has seen its shares tumble by 93% during the past year – it has been attempting to recapitalise itself for months.

Hastie last traded at just 16 cents, down from as high as $2.45 at this time last year. Industry unions are already riled by the announcement, which has left thousands of employees without work. The business has 7,000 employees overall, with 4,000 in Australia.

Ian Carson, David McEvoy and Craig Crosbie of PPB Advisory were appointed as administrators after the company announced the accounting irregularities last week.

In a statement, Carson said the move is a disappointment, but there was no other option "given the extreme financial situation".

"We are obliged to confirm Hastie Group's ability to fund trading before we can resume business. We need time to assess the details of the situation and to determine the viability of the ongoing businesses.

"In the meantime, we remain acutely aware of Hastie Group's role on major construction projects and are assessing those urgently. We will provide an update to employees and other affected parties as soon as possible."

All New Zealand businesses will continue to operate as normal, although receivers and managers have been appointed to one company there.

This comes after the company announced it had found "irregularities" in its finances – as high as $20 million.

"These irregularities date from the financial year 2009 and appear to have resulted from the deliberate actions of a current employee (on suspension)," the company said last week.

Accounting irregularities totalling $3 million were discovered during the audit process for the first half of the year and were taken as a net loss. But "fresh information" prompted a new investigation.

PPB was contacted this morning, but no reply was available prior to publication.

The collapse comes during what has been one of the worst years in recent history for the construction market, with record numbers of insolvencies, while fraud has also been on the rise fuelled by global economic turmoil.

This is the latest development in a line of bad news for the company.

Earlier this month, Hastie's shares were suspended due to a "review event" prompted by the company's banking syndicate. The review event was set aside, but Hastie was still in negotiations over financing – it submitted two proposals on May 18 and gave no further update.

In its latest financial report, for the half-year ending December 31 2011, the company recorded a net loss before tax of $159 million up from a loss of $95 million during the previous corresponding period.

The result led to the company breaking some of its banking covenants, which caused debt repayments to be accelerated.

And yet Hastie had even more problems last month surrounding a dispute in the Middle East with Dutco Balfour Beatty over a building project. DBB wanted to terminate the company's contract and called for payment of performance bank guarantees worth $6.2 million.

A second update on May 3 said DBB had been paid $7.4 million under the bank guarantees.

As a result of all of this, Hastie said anticipated EBIT for the second half of the year would be "reduced to approximately $0".

Non-executive directors Lindsay Phillips and Harry Boon resigned from their positions last week.

Source: http://www.smartcompany.com.au/construction-and-engineering/049909-how-a-20-million-fraud-took-down-construction-firm-hastie-group.html



And in other news:

St Hilliers Construction founder Tim Casey says the firm is owed more than $6 million by the NSW government and has slammed its decision to take over 13 NSW social housing projects.

Speaking at a creditors' meeting in Sydney on Friday, Casey said he had written to the State Treasurer, Premier and Finance Minister over the $8.1 million in work St Hilliers has undertaken on the projects.

Casey claims the construction business has only been paid $1.4 million.

Of the $6.7 million still owed, $3.5 million is owed to sub-contractors of St Hilliers Construction.

Casey says St Hilliers plans to sell the company’s Cumberland Street headquarters in Sydney, worth up to $22 million, to pump money into the ailing construction business.

“It’s a high-handed decision of the state government to [terminate these state housing contracts],” Casey said at the creditors' meeting.

One contractor on the NSW housing projects, Ivan Stefanac, a gyprocker who is owed $41,000, told The Australian he does not expect to receive any money now that the government has taken over the projects.

At the meeting Casey said all but two of the projects would be reopened and said he was confident the construction business would find a way to start trading again.

There are about 1,000 creditors of St Hilliers Construction.

At the meeting, attended by about 100 creditors, administrators Trent Hancock and Michael Hird of Moore Stephens Sydney Corporate Recovery Group did not say how much was owed to creditors.

The St Hilliers website is functioning normally again after previously only linking through to a press release about the voluntary administration decision.

Separately, the Reed Group, which is facing the threat of supplier seeking to wind up the business, has had its claim that it is owed up to $70 million by the NSW state government rejected following a parliamentary hearing.

An independent expert panel chaired by Andrew Rogers QC found that the monies Reed claims it is owed by the state government were not “anywhere near” the true figure.

Reed claims the money is owed for work done on building roads and building schools as part of the federal government’s $16.2 billion Building the Education Revolution scheme.

Source:http://www.propertyobserver.com.au/news/st-hilliers-founder-says-government-owes-it-millions-but-reed-group-government-claim-rejected/2012052854859


Till next time...

Another sign of the times?...

Hmmm....yet another one on the brink...

A proceeding has been filed in the NSW Supreme Court to wind up Reed Constructions Australia after the construction company missed a government-imposed deadline earlier this week.

The NSW Government gave Reed until May 21 to prove it could restart work on key major works projects after the construction company suffered a severe cashflow crisis and failed to pay subcontractors on four road projects, causing the workers to down tools.

Reed was described by the state opposition as on the verge of collapse with 1,500 jobs at risk.

That deadline has passed and now BCI Nominees has commenced proceedings, which will be heard on June 20, to wind up Reed.

Church and Grace is representing BCI Nominees but the law firm did not respond to SmartCompany’s request for comment prior to publication.

Reed has claimed it is owed up to $97 million from work it has completed on Building the Education Revolution and other government projects.

However, the NSW Government said it is investigating whether up to $90 million of Building the Education Revolution money was diverted to expand a division of Reed.

An expert panel, led by Andrew Rogers QC, was established by the government when it learnt of Reed’s financial difficulties in February.

Reed agreed to a government demand that subcontractors be paid first from any decision on Reed’s claims.

Reed Constructions told SmartCompany it was unable to comment on the wind up notice.

The company issued a statement from managing director Geoff Reed, in which he said the company and the government were still finalising the expert panel’s determination.

“Reed Constructions Australia Pty Ltd is pleased that the expert panel has provided its interim determination for liability relating to variation claims for works carried out by Reed for Roads and Maritime Services and the Building the Education Revolution Program,” Reed said.

“As Reed and the NSW Government are in the process of finalising the determination, we are unable to make any further comment at this time.”

NSW Minister for Finance and Services Greg Pearce released a statement earlier in the week that said the government’s priority was to protect jobs and ensure the projects were completed while ensuring taxpayers got value for money.

“The NSW Liberals and Nationals are getting on with the job of fixing this mess so that the projects can be completed as soon as practicable,” Pearce said in the statement.

SmartCompany contacted Pearce, but he failed to respond prior to publication.

Source: http://www.smartcompany.com.au/construction-and-engineering/049884-application-filed-to-wind-up-troubled-reed-construction-group-as-investigation-continues-into-missing-90-million.html



Till next time...

Margins; the Be All and End All?...

I was listening to my favourite talk back radio station a couple of days ago and the morning presenter was talking about the 2 major supermarkets and their duopoly.

He was talking about the fact that 3 or 4 (can't recall the number) major tomato farmers have recently gone bust and he was also talking about how the majors work when it comes to sales and specials.

Essentially, what he was saying was that when the majors decide to run a sale or special it is the farmer, producer, manufacturer that really runs the sale (unbeknownst to us, the consumer).

So, if an apple, for example, costs the supermarket 80c to buy from the farmer, they'll sell it for say $1.40, so a mark-up of 60c.  But, if the supermarket decides to run a special and discount the apple by 40c, thus selling it for $1.00 that doesn't mean that the supermarket is being generous; it means that the supermarket is telling the farmer to bend over so they can screw him some more!

It is the poor old farmer that suffers because he will only get paid 40c for that same apple; that same apple that takes just as long to grow, that same apple that takes just as much labour to pick, sort, box and distrubute, yet it is the supermarket that still has his 60c profit!

How on earth does this work? 

And more importantly, how has this been allowed to happen, and allowed to continue?

It is such a ridiculous proposition that the margins of the supermarkets are a protected species yet the margins of the farmer are not?

This isn't just isolated to the farming industry.

Take the banks as another example.

The RBA recently lowered the cash rate by 50 basis points yet the banks only passed on a portion of it.  Why?  Because they need to maintain their margin!

WTF???  What gives them the right to protect their margins, but the farmer can not, or the manufacturer competing with some cheap import can not, or the builder can not.

What makes them so special?

Something has to change, because this is just plain wrong.  Companies run by hardworking individuals are going broke because big business are screwing them for the sake of their own margin...for the shareholders, for maximum growth!

Well, what about the shareholders of the companies going broke?

It's just not OK.


Till next time...

Need I Say Any More?...

Ha!

Following on from my last post, here's some more doom and gloom...albeit a little old, but nothing's changed since this was written!

http://www.smartcompany.com.au/construction-and-engineering/048778-suburban-tradies-collapse-as-construction-and-building-industries-suffer-through-2012.html


Till next time...

Murphy's Law and other bits...

I've had a funny start to the week this week.


On Friday I had my regular fortnightly session with Simon and he was having a go at me because I haven't done any of the internet  marketing stuff that he set for me to do.


I've been saying to him for quite a while that I think all this internet stuff is bullshit and all this Adwords stuff is just ridiculous (not to mention so freaking complicated I'm flabbergasted that anyone can make any sense of how it all works!).


So, after my little rant and refusal to do the things he's asked of me, Murphy's Law just had to stick it to me.  I received 2 random enquiries from the internet.


Of course, it just had to happen to me.


But, I still stand by my opinion for the moment.  Now instead of completely against it all, I've opened myself to the possibility that it may be beneficial in some small way.


The jury is still out.




On another front, I'm really, really starting to become worried about what the future holds for me.


We've recently had Kell & Rigby go down, Reed Constructions is goodness-knows where, the Nahas site near to me has been abandoned for several months with rumours they're also on the brink of failure and there are a couple of other companies that have either failed or are on the brink of failure (whose names all escape me right this moment) and this morning another heavy weight of the construction industry, St Hilliers, has gone into Voluntary Administration.


http://www.smartcompany.com.au/construction-and-engineering/049712-construction-pain-continues-as-st-hilliers-placed-in-voluntary-administration-after-funding-failure.html


So, I ask yet again, if these boys can't make it with all their collective wisdom, experience, know-how and contacts, what hope does small-fry like me have?


You know, I haven't analysed the data but it really wouldn't surprise me at all if we were in a recession.  But the media and the government are just too darn scared to mention the "R" word.  Grow some balls people and stop pretending everything is OK...because it's not.  This country is become more and more f'd up by the day and it is very, very upsetting!




Till next time...
  

Declaration of Lack of Independence...

Thank you to a friend of mine for alerting me to this wonderful article!



“Time and chance happeneth to them all.”
(Ecclesiastes 9:11 – King James Version)

Declaration of Lack of Independence

by James Allan

May 10, 2012

---

Let me paraphrase the old gag of former New Zealand Prime Minister Robert Muldoon and tell you that Craig Thomson’s move out of the Labor Party to sit with the independents on the cross-benches has done one thing for sure. It has raised the average IQ of both the Labor Party and the independents.

---

And what astonishing examples of independents they are. No matter how superb their bargaining power, they extract virtually nothing from Ms. Gillard’s government save for a few trifling baubles here and there. (I assume that by now no one counts the NBN as a life-altering good thing.)
They just vote with the government through thick and thin, regardless of the swirl of surrounding events.

Normally that’s not most accurately described by the adjective ‘independent’. Somewhat more apt might be descriptions such as ‘retainers’ or ‘sycophants’ or ‘lap dogs’ or, well, ‘dependents’.
You see at least when it comes to Messrs Oakeshott and Windsor they are very much dependent on this government plodding on in order to stay in Parliament. Neither has the remotest chance of being re-elected. It may well be that one or both of them won’t even have the courage to run again and take their medicine from the constituents whom they misled.

If you understand politics in terms of principles, then it’s hard to see what principle motivates these two men to keep this Gillard government in power. I suppose you could say that both were always a bit on the rural socialist side of things that fits a bit with some Labor outlooks. But if there’s any principle at work at all it seems to me to be an old-fashioned sort of hatred aimed at the National Party and Mr. Abbott, together with a puffed up self-regard that isn’t all that pleasant to observe.
Of course if you throw out that sort of template and see politics in terms of self-interest, or even of rent-seeking behaviour, then these two men just come across as incompetent. Let’s be honest. They have got next to nothing extra for their constituents. And they’ve destroyed completely their own political careers.

They will be remembered as the men who put into office, and kept there, the worst government in Australia’s history. Mr. Whitlam should be thanking them every chance he gets.

And that sort of accomplishment surely deserves special recognition. How about commemorating it in a Declaration of Lack of Independence? With apologies to Mr. Jefferson, here’s my suggestion.

When in the course of human events (including inadvertently finding yourself holding the balance of power between the political party you once belonged to and any other party at all) it becomes necessary for a few loose cannons to dissolve the bonds that separate them from not just from their former party but from the wishes of the preponderance of their constituents, a decent respect to the opinions of the ABC requires that they should support anyone but the Coalition, and continue to do so regardless of what that propped up Government does and however many breaches of trust with the voters it may commit.

Indeed we hold these truths to be self-evident. That all independents will vote with the Labor Government come what may. That all confidence votes are created equal and will not be allowed to bring down Labor. That we dependents (oops, independents) have been endowed by our creator Ms. Gillard with certain inalienable entitlements, that among those are Serving a full three years to pursue as much happiness as we can before it all goes down in flames. And that to secure these entitlements, this Government has been instituted by us, deriving its just powers from the consent not of the governed, but of us, Tony and Rob.

And lastly, whenever this Government becomes destructive of the interests and consent of the governed, tough toenails.

Now there’s a Declaration our two independent MPs might find they could sign up to. Meantime anyone who thinks either man, under any circumstances, will bring down this government seems delusional to me.




Source: http://www.quadrant.org.au/blogs/allan/2012/05/declaration-of-lack-of-independence


Till next time...

Customer service really does not exist anymore...

This morning I went to my local supermarket and fruit market to top up on some supplies.

I went to the fruit market first and paid for my purchase using my debit card. 

I then went to the supermarket next door and went to pay for my purchase using the exact same card that I used not 2 minutes earlier and it wouldn't work.

The woman behind the counter tried my card several times all the while saying that there must be a problem with my card because they're new machines in the store.

Well, not to make a big deal out of things, I told her I'd run to the ATM just a few doors down and be back, which I did.

So, when I went back to pay for my purchase with cash I told her what happened to me just 2 weeks ago.

I said "you know, it can't be my card that's the problem.  It must be your new systems that are the probelm.  I shopped at your supermarket in a different location 2 weeks ago.  I purchased $400 worth of groceries and my card wouldn't work in your other store either". 

And the lady looked at me and shrugged her shoulders.

She shrugged her shoulders!

Oh my goodness.

I said to her "Is that all you can do, just shrug your shoulders.  Don't stand there and act like what I've just said doesn't matter, because it does matter.  There's clearly a problem with your new systems and I'm telling you about it".

Surprised at my comment she asked "What do you want me to do, tell my manager"?

To which I said "well, yes!  Not right now, but when you have a quiet moment you should be saying to your manager 'I had a customer today and she told me this, this and this', that's what you should do".

And I handed her my money and walked out.

I just couldn't believe the attitude...she just didn't care.

How does business survive when they have front line staff with such high degree of non-care?

All I can do is shake my head in sadness for the bosses of these businesses.  I feel sorry for them.


Till next time...

Whinge, Whinge...

Some people who may stumble upon this blog may read it and think that all I do is whinge. 

I sometimes think that all I do is whinge...but for crying out loud...I wouldn't whinge if people didn't give me things to whinge about, now, would I?

Sometimes I really wonder whether I'm properly equipped to handle my job. 

I've got some clients at the moment and they are a challenge to say the least.  The fact that it took one year from initially meeting them to eventually entering in to a contract should have been a clue (but we all have 20-20 vision with the benefit of hindsight, don't we!).  But I actually enjoyed that whole process; that cat and mouse, too-ing and fro-ing dance that we did.  It's just everything after that that I can't stand.

Yet another reason it would be best if I got back into property development.

Either that, or expanded the business so much (soon!) that I could employ a CRM person to handle the clients once I've gotten them past Contract.

Now that I think about it, I'm not equipped to do my job.  Perhaps equipped is the wrong word. 

To put it simply, I don't want to do one of the roles I'm doing now.

I don't want to look after clients.  I'm happy to bring them through the sales process and to the point of about to start contruction (ie, contracts signed, deposit paid), but after that, I'd love to hand them over to a "pom-pom" girl...someone who can act as their cheerleader and advocate and handle their every little query, concern, request, etc.

That person is just not me. 

I'm quite OK with dealing with issues that need to be escalated, but not the little bits and pieces of daily stuff that needs to be dealt with during a build.

Let me just continue developing my relationships with architects, project managers and other work sources and get the work in, and I'll be happy.

Till then, I'll really dislike a number of aspects of my job.


Till next time...

Crunch Time Approaching...

That's right.

Things are going to get scary pretty soon.

I haven't done a single tender since the last one I posted about back in March! 

Even people who aren't in business know that it's a numbers game and the more you tender the more likelihood of securing work.

So, what's the problem?

Well, I've been working on my marketing stuff since I started working with Simon (Nov last year??).  I've got all that down pat, I think. 

I'm getting out there and meeting architects (who are my primary source of work) and getting myself and my company known as best I can.

I'm calling as many private individuals who require building services as I can.

But nothing's moving, nothing's shaking.  Simply nothing is happening.

The architects are pretty much all saying the same thing; it's quiet.  Will include you on the next tender...

But when is that next tender going to come around?

So, what do I do?

Do I start looking at renovations, additions and extensions? 

Sometimes I think that maybe I should.  But then I remember the countless tenders I did for these types of jobs and the number of jobs I won (not!!).  I'm simply not competitive in that sub $600k market. 

Do I adjust my methodologies so that I become competitive in that market? 

Well, I just don't know.  That essentially means working for very little and taking on monumental risk for the privelege of doing so; not to mention the requirement to take on multiple projects at any given time because your model becomes about volume not margin.  I understand why so many builders just don't take on renovations, additions or extensions; it's hardly worth it.  I look at the last renovation job we completed and the reward was certainly not commensurate with the effort and resources it took to get the job completed within the time frames required.  And it was really stressful too; very different to building a new home from the ground up.

Do I look at establishing multiple arms to the business, thus generating multiple revenue streams?

There's small works, there's project/volume homes and there's insurance work.

They'll all take time and  money to establish.  And even though they all work on a lower margin higher volume model, you're spreading your risk across multiples of smaller jobs instead of one or two larger jobs at any one time, so on the surface it would appear to be a much better option than branching into reno's, additions and extensions.

The small works has the potential to whittle away my Home Warranty Insurance limits so that if I do get a nice, big, juicy home to build I may end up not having sufficient Insurance to take the job on anyway (the Home Warranty Insurance set up in this state is a disaster, and the subject of many a future rant from moi!).

The project/volume home idea is very attractive to me, and the more I day dream about it, the more it's growing on me.  But, the time it would take to establish is lengthy; I need to come up with house designs (and various options for each), inclusions lists, get a stable of project home trades, then start a whole new marketing push to a different market.  It's do-able, but it will take significant human resources (ie - my time...which we all know is limited as it is).  The costs, I expect, would be minimal because I wouldn't go the whole hog and build a display home.

So, what about insurance work? 

Well, I have done a little bit of investigation...but it has been limited.  Why?  Because when I call the insurance companies to speak to the most appropriate person who awards builders with these contracts, no one knows who to connect me to!!  

Is that a joke, or what??

So, I'm at a bit of a standstill when it comes to that.  I don't quite know how to move forward with it.

I've had a look at some of the builders who are exclusively insurance builders and it would appear that their technological set-ups are pretty sophisticated.  In time I would need to do something similar if I were to go that path....that's if I even get there, that is!

So, what do I do?

Well, I just don't have an answer.  At all.  And that's what worries me most.

I recall reading a book about Richard Branson, and there was a story about him being on his last legs financially.  What he did was go and borrow some money and buy himself an income stream.  That's right - he went and bought himself another business.  Each time he was in strife he went and got himself into debt and new business.

Should we take that approach?  Should we go and buy another business that's generating cashflow that can keep us liquid during this slowdown? 

So, what's the answer?  What do I do?

I just don't know...and the fact that I don't know is freaking me out....alot.  I'm half tempted to embark on all 4 approaches so I don't miss something, but that's just dumb thinking brought about by panic on my part.

I was talking to a friend of mine last week and told him of my recent rough times and I was telling him that ultimately I'd like to get back into property development and that this contracting business is simply a means to achieving that.  Having experienced contracting I'll never give it away; we'll always continue to do contracting even when we're back doing our own developments.  But, the ultimate goal was to get back to doing my own thing, just not on a scale as big as what I was doing it before my downturn.  I was saying to him that a total cost of complete of around $5m is about all I'll do.  That's very manageable and I can do it largely on my own with very little staff.  I just need the money to get going again, which is what the contracting is supposed to provide.

He asked me the question "have you considered equity funding/partnering as opposed to debt funding"....well,  of course!  But where on earth do I find these people?

He claims there's stacks of private money around with no where to go....but I just don't know where to look for this private money.  Where is it?

I've previously gone down the road of seeking investors, but investors are a whole different kettle of fish with a totally different mentality to equity partners.

So, if I had a genie in a bottle in front of me granting me 3 wishes, one of those wishes would be to have the funds to do my own developments again so I don't have to burden myself with the anguish of constantly trying to source work in an environment that simply isn't conducive to people spending their money, thus providing me with the work.

I wish this selfish bloody labor federal government of ours would do the honourable thing and call an election so the Libs can take control and get this country running properly again! 

That would be my second wish.

And my third wish would be to win the OzLotto $70m jackpot being drawn tonight!  LOL


Till next time...