Major builder Probuild hoping for a saviour after going into administration

Probuild and its administrators hope to save the building firm after its parent company pulled the pin on its financial support, sending one of Australia’s largest construction companies into administration.

Administrators at Deloitte hope to find a new owner for the construction firm after taking control of 18 businesses in the WBHO Australia Group, including Probuild.

WBHO Australia said Deloitte was appointed as administrator after it was “abruptly informed” by its South African parent company that all financial support for the Australian arm would cease.

“We are caught up in a set of circumstances not of our making,” a Probuild spokesperson said in a statement on Thursday.

The Probuild spokesperson said the company isworking closely with the administrators on a number of plans to protect its clients, subcontractors and employees.

“The Probuild brand is strong and we intend to keep it that way.

“We have several options for raising the necessary capital to continue as a premium Australian building company. These will all be pursued.”

The three construction and project management businesses of Probuild, Monaco Hickey and WBHO Infrastructure were among the companies within the WBHO Australia Group (WBHOA) that went into voluntary administration on Wednesday night.

Voluntary administrator and Deloitte Turnaround & Restructuring leader Sal Algeri said WBHOA has been a major contributor to the construction sector and the broader economy, including as a direct and indirect employer.

“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,” Mr Algeri said.

“Our 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.

“We will also be commencing a sale and recapitalisation process in order to secure a new owner for the businesses.”

COVID delays blamed for Probuild’s woes

Parent company Wilson Bayly Holmes-Ovcon Limited cited the impact of the COVID-19 pandemic when announcing its decision to no longer provide financial assistance to the Australian business.

WBHO said it had injected two billion rand ($A183 million) into WBHOA over four years to enable the Australian group to continue operating.

It said the Australian businesses have not been able to complete projects on time nor recover the costs of delays.

“The group has been monitoring the trading operations of WBHOA for a considerable period of time and has made every effort to contain costs and restore a level of profitability to WBHOA,” a WBHO statement said.

“Of particular concern is the project delivery capability of WBHOA which has been negatively affected by unforeseen and severe COVID-19 restrictions and the contractual environment.

“Consequently, WBHOA has been unable to complete projects on time nor recover variation and delay claims in the current financial period, resulting in material losses.”

WBHO had tried to sell the Probuild business to a Chinese company in late 2020, but the deal was blocked by the Foreign Investment Review Board.

“Following on from this, WBHO implemented its strategy to downsize the business, and considered other sales options which proved fruitless due to concerns potential acquirers had as to the impact of the regulatory approach to COVID.”

Repeating comments in its October annual report, WBHO said the Australian construction environment had become increasingly competitive and contractual, and the potential risks on large mega-building projects outweighed the current margins available.

“The Australian government’s hard-line approach of managing COVID-19 through a combination of border restrictions, snap lockdowns and mandatory work-from-home regulations for many sectors, has had a considerable impact on property markets as well as other industries such as the leisure industry,” it said.

The latest casualty of building crisis

Work has stopped on Probuild’s $5 billion worth of building projects across Australia, including an apartment tower in Brisbane and biotech firm CSL’s new headquarters in Melbourne.

Established in Western Australia in 1987, WBHOA is based in Melbourne and has offices in Sydney, Brisbane and Perth.

It has a number of active commercial and public sector projects in varying stages of development across Victoria, New South Wales, Queensland and Western Australia, Deloitte said.

The WBHOA group, which has annual revenues of more than $1.4 billion, directly employs about 750 people but thousands of contractors and subcontractors are also affected.

Several major construction players have gone under during Australia’s homebuilding boom, amid supply chain issues with a shortage of building materials worldwide resulting from COVID-19 disruptions, labour shortages and soaring building costs.

Brisbane-based Privium, Melbourne-based ABD Group, BA Murphy Group on the Sunshine Coast, and the Hotondo Homes franchise in Tasmania are among the casualties.

Australia’s largest apartment and unit owner advocacy group, Australian Apartment Advocacy, said a congo line of major builders are also likely to be facing financial difficulties, due to the costs for materials and long delays in completing contracts.

“As usual, it may be apartment owners who have to foot the bill and we need to know where off-the-plan buyers are going to be left when all of this pans out,” AAA head Samantha Reece said.

“There is a congo line of builders out there who are in strife and Probuild’s problems may also spark the end of the line for many others in financial difficulty.

“It’s time for the relevant state governments to provide greater protection for apartment buyers and owners under these circumstances.”