A company in the construction industry went bankrupt with $2.5 million in debt.
Melbourne-based kitchen manufacturer MadeCo has gone into voluntary administration, with 30 employees affected.
The failure of the scheme left 70 creditors with unpaid debts, including $620,000 owed to employees in annual leave, long service leave and severance pay.
Paul Langdon and Ian Grant of LangdonGrant were appointed administrators in March.
Mr Langdon told news.com.au that the company had been forced into voluntary administration due to a “knock-on effect” from the collapse of two other companies that owed MadeCo a total of $520,000.
“The companies had been in financial trouble for quite some time, but last year one of them went bankrupt with $400,000 in debt. That was a bit of a turning point,” he explained.
Langdon added that MadeCo is another casualty of the construction industry, which continues to be plagued by the cost crisis.
“Essentially, companies operating in the construction industry, and the construction industry, are constantly facing financial challenges, particularly with respect to COVID-19, supply costs, wages, labor supply, staff retention, etc. “We’re constantly in financial trouble due to general economic issues such as the increase in the number of people living in the country. Those kinds of things have had an impact,” he said.
“But two more of our customers are bankrupt and owe a lot of money and haven’t been paid yet, so there’s a knock-on effect.”
Mr Langdon said there was a number of kitchen constructions and installations still pending, with “quite a few” completed after Madeco’s bankruptcy, but there were no outstanding deposits as people paid after the work was completed.
“The impact on customers is minimal, but obviously there is an impact because people are ordering and waiting for it and there were a lot of different orders,” he said.
“If you place an order and have to wait a month or two for your kitchen to arrive, and then you’re told you can’t get your kitchen, that’s obviously very difficult.
“The impact is not an economic one, but it is certainly a very frustrating process and an inconvenience for customers who have to go elsewhere.”
MadeCo announced on social media that it was with a “heavy heart” that it had taken the “difficult decision” to enter voluntary administration on March 20.
“At MadeCo, we have weathered many storms, but unfortunately, some waves hit harder than others. The challenges posed by the pandemic have been tough enough, but recently we have weathered many storms. In addition to the downturn in the furniture market, the closure of two of our major suppliers has made our journey even more difficult.”
Langdon said at a meeting of creditors on April 17 that the 18-year-old company was likely headed for liquidation.
He added that creditors included other industries, financiers and the Australian Taxation Office, and it was still too early to say whether their money would be paid.
“The company has now ceased trading and is clearly insolvent and I have recommended to its creditors that the company be liquidated,” he said.
very difficult times
The construction industry has been through a tough few years with hundreds of companies going bankrupt and there is no respite in sight.
News.com.au reported that dozens of construction companies have gone into administration and liquidation in the past two years.
In times of economic hardship and inflation, construction companies are usually the first to feel the pinch, as profit margins are very low.
As many as 2,349 construction companies have gone bankrupt in the past year, and there are fears that many more will go bankrupt soon.
In fact, almost 28% of the 8,471 business failures in 2023 occurred in the building and construction industry, according to data released by the Corporate Regulatory Authority.
Langdon said the industry continues to face challenges.
“There were supply issues, labor and competition for labor, and a lot of staff moved to government projects in the city, such as railways and tunnels (in Melbourne). And then there were interest rate issues, making it a very difficult industry. ”’ he pointed out.
“In the construction industry, you have a chain reaction of stakeholders that you work with that have financial difficulties, suppliers, subcontractors, etc. If the builder goes down and they don’t pay, you Here’s what happens: Don’t pay your debtor.
“Obviously a lot of big construction companies are failing, like Probuild, Porter Davis, Lloyds Group, some of the big guys, but also a huge number of smaller construction companies. As you’ll see every other week, this company, MadeCo, lost $500,000 in outsourced management to two debtors.
“I think it’s always going to be difficult for a variety of reasons. The cost of materials, access to labor, interest rates, cost of living, everything is very expensive and very difficult. And I don’t think that’s going to change. “short term. “
Already owe millions
Recent bankruptcies include the case of employees at two New South Wales factories who slammed their former employers after the companies went bankrupt, draining them and other creditors of millions of dollars. is included.
In February, Cubitt’s Granny Flats and Home Extensions announced it had taken the “devastating decision” to go into voluntary administration with $5.6 million in debt, while companies in the construction sector He went bankrupt with just $6 in his bank account and now owes creditors more than $2 million.
LVX, a global construction company headquartered in Australia, also fell into financial crisis earlier this month.
sarah.sharples@news.com.au