The residential construction sector is under pressure. Photo / file
The residential construction sector is under pressure. Photo / file
Creditors of an insolvent Canterbury house-building and renovation business have been projected to lose more than $1 million after the company went under.
ACC, a council, telco, an energy provider, a roofing business, building material suppliers, plumbing businesses, scaffolders and Inland Revenue want money from the company, which blamed troublegetting materials and consents as well as Covid for the failure.
Brenton Hunt of Insolvency Matters in Christchurch estimated David Magill Builders 2017 would end up owing secured and unsecured creditors $1,006,500, of which $800,000 would be owed to unsecured creditors.
The company built houses and did renovations in the Christchurch area, and was incorporated in 2016. But after financial difficulties, sole director Craig Eion Freeman realised the best course of action was to go into liquidation, Hunt said.
“Over recent years the company has struggled with the delays around building materials and building consents being issued and the constant increase in building material costs. The building contracts allowed for the costs to be passed onto customers but not all customers would accept them,” Hunt wrote in his first report on December 22.
“One recent client has raised a large dispute and withheld significant progress payments. One outcome of this dispute was the insurance provider suspended the ability for the company to offer building guarantees. In addition sales in the last financial year have been significantly lower than prior years.”
So Freeman had sought professional advice and decided to liquidate the company, Hunt said.
BNZ, Halswell Timber Co, The Architectural Roofing Company, McVicar Building Supplies, Oakleys Plumbing Supplies and Elliott Scaffolding were listed in the first report as secured creditors.
Inland Revenue is listed as being owed $45,000 and staff wages and holiday pay of $26,500 are owed.
On the asset side of the balance sheet, Hunt listed plant and equipment worth around $21,000 and motor vehicles worth around $35,000 which could realise around $30,000 on sale. Two sections of land are yet to be settled and were assets not subject to specific charges or available to preferential creditors.
Unsecured creditors include Fairview Shearmac Aluminium, Contact Energy, ACC, Hire King, Independent Doors, National Storage, Officemax, Vodafone NZ, Trends Kitchens and the Selwyn District Council.
The business was based and worked in Christchurch. Photo / Christchurch City Council
The company’s shareholders are Yaldhurst’s Freeman, Lincoln’s Andrew Michael Beresford Poore and Pauline Ann Poore and Yaldhurst’s Renne Ann Beresford.
The business was founded by David and Kerry Magill and had been family-run.
Craig Freeman was also a director of Harewood-based Freeman Construction, incorporated in 2007 but put into liquidation in 2018. That ceased to operate after it could not get any new work. The company held some plant and equipment that was secured to a bank and liquidators at Insolvency Management sold that and paid the proceeds to a bank against the company’s debt, a final report said.
Stress in the house-building sector was reported on this week when CoreLogic NZ’s Cordell Construction Cost Index found the rate of inflation halved in the latest quarter but still hit a new annual high of 10.4 per cent.
The short-term trend might be down but the 12-month picture still shows fast-escalating increases in the sector.
The index found 1.7 per cent inflation in the residential building sector in the final quarter of last year, down on the 3.4 per cent increase in the third quarter, or the three months to last September.
Kelvin Davidson of CoreLogic said annual new dwelling consents could drop from around 50,000 annually to around 30,000 to 35,000 in the longer term.
StatsNZ data showed that In the year to last September, 50,732 consents were issued for new dwellings, up 7 per cent annually.
But the Construction Industry Confidence Report out late last year showed 59 per cent of builders and 46 per cent of architects predicted the sector to deteriorate even though StatsNZ’s data was continuing to show record numbers of new housing consents issued.
New Zealand had 283 building company liquidations in 11 months, Commerce and Consumer Affairs Minister David Clark said late last year.
Andrew Bayly, National’s construction spokesman, said he was concerned about high failure rates so he asked Clark for the numbers via questions in Parliament.
Clark told Bayly the 283 liquidations were from January 1 until November 24.
Liquidations are not just because of financial failures but also when businesses’ assets have been sold, when a company’s work is complete and for other reasons.
