The Queensland industries facing insolvency in 2019
LIQUIDATORS say 2019 is likely to keep proving troublesome for building and retail sectors, which were roughed up in the past year.
Charities and aged care were other industries that could face struggles in 2019 amid government inquiries and changed funding rules, the insolvency experts said.
The number of companies entering some form of insolvency - such as voluntary administration - continued to fall in the 2018 financial year in Queensland.
Records with the Australian Securities and Investments Commission notched 1606 cases in the Sunshine State, down from a recent high of 2045 in 2016.
But the percentage of construction-related insolvencies was stubbornly high at 16.3 per cent of the total, while retail was at a five-year peak at 8.2 per cent.
Among failures last calendar year were food outfit Doughnut Time, although the brand has now been acquired by a new owner, and builder Sommer & Staff Constructions, which went into voluntary administration after the watchdog Queensland Building and Construction Commission (QBCC) suspended its licence.
Ginette Muller of Jirsch Sutherland said, in general, the building sector could again face more tough times "but with some more regulatory attention". Last year had shown that the QBCC wanted to be seen as acting on complaints, she said.
"There's a lot of undercutting going on," she said of reasons for construction firm failures. This was occurring as work levels decreased, she said, with some builders seemingly hoping to make money back on the next job.
Qld company insolvencies fiscal 2018
(16.3% of total)
(8.2% of total)
Joanne Dunn of FTI Consulting also thought some troubled building firms were pricing projects too low.
"It is under-pricing or not reading the contracts (properly)," she said. One problem might be builders accepting a job a year earlier and pricing it at the time - but not properly anticipating cost rises in the ensuing period for sub-contracting work,she said.
Richard Hughes of Deloitte said retail was another area that had faced problems in 2018, with this partly linked to the disrupting impact of online sales. Some retailers were not adapting adequately and this trend could continue in 2019, he estimated.
Mr Hughes also noted that some second-tier financiers, in areas such as small-medium business lending, were encountering trouble.
"There's a de-risking happening from the banks," he explained. That meant these riskier loans were being increasingly sourced from second tier financiers, with the lending then turning sour.
Mr Hughes predicted the upcoming royal commission into aged care could also spark some financial troubles for operators in that sector.
Ms Dunn said another area that could face struggles in 2019 was some non-profit charities working with the National Disability Insurance Scheme, which has already undergone a change in timing of funding that is impacting some cash-flows.
"We have (already) seen the effects of that on some organisations," she said.
Some liquidators had not found any rush of directors looking to take advantage of safe harbour provisions about insolvent trading, which were introduced last financial year.
The laws are designed to provide protections for directors in seeking advice and trying to take steps for a struggling company.
"The intent is good," Mr Hughes said of the laws. But a problem was that there were restrictions about when the laws apply, he said.