Probuild in administration as South African parent calls time

“We found out everything this morning,” the person said. “It was whispers until then.”

Representatives of Probuild declined to comment. Deloitte declined to comment.

The collapse of Probuild, which suffered a drop in revenue last year to $1.6 billion from $2.4 billion a year earlier, is by far the largest in a string of construction industry failures and would have a devastating wider impact.

The extent of unpaid debts was not immediately clear, but the company had current liabilities worth $401 million last year – $311.6 million of which were listed in its annual accounts as trade and other payables – and the fallout for subcontractors could be severe.

WBHO said it “intends to honour its existing parent company obligations provided to Australian institutions”, but made no comment about unsecured creditors.

Apart from the hit to Australia’s subcontracting industry – whose members perform up to 90 per cent of the actual construction work done on building sites – the loss of Probuild will deplete the country’s building capacity. It was one of just a handful of very large contractors – along with Multiplex, Lendlease, CPB and John Holland that had the capacity for large-scale projects.

The squeeze on materials and labour worsened the trading environment for Probuild – like other builders – after Treasurer Josh Frydenberg blocked the planned $300 million sale of the company by WBHOA to China State Construction Engineering Corporation on national security grounds.

But the company had problems of its own making.

WBHO last year said it was concerned with the “troublesome” Western Road Upgrade project in Sydney, which had a forecast loss of $161 million by June last year and which had forced the parent company to pay in $141 million to ensure completion.

A separate project for Cbus Property at 443 Queen Street 47-level residential tower in Brisbane for Cbus Property had racked up a $48 million loss.

WBHO last year resolved to withdraw Probuild from the Queensland and WA markets by the end of FY22 and to take a more conservative approach to bidding in NSW and Victoria after the failed sale.

“It was the Company’s intention to see some decline in the order book as we reduced our exposure to high-risk projects,” it said on Wednesday.

“However, sourcing acceptable projects has been made more difficult with procurement activity and the number of available projects being impacted by Covid-19.”

Australia’s “hardline” COVID stance prevented many new projects from starting, it said.

“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,” WBHO said.

This made it impossible to keep supporting the business, the parent company said.

“Of particular concern is the project delivery capability of the business which has been negatively affected by unplanned Covid-19 restrictions, the contractual environment and the increased difficulty in raising guarantee facilities necessary to secure new work,” WBHO said.