Maali Group in $10m ATO debt, restructuring bid

UPDATED: Contractor Maali Group has amassed a $10 million tax bill, with creditors advised to vote to enter a restructuring proposal from a Perth civil engineering company.

McGrathNicol’s Rob Kirman and Rob Brauer took control of Mitch Matera-led Maali after the business entered administration in mid-March. 

Maali Group is an Aboriginal owned and managed contracting services company, headquatered in Perth but with operations in the South West, Goldfields, Esperance and Pilbara.

Based off preliminary observations, the administrators said Maali had been making a loss over the past three years, with rising expenses outpacing revenue growth.

Mr Matera owns the majority foothold in Maali Group, and up until three months ago power and telecommunications contractor GenusPlus Group held a 39 per cent stake, but sold out for $10,000. 

Key challenges cited by the director were an increasing $10.4 million debt to the Australian Taxation Office and the loss of a major contract on short notice which “critically impacted revenue” and short-term liquidity, according to the report.

Following their appointment, administrators launched a sale campaign which attracted 29 parties, five of which lobbed non-binding indicative offers, and three were shortlisted to put forward a final offer.

Perth-based Halo Civil Engineering emerged as the preferred party, with a proposed a deed of company arrangement to become a 49 per cent shareholder in Maali.

Halo is a civil contracting business that also specialises in project management, plant and labour hire services and noise walls. It’s led by managing director Peter Breen.

Under that proposal, Maali’s director Mr Matera would maintain a 51 per cent holding in the company and remain as a director. Halo would also appoint a director.

The administrators said it was their opinion that it was in the best interest of creditors to vote to enter the proposed DOCA, because its expected to provide a better outcome and retain the majority of employees. 

Also in the report, administrators said Maali derived its monthly revenue of $2.9 million, over the last six months, from 25 key customer projects at different stages.

Maali recorded a net loss of $3.3 million in FY23, compared to a loss of $318,000 in FY22. Its total revenue was $36 million for FY23, compared to $25 million in FY22.

Its FY24 year to date financials were a net loss of $2.7 million and revenue of $23 million, according to the report.

Maali experienced a substantial boost in project revenue in FY23, but escalating employee costs tied to an expanding workforce outpaced revenue leading to the $3.3 million loss for the period, the administrators said. 

According to the report, the director cited difficulties such as increasing debts owed to the ATO totalling about $10.4 million alongside the tax office issuing a notice that affected Maali’s credit rating, which led critical suppliers to demand cash of delivery payment terms straining the company’s available liquidity.The loss of a major contract also impacted the business. 

The administrators said they did not dispute the director’s reasons, but said Maali did not properly plan for its liquidity needs while undergoing rapid expansion.

They said Maali’s business model was heavily reliant on non-contractual, informal purchase order arrangements with customers, effectively underpinned by strong personal relationships.

The administrators said this approach gave customers significant leverage over the business, allowing them to vary requirements leading to unpredictable revenue.

At the time of the administrators’ appointment, Maali had 120 employees on the books, 97 of whom were full time and 23 were casual staff.

Maali Group managing director Mr Matera was named a Business News' 40under40 winner in 2023 and also won the Indigenous Business Category for Maali Group.

He founded the business when he was 24 years old after gaining experience as a fly-in, fly-out electrician and working in his father’s business.

Creditors will meet at a second meeting next week.

UPDATE: At the meeting on April 17, creditors backed the DOCA proposed by Halo Civil Engineering, which will see Halo gain a 49 per cent shareholding and Mr Matera retain 51 per cent.

Established in 2021, Halo Civil Engineering was formed to meet demand for high quality tier 3 civil contractors in Western Australia. 

Company founder Peter Breen moved to Australia in 2011 and worked for a range of contractors including NRW, Laing O’Rourke and ACCIONA Geotech.

Halo’s core competencies are earthworks, drainage, pavement and utility installation on metro and remote projects.