06/03/2012 - 12:49

Property collapses set to rise: Taylor Woodings

06/03/2012 - 12:49

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Property collapses set to rise: Taylor Woodings

Western Australia’s property development, retail and residential building sectors are set for an increase in corporate insolvencies over 2012, despite a falling trend in the total number of company collapses in the state, accounting firm Taylor Woodings says.  

Taylor Woodings, a specialist in restructuring and corporate recovery, said low consumer confidence and the high Australian dollar would continue to make 2012 a challenging year for many Australian businesses.

This would likely lead to further failures amongst smaller retailers, pubs and cafes, transport operators, small manufacturers and builders.

"We believe 2012 company collapses will remain at historically high levels, especially amongst SMEs (small to medium-sized enterprises) and the construction industry, before falling off in 2013," Taylor Woodings said.

Taylor Woodings' analysis of insolvency data for January 2012 from the Australian Securities and Investments Commission (ASIC) showed that the number of company collapses fell 32 per cent, from 763 in December 2011 to 518 in January 2012.

But, the number of corporate failures in January 2012 was 13.8 per cent up on the figure for January 2011, and 10.9 per cent above the five-year average for January.

For the financial year to date, the number of company collapses was up 13.4 per cent for the prior corresponding period, at 6,068.

In Western Australia, there were a total of 29 company failures in January, compared to 47 in December.

In January 2011 there were 50 company failures in WA.

Taylor Woodings said WA’s property development, residential building and retail sectors would face problems over 2012, with some isolated issues appearing in agriculture and base metals.

Historically, Taylor Woodings said January typically showed a fall in court-ordered wind-ups when compared to December because many people were on leave and courts were closed.

Taylor Woodings managing partner Michael Ryan said that since the global financial crisis, there had been a "step change" in the quantity of insolvencies and they had remained at stubbornly high levels.

The global financial crisis had hurt consumer sentiment, which had resulted in lower retail sales growth and residential building activity.

More recently, the higher Australian dollar had negatively affected the tourism industry and the export sector.

Tighter lending criteria had also impacted property development.

Mr Ryan said the level of insolvencies was expected to taper off in 2013 as the worst of the effects of the GFC died down and growth re-emerged in some sectors.

Business lending growth had also been fairly flat, which meant there was less debt to recover.

However, there were still "X factors" that could hinder recovery, such as an economic hard landing by China, which could affect commodity prices, and an oil price spike.

Mr Ryan said small business could mitigate against some of the challenges they faced by managing their forward-looking cashflow.

If they could not easily improve revenue and profit growth, they could focus on reducing costs, collecting debts more quickly, agreeing to extended payment terms with creditors, selling non-income-producing assets, or restructuring bank debt.

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