Immediately following the release of Newpoint’s 2022 Tier 2 Builder Metrics, Probuild (one of the seven builders reviewed), entered Voluntary Administration with c$5bn worth of pipeline across Australia.
What are the key facts of Probuild from Newpoint’s Tier 2 Builder Metrics?
- NPAT Margin only 0.2% on revenue of $1.37bn (lowest of sample)
- YoY* Employee count down 18% (2nd highest of sample)
- YoY Revenue down 19% (2nd lowest of sample)
- Equity to Assets Ratio (2nd lowest of sample)
What is the likely fallout from the Probuild administration (contagion risk)?
- Flow on insolvencies of Probuild subcontractors
- Other builder insolvencies (from above subcontractor insolvencies)
- Owners Corp. issues for any defects/unknown issues
- c40% increase on cost to complete for replacement builders on Probuild’s incomplete projects
- Developer distress on Probuild’s incomplete projects
- Issues in securing Performance Bonds for builders industry wide
- General nervousness and loss of confidence in the industry
- Heightened union activity, particularly in Victoria
What are the warning signs for stakeholders on other projects?
- Rising construction prices
- Frequent variations
- Inability to rationalise overheads
- Key subcontractor failure(s)
- Project delays / disputes with developer
- Industry rumours – ‘where there’s smoke…’
- Statutory demands and winding up applications
Newpoint Advisory specialises in builder delivery risk mitigation through detailed financial analysis. This enables financiers, developers, and investors to make informed credit and investment decisions to manage risk and maximise financial performance.
It is never too late (or early) to discuss the Builder Financial Review services Newpoint undertakes and how we can assist in this rapidly changing construction/property landscape.
*YoY: Year on Year