Condev Subbies Stay Home

14-03-2022 10.30am

Despite plea's from Condev management to "come to work today", Condev Subbies are scrambling to get their gear off various sites and who can blame them.

Project managers have contacted subbies and said they are expected to be at work today. Others have said "get your gear off site".

Under the circumstances, how they can expect subbies to return today is beyond me. Naivety or blind loyalty perhaps or a lack of knowledge of what is to come.

One site was described by a subbie as "an absolute lollie scramble" with subbies trying to get their gear off site. Other sites are similar with staff sitting in their site office and subbies bustling to pack up. There is security on another site in Varsity Lakes.

Its not that subbies are deserting a wounded construction company but its unfair to ask them to continue to work and potentially add to their losses when Condev management don't know if they can continue to trade.

Clearly they can't continue without a rescue package and that is an indication that they are insolvent which brings them to the attention of the QBCC and the potential for their licence to be suspended.

The fact that Condev have taken the course of action they have creates a big problem for subbies.

The problem is that from this point on everyone knows the company is insolvent including the QBCC.

If a miracle doesn't happen and it goes down within the next 6 months and all the historic indicators say it will, everything paid to the subcontractors from Saturday onwards will be considered a preferential payment and will be clawed back by greedy liquidators.

If it goes down in 6 months every payment from that date back to now is a preferential payment.

The only way that won't happen is if Condev agree to a Deed of Company Arrangement (DOCA) so if all else fails and they really care about their subbies suppliers and staff, they will head in the direction of a DOCA.

But when the chips are down, its usually the builder who comes out of it clean and subbies are left holding the bag.

Without exception subbies that we have talked to are hoping that a rescue package can be found for Condev who have all the infrastructure in place to make it work. The big question is the profitability of their jobs and on the surface of it, there is no profit margin. Its been that way for 2 years with a 358k loss on turnover of 181 million in 2021 financial year and a small profit in 2020.

Time will tell what has happened this year but the company is obviously not in profit.

All the subbies I have talked to are paid up to date which leaves up to 45 days of work plus their retentions at risk.

Government has legislated that all retentions are to be paid into a third party trust account so that builders cannot use that money for cash flow.

Projects valued at 10 million plus came into effect in January this year and up to down to 1million next January but it should have been kept on target to happen earlier and would have it it was not for MBA lobbying the Government to hold back.

Retentions are always lost in an insolvency and the numbers can be very large for the bigger subcontractors. Even the small retentions are relative to small subbies and hurt just as much.

Payment up to date means January claims have been paid leaving February and whatever work has been done in March so its a big hit for subbies.

The ball is now in the QBCC's court who no doubt, will have a close eye on Condev.

To be brutally honest, everyone seems to be missing the point about the big player in the Condev matter which is the QBCC. Like them or hate them, they have the final say.
Despite what we all hope for, we have seen it many times when directors engage in the fantasy of rescuing a lame duck.
The MFRs have two elements. The Net Tangible Assets test and the Current Ratio.
What is clear is that they would fail the Current Ratio test. That is the projected income is less than the projected expenditure and despite what they say, they are more than likely trading insolvent.

The process will be:

1. QBCC is now aware of the Condev issues and will ask for financials
2. QBCC might go for immediate suspension
3. Condev will provide financials in 7 days
4. QBCC will suspend licence
5. Condev will go to court and the licence will be reinstated pending full hearing
6. 7-14 days later, court suspends Condev's licence and they are gone

Condev have done good things for the community over many years including provide employment for a lot of loyal staff and hundreds of subcontractors and suppliers.

Their charity condevcares.com.au has been of great assistance to people in need so like everyone, we wish them all the best but our comments are tempered by experience in a very tough industry and that has forced us to be realists. We won't give people false hope.

Subbies add a level of protection to your business and join SubbiesUnited and make use of our private members forum for up to date information but a warning, do not join if you are NOT a subcontractor, we will weed you out and you are not welcome.