Wilson Bayly Holmes-Ovcon Limited (WBHO) has discontinued financial assistance for Probuild, which has led the company to be placed in administration.
WBHO, Probuild’s parent company, said that the Board can no longer see a strategic imperative to retain Probuild, as it has depleted WBHO’s resources. This decision came into effect on 22 February 2022.
In a statement, WBHO said ”The Australian construction environment has also become increasingly competitive and contractual, in our view, the potential risk on large mega-building projects outweighs the current margins available.”
WBHO said it has been monitoring the trading operations and profitability levels of Probuild for a considerable period of time. Of particular concern to them is the project delivery capability 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.
The protracted effect of COVID-19 has delayed significant economic recovery and procurement activity in Australia. Over the course of four years, WBHO has provided financial assistance in the form of equity investments amounting to $2 billion.
In a statement, WBHO said “The Company has adopted a more conservative bidding strategy focused on securing lower-risk and less complicated projects. Based on this approach, it was the Company’s intention to see some decline in the order book as we reduced our exposure to high-risk projects. However, sourcing acceptable projects has been made more difficult with procurement activity and the number of available projects being impacted by COVID-19.”
During 2020, the Company entered into negotiations with a third party to sell Probuild. This transaction was progressed to agreed terms by December 2020 but approval from the Australian Foreign Investment Review Board was not obtained. Following this, WBHO implemented a strategy to downsize Probuild, and considered other sales options which proved fruitless due to concerns potential acquirers had as to the impact of the regulatory approach to COVID.
Probuild has struggled to complete projects on time and has not been able to recover variation and delay claims, resulting in material losses.
The CFMEU has responded by stating their commitment to ensure the interests of their members in the construction industry are made the primary consideration.
Nigel Davies, CFMEU Construction National Assistant Secretary, said the CFMEU is currently seeking information from Probuild to understand the company’s situation and any likely impact on workers.
“As always, the union will work to ensure the interests of our members in the construction industry are made the primary consideration,” Mr Davies said.