Following the collapse of the Hastie Group, CCN has prepared this special news report detailing the fallout both here and overseas. While former Hastie Group chief executive Bill Wild believes a “culture of dishonesty” at the company contributed to the collapse, other executives blame the banks for withdrawing financial support.
The fallout from the Hastie Group collapse has spread quickly throughout the HVAC&R industry in Australia, with thousands of workers stood down.
The job losses occurred when the Hastie Group entered voluntary administration in late May after financial support was withdrawn by lenders, including Australia’s big four banks.
Lenders were divided over whether to extend another line of credit to the refrigeration and air conditioning company or cut losses and get out.
A former Hastie director, Harry Boon, who resigned in the wake of the fallout, blamed three banks for refusing to take a write down on the company’s debt.
“This was not a ship that was sinking,” Boon told the Australian Financial Review (AFR).
“It had two independent financiers who looked it over and were willing to put the dough in and we had a minority of banks who, in my view, were acting unreasonably, and we could not budge them. At that point, what’s a director to do? We’d tried so hard.”
Following the collapse, banks are reportedly owed more than $500 million in loans and guarantees, many of which were created to fund Hastie’s rapid expansion, according to Fairfax.
ANZ is the largest creditor and is owed $150 million, while Westpac is owed nearly $80 million, NAB about $35 million and Commonwealth Bank some $20 million.
These figures could grow as accountants review the company’s books. The company could also face lengthy litigation stemming from the collapse, as investors who contributed to a $160 million recapitalisation last year explore their legal options.
PPB Advisory was appointed administrator of the 44 companies in the Hastie Group.
Only 10 of Hastie’s subsidiaries are expected to survive.
The receiver and manager of the Hastie Group, McGrathNicol, is attempting to trade on a ‘business as usual basis’.
“I would like to assure customers and employees that our appointment allows the Spectrum Fire and Safety, Hastie Services, Gordon Brothers and Austral businesses to continue to operate with minimal disruption while we run an orderly sale campaign for each business,” McGrathNicol partner Peter Anderson said in a statement.
Irregularities
The Australian Securities and Investments Commission (ASIC) had been investigating more than $20 million of accounting irregularities that had gone unnoticed by the company’s auditor, Deloitte Touche Tohmatsu. The irregularities date back to 2008-09 and total $23 million, which is more than the market value of the company when it collapsed. In probing the company’s collapse, the actions of a suspended employee in 2009 have come into focus, but PPB chairman Ian Carson said the problems went far beyond one employee.
“We have sent our forensic team up there [to Queensland] and they will be looking at that as we go forward; we have to do a report for ASIC and we will report on that,” Carson told the AFR.
Former Hastie Group chief executive Bill Wild said a practice developed in the northern region part of the business “of putting off bad news and moving numbers around to ensure that budgets were still met and forecasts were still met. I don’t think it went back earlier than 2008-09.”
Wild was hired in October 2011 to revive the company but was critical of its governance and growth strategies.
He said the Hastie Group’s strategy of growth through acquisitions was “completely flawed”.
“It was acquisitions without sufficient thought,” he added.
Wild called Hastie’s structure “a gaggle” of companies, adding that “from a management point of view, it was a complete disaster”.
He even claimed the company had a “culture of dishonesty”, especially when it came to financial results.
“There was a dishonest culture in the company; the accounting irregularities were the straw that broke the camel’s back,” Wild said.
A week after the collapse most of the company’s management team, including Wild, had their employment terminated.
Job losses
Workers at Hastie’s Homebush Bay site have been stood down with 600 electricians terminated from Hastie subsidiary, Heyday, according to the Australian Manufacturing Workers Union (AMWU).
AMWU NSW branch secretary Tim Ayres said workers were told there was no money to pay them and there is no point returning to work.
A further 500 workers have been stood down in Victoria but CCN understands these workers have been given access to redundancy payments. About 150 staff in the Northern Territory face an uncertain future.
The future of two Hastie Group subsidiaries – Airducter and QAL Refrigeration – is unknown.
Airducter operations manager Wayne Miggins said about 50 people working under him have been left with no pay or benefits.
He said employees in Darwin and Alice Springs have been told by administrators that there is no money to pay their wages.
Staff at QAL Refrigeration in Darwin have also been told their jobs are gone more unless the company is sold by administrators.
While the company is not trading, institutions including the Royal Darwin and Katherine hospitals, which have had air conditioning systems installed by Airducter, will have to get them maintained by other contractors.
A contract for the Royal Adelaide Hospital is also in doubt after employees at Frigrite Air Conditioning and Watters Electrical were suspended without pay while administrators assess the future of these firms.
The Hastie Group was awarded a $270 million, five year contract for the new RAH, shared between subsidiaries Frigrite and Victorian-based CDC Plumbing and Drainage.
Frigrite, which has 140 employees, was subcontracted to install the air conditioning and reticulation systems for medical gases such as oxygen. Watters Electrical has about 160 staff and apprentices.
The impact of the Hastie’s collapse has hit every state in Australia except Tasmania.
Overseas
Hastie Group is a provider of technical and engineering services to the building, infrastructure and resources sectors with operations in Australia, New Zealand, the United Kingdom, Ireland and the Middle East.
Worldwide the company has approximately 7000 employees, including an estimated 4000 in Australia.
PPB Advisory said receivers and managers have been appointed to one company in New Zealand with the remaining NZ operations expected to continue as normal.
Hastie’s employs around 500 staff in NZ with contracts in Auckland, Tauranga, Palmerston North, Wellington and Christchurch.
NZ-based Hastie businesses include Aquaheat Industries, Professional Building Services, Medical Gas Services, Cowley Refrigeration, Gordon Refrigeration and Project Piping.
While Cowley Refrigeration provides fridges and chillers for supermarkets, Aquaheat has provided heating systems for Wellington Airport and Wellington Hospital.
However, a PPB spokesperson said that in coming weeks steps will be taken to sell the Rotary UK and Ireland businesses as going concerns.
Closer to home, the administrators will remain in control of the companies that comprise the mechanical, electrical and plumbing (MEP) businesses in Australia as well as operations in the Middle East.
These businesses employ 2700 people in Australia and approximately 2000 in the Middle East.
“There are insufficient funds to enable the administrators to operate the MEP companies,” the spokesperson said.
“Regrettably the administrators have no option but to suspend operations while they assess the financial position of each company. The administrators will make every effort to assist employees.”
In fact, the federal government has been in contact with the administrator and is working to ensure affected workers are provided with support.
The administrator was contacted by the Minister for Employment, Bill Shorten, who issued a statement expressing his concern for employees and families affected by the collapse.
“I am particularly disappointed that these potential job losses have been brought about by poor financial management in the company,” Shorten said.