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Statswatch – Oct 2021
SEPTEMBER-OCTOBER’S STATS show both highs and lows, with some warning signs.
• Riskgrowsinresidentialconstruction.
• September quarter’s value of building work softens.
• Non-residential year records all-time high in October consents.
OCTOBER RISK DATA
Our regular data series from CreditWorks Data Solutions (www. creditworks.co.nz) assesses the level of credit risk posed by the four business sectors most closely associated with our chosen industry:
• Hardware,Building&GardenSuppliesRetailing • CoreRetailing
• ResidentialConstruction
• CommercialConstruction
In our last update on the September month, we warned about rising debt costs for companies in and around the building industry who may have over-extended themselves.
Indeed, so far at the time of writing in November, we have seen at least two major building firms go into liquidation. One of these, Maxim Design Ltd, has a tax bill with IRD of $450,000 and unsecured creditors of close to $3 million.
“We are certainly noticing some stress in building sector cashflows,” confirms CreditWorks’ Alan Johnston.
Our stats this month reflect a clear increase in aging debt through all four sectors, particularly around the low to medium risk areas.
This is represented by increased risk in the 1.5-5.0% areas in particular.
The increased risk movement appears most prevalent in
the Residential Construction sector where we are seeing deterioration in three of the risk columns, from 1.25% out to the
20% risk profile (see opposite for the detail).
While this level of risk increase may not seem much at this
point,AlanJohnstoncallsthismovement“asignificanttrend that we would want to see arrested prior to going into the perennial payment problem period of Jan-March.”
“This is of concern as it doesn’t take much beyond this to start seeing more failures in the industry,” he underlines.
“A word of warning to all Credit Managers out there.
“When assessing the perceived debt levels of a company, and their aging, always bear in mind that the IRD will not have disclosed their figures anywhere along the way, and there will inevitably be a substantial tax bill outstanding as well as trade debt.
“TheMaximDesignfailureclearlyshowsthisand,while creditorsmayhavefelttherewas,ormayhavebeen,enough cashflowbeingproducedtowarrantcontinuingsupply,theIRD has preferential rights in any liquidation.
“In this instance, after the failure, they stepped in with a bill of $450,000 which needs to be paid before any other unsecured creditor gets a penny.”
VALUE OF BUILDING WORK – SEPTEMBER QUARTER
While the June 2021 quarter’s Value of Building Work put in Place from Stats NZ (www.stats.govt.nz) showed big gains, figures for the September 2021 quarter show more modest growth, thanks to Auckland’s lockdown.
The September quarter’s total actual value of building work was $7.2 billion, +5.1% on the September 2020 quarter, with residential building work +12.2% at $5.0 billion, and non- residential –8.4% at $2.1 billion.
By region, the biggest growth in the actual values of total building work in the September 2021 quarter were: rest of the North Island (+30%); Wellington (+12%); Canterbury (+11%);
stats watch
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