7 of Australia’s Most Notable Business Collapses in 2015January 13th, 2016
At Australian Debt Solvers we know the economic problems that many small business and multinational listed companies are faced with both here in Australia and overseas. In fact, over 10,000 businesses get into serious financial difficulty every year.
This is why it’s important to ensure that you make the best choice for your business when facing a financial crisis.
With this in mind, here are 7 notable Australian business collapses in 2015 and how these businesses chose to approach or overcome significant financial crises.
- QUIKSILVER – A Resilient Aussie Surfing Icon
The U.S. arm of Quiksilver filed for Chapter 11 bankruptcy in US court in September. Quiksilver President, Greg Healy stated, it was due to too much debt incurred by a sales drop of 14% and a loss of $309.4 million in 2013. This was further impacted by the company’s inability to maintain an image that appealed to young people (its core demographic) and a recent move into US department stores caused significant brand damage.
Chapter 11 bankruptcy in the United States allowed Quiksilver to continue operating while executing a reorganisation. This involved a ‘debtor-in-possession’ plan with Oaktree Management providing over $175 million in financing to the company.
Healy was quick to emphasise that Quiksilver’s “European and Asia-Pacific businesses and operations remain strong and are not part of this filing.”
This was definitely clear in Australia with the company opening their 16th Boardriders concept store. To add to their successful brands, Roxy and DC Shoes, Boardriders are a hybrid retail, music and food experience, with the latest Torquay-based store also boasting a barbershop, free Wi-Fi, weekly yoga classes and surf industry nights.
Quiksilver ANZ retail manager Todd Liddy said that the company “designed a space around the way the active boardriding community live their lives.”
With their eye still firmly set on the dynamic surf and beach communities both here and overseas, 2016 brings a blank slate for the iconic Aussie company to work with.
- ERNEST HILLIER – Australia’s Oldest Chocolate Maker
The Ernest Hillier chocolate company celebrated its 100th anniversary in 2014, but this feat quickly soured with the company going into voluntary administration in January 2015. The company’s collapse is believed to have been caused by an increase in cocoa prices in September 2014, a boom in competition from international confectionary, and a growth in the popularity of free trade products and niche brands.
Founded in Melbourne, Ernest Hillier was sold to RE Capital, the Australian branch of UK-based Hilco Capital for $11 million in 2014. At the time RE Capital had planned to take the company “overseas and explore new markets locally”.
However, the voluntary administration hasn’t dampened Ernest Hillier’s spirits. The company is still trading while also making a positive impact on the community at the same time. Ernest Hillier’s open-minded recruitment policy focusing on employing more young people, asylum seekers and people with disabilities is an inspiration amongst Australian businesses.
As of October 2015, two refugees, one asylum seeker and four young apprentices joined the 65 strong staff at the Coburg-based chocolate factory. So while the much-loved chocolate company faced a rough patch last year, it’s obvious it is still making a lasting impact on Australian culture.
- HOMEART – An Iconic Australian Homewares Chain
Homeart was forced to close its 116 stores in 2015, leaving 600 employees out of the job. Going into voluntary administration in January, the initial plan was for the company to find a buyer, however after having no success the company decided to close all its stores in March.
Homeart was believed to be a victim of a rapidly changing retail landscape and, like many companies, its biggest hurdle had been overcoming the increasingly popular online retail market. This is reflected in strong competition from chains such as Target and Kmart, who have in recent years launched themselves successfully into the homewares landscape.
Launched as Copperart in Melbourne in 1978 by Amy Van Roest and her husband Aart, Copperart soon became an Australian suburban staple with franchises springing up around the country from 1982. Due to the company’s thriving franchise business, Aart Van Roest was also elected chairman of the NSW Chapter of the Franchise Association of Australia & New Zealand (FAANZ).
Rebranded in 2001 to ‘Homeart’, the company no longer solely concentrated on copper and brass décor and instead focused on a wide range of homewares including giftware, electrical goods, furniture, manchester, dolls, and kitchen appliances. At the time of Homeart’s end in 2014, Amy Van Roest was still serving as the company’s managing director. The company had reportedly earned total revenues of $61, 430, 000 during its lifetime.
Known for its kitsch products, at its height in the 1990’s, the chain store was a readily recognisable part of Australian popular culture and featured in a sketch on the Australian comedy program ‘Fast Forward’. The sketch was a parody of the Copperart television ads frequently shown on Australian television.
- WENDY’S SUPA SUNDAES – Major Ice cream and Hotdog Master Franchisor
The Master Franchisor of the well-known Wendy’s franchise established in 1979 went into voluntary administration in July shocking many Australian’s who work and eat at the stores.
This comes after Supatreats Australia became the Master Franchisor taking over the Wendy’s licence in the latter half of 2014, and Wendy’s was bought for $10 million by Asian food firm Global Food Retail Group a subsidiary of Singaporean company, Global Yellow Pages.
Wendy’s Supa Sundaes told franchisee’s in a letter that, “The decision to place the company into voluntary administration was taken because the company was unable to resolve a range of legacy issues which arose under previous management and ownership, and because it had recently come to the attention of the current management of the company that its business has been severely compromised and the integrity of the Wendy’s brand was under threat.”
This comes after many scathing reports from former franchisees about the duty of care, operations and management of the franchisor. This includes reports of a suicide related to a failed franchise, as well as claims of refused maternity leave, and one franchisee being locked out of his own store after a dispute with the company.
In fact, despite maintaining that it was ‘business as usual’ during the voluntary administration some franchises were forced to close after they did not reach an agreement with Supatreats to trade under the Wendy’s brand.
So while the company was able to regain its composure and appoint chief executive of Supatreats Australia, Karin Hattingh, as the new Wendy’s CEO, 2016 could be the year that Wendy’s overhauls both their image and business practices. And with Hattingh’s unmoving faith that Wendy’s will still prosper in a society that is increasingly cracking down on unhealthy retail chains, only time will tell.
- VOCATION LTD – Over 10,000 Students Left in Limbo
Training provider Vocation went into voluntary redundancy at the end of the year, 12 months after it lost $19.6 million in Australian government funding which lead to a stock plunge of 57% in just one day.
However, the voluntary administration of Vocation lasted less than a week before the company ceased operations. As a result 150 employees lost their jobs and over 10,000 students in Victoria, NSW, Queensland and Western Australia were left in limbo with many in the middle of gaining their qualifications.
The downfall of Vocation began in 2014 when two of its colleges were stripped of their federal registrations and government funding. This forced the company to withdraw the qualifications of approximately 1,100 students in professions including first aid, childcare and aged care. In direct competition with the tax-payer owned TAFE’s, Vocation provided vocational education and training (VET) courses in private colleges.
At its peak, shares traded at $3.35 in September 2014 – this dramatically contrasts with the 12c that the same shares traded at during Vocation’s last week on the market. The company was also subject to three class actions as shareholders alleged that the company hadn’t adequately disclosed its regulatory issues.
Martin Riordan, chief executive of TAFE Directors Australia said regulation in the training sector had led to “major reputational issues for Australia.”
- HEAVY HAULAGE AUSTRALIA – Jon Kelly’s MegaTruckers
Self-made millionaire Jon Kelly’s $40 million trucking empire collapsed in July after no buyer was found for the business. Brendan Richards of administrator Ferrier Hodgson said that there was “a promising level of initial interest” but “the continuing fall in iron ore prices and the subsequent pressure on the Australian mining industry has seen that interest dissipate.”
Signalling the end of an Australian trucking era, Heavy Haulage Australia (HHA) was established in 1999. A sponsor of Australia’s much-celebrated V8 Supercars, the company was also the subject of a 2012 television series called MegaTruckers on Foxtel.
Heavy Haulage Australia was half-owned by Australian company McAleese, which had paid $3 million in 2014 to take a 50% equity interest in the business. At the time the company had said that HHA represented an opportunity to move into new geographies and customer sectors like oil and gas. Due to the collapse of the company, McAleese had a loss of $18.9 million and was considering options for ‘legal recourse’ against the seller of the 50% stake, which also included the option for them to buy the remaining 50% in two to five years.
“We have learned a lot and won’t be rushing into acquisitions of that nature without serious consideration,” chief executive of McAleese, Mark Rowsthorn said.
As a result of the failed sale of HHA a large private sale of more than 50 prime movers, 120 heavy haulage trailers, 15 cranes and 40 pilot and light commercial vehicles occurred.
- ALPHATISE – World’s Best Internship Startup
Australian online shopping startup Alphatise went into voluntary administration in early March because of a high ‘cash-burn rate’ that had them spend $3 million in 2014 despite only $270,000 in revenue. Known for generating international media coverage for its ‘ world’s best internship’ competition in August 2014, the successful applicant received a $100,000 package including $50,000 salary, $50,000 worth of shares, a car, a laptop and a mobile phone.
The winner, a 19-year-old University of Sydney student named Anna Bezuglova, had filmed herself jumping out of a plane to win the coveted role. This was followed by a publicity stunt in which the company secured the first two spots in the line outside the Sydney CBD Apple Store for the iPhone 6 launch. Advertising and PR costs for Alphatise ended up exceeding $500,000 over three financial years. Subsequently investor confidence dwindled and the company was forced to go into administration.
In saying this, by July, the company was able to recover and relaunch with 50 of its initial investors. This goes to show that creative ideas can persist in the face of economic turmoil, especially if enough people believe in it.
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