$51m debt af­ter Grollo bailed out Gro­con

The Weekend Australian - - BUSINESS - BEN BUT­LER BEN WILMOT CON­STRUC­TION

Gro­con owner Daniel Grollo has to re­pay $51 mil­lion by late Septem­ber af­ter tak­ing out a high-in­ter­est loan to re­fi­nance the strug­gling de­vel­op­ment and con­struc­tion group, com­pany doc­u­ments show.

The com­pany’s poor fi­nan­cial state is laid bare in an an­nual fi­nan­cial re­port, filed with the cor­po­rate reg­u­la­tor this week, that re­veals it lost al­most $50m last year, be­fore tax, and in­cludes a warn­ing from au­di­tors that it might not be a go­ing con­cern.

Gro­con’s re­port also re­veals the com­pany planned to sell the rights to a “sub­stan­tial de­vel­op­ment project”, of at least 90,000sq m, which the com­pany did not name.

The re­port’s rev­e­la­tions fol­low a hor­ror year for the com­pany, which has lost its builders li­cence in Queens­land be­cause it did not hold suf­fi­cient cap­i­tal, been hit by com­plaints of late pay­ments from sub­con­trac­tors at the $550m Gold Coast ath­letes’ vil­lage for the Com­mon­wealth Games and lost a $200m con­tract to build new Syd­ney head­quar­ters for the Nine Net­work af­ter it failed to lodge a per­for­mance bond on time.

Much now hinges on the suc­cess of the $1.8 bil­lion Cen­tral Baranga­roo project, where Gro­con is part of a win­ning con­sor­tium that has bat­tled over what can be built at the site with James Packer, who is keen to pro­tect views of the har­bour from a casino his Crown Re­sorts group is build­ing.

The an­nual re­port, which was filed three months late, also con­firms The Week­end Aus­tralian’s re­port­ing that Mr Grollo has tipped his own money into the com­pany.

A di­rec­tors’ state­ment in the an­nual re­port, signed by Mr Grollo, shows that on De­cem­ber 19 the “sole share­holder” of Gro­con Group Hold­ings “en­tered into a fi­nanc­ing agree­ment with an ex­ter­nal fi­nancier pur­suant to which the pro­ceeds of $40m, less trans­ac­tion costs, were in­vested in the group”.

“The fi­nanc­ing ar­range­ment between the sole share­holder and the fi­nancier re­quires re­pay­ment of $51m by 22 Septem­ber 2018, and is sub­ject to cer­tain con­di­tions over this pe­riod.”

Com­pany doc­u­ments show Gro­con Group Hold­ings’ sole or­di­nary share­holder is Gro­con In­vest­ments, which in turn is wholly owned by Mr Grollo.

Pref­er­ence shares in Gro­con Group Hold­ings are owned by another com­pany, Twenty Twenty2, which is owned by Mr Grollo and his wife, Kat.

A Gro­con spokes­woman de­clined to com­ment.

The loan, which has an ef­fec­tive an­nu­alised in­ter­est rate of 36.5 per cent, is se­cured by guar­an­tees from Gro­con and its sub­sidiaries and se­cu­rity over “the rights and in­ter­ests to the de­vel­op­ment fees from a ma­jor de­vel­op­ment project”.

Gro­con’s an­nual re­port does not dis­close the name of the len- der or say which project it has given the ex­tra se­cu­rity over.

How­ever, last month The Aus­tralian re­ported that an en­tity con­nected to mez­za­nine fund­ing group MaxCap took se­cu­rity over Gro­con’s as­sets just be­fore Christ­mas.

The MaxCap Baranga­roo Unit Trust was reg­is­tered as a busi­ness only a fort­night ear­lier, on De­cem­ber 7, records show.

Gro­con’s an­nual re­port shows the com­pany bled cash in the 2016-17 fi­nan­cial year, with cash out­flows to­talling $105m.

The group made an op­er­at­ing loss of $37.8m, which when fi­nance costs were added re­sulted in a loss be­fore tax of $48.9m.

How­ever, the re­ported af­ter­tax loss was nar­rowed sig­nif­i­cantly by a tax ben­e­fit of $21.4m.

In his re­port Gro­con’s au­di­tor, PwC part­ner An­drew Cronin, drew at­ten­tion to the com­pany’s $27.5m af­ter-tax loss, its mam­moth cash out­flow and a de­fi­ciency of cur­rent as­sets of $14.4m.

The com­pany was also “highly de­pen­dent on suc­cess­fully achiev­ing its ini­tia­tives to sell the de­vel­op­ment right to a de­vel­op­ment project as well as achiev­ing suf­fi­cient fu­ture cash flows on ex­ist­ing and pipe­line projects in line with the group’s fore­cast to con­tinue its op­er­a­tions”, he said.

He said “a ma­te­rial un­cer­tainty ex­ists that may cast sig­nif­i­cant doubt on the group’s abil­ity to con­tinue as a go­ing con­cern”.

Gro­con’s cash­flow state­ment paints a pic­ture of a com­pany feel­ing the pres­sure.

Cash re­ceipts from cus­tomers fell from more than $450m to about $399m, while over the same pe­riod pay­ments to sup­pli­ers and em­ploy­ees jumped from $347m to $505m.

Daniel Grollo

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