Company liquidations ahead of ‘tough winter’ for businesses
It will be a difficult winter for many in business in South Canterbury, as interest rates continue to rise, consumer spending weakens, and the number of jobs being advertised remains well down, according to a finance and credit expert.
Centrix managing director Keith McLaughlin’s comments come as more companies in the region are placed into liquidation – a trend that is not uncommon throughout New Zealand, he says.
Although Centrix, which collects data on liquidations, is not able to break its data down to district level, its figures show that throughout Canterbury there were 230 company liquidations during the 12 months ended on March 31. That was an increase on 176 in the previous 12-month period.
In March alone, there were 37 company liquidations in the Canterbury region, and 230 throughout the country – a level not seen since 2015.
This was up 30% year on year, and a breakdown of those liquidations by industry showed 27% were in the construction sector while 15% were in hospitality, 12% were in retail, 8% were in property and 7% were in financial services.
“Those figures [for Canterbury] are consistent with what’s going on throughout the country,’’ McLaughlin said.
The construction industry had been hit particularly hard in recent months, with the cost of living and increasing interest rates creating concern, he said.
“It means people are not committing to building projects and are delaying decisions. They’re thinking, ‘I’ll wait and see,’’’ he said.
In April, Inland Revenue warned construction companies to sort their taxes out or face enforcement action that could lead to prison time, saying it planned to send letters and emails to 40,000 companies with outstanding debt, overdue tax returns, or both in the coming months.
Another impact had been the rising cost of materials, combined with work drying up around the country.
McLaughlin used an example from the Bay of Plenty where out-of-town builders were under-quoting clients in the area, as the jobs had dried up in other parts, in an attempt to obtain work.
“And at the same time as costs are over-running, [property values] are starting to come back, and the cost of building is going up.
“Banks see what is going on and they start to pull back availability of funds. It’s a very, very difficult situation.’’
McLaughlin said going into winter, people would be tightening their belts with less spending and less travel.
“I think it’s going to be a tough winter. But hopefully consumer confidence will improve in about September [or] October, when hopefully it’s a bit more stable.’’
He urged any business owners facing tough times to speak to their banks and Inland Revenue. “Once the communication is two-way, things can be worked out.’’
Renegotiation of terms could be one way of working through tough times.
“Whoever is facing these tough times, they’re not on their own,” he said, urging owners to “front-foot” issues.
It was important to also consider the personal stress that financial struggles brought about.
Referring to the data on companies being liquidated, he said: “Each one of these numbers is a person and they have a family.’’
Reports pile up
Over the past eight months, The Timaru Herald has reported on several businesses in South Canterbury that have been placed into liquidation.
In October 2023, Kitchens Direct (NZ) Ltd, which traded as Kitchens Direct, was placed into liquidation along with three other companies linked to it – Kitchen Direct Appliances Ltd, Kitchens Direct IP Holdings Ltd, and Kitchen Direct Franchising Ltd.
Temuka’s Monarch Kitchen was placed into liquidation in February, while building companies K J McIvor Building Ltd and KJMB 2022 Ltd have been placed into liquidation after applications from Inland Revenue.
That same month, Cooks Trading 2012 Ltd was put into liquidation following an application by a creditor over unpaid bills.
In March, Timaru employment agency Staff Services Ltd was placed into liquidation, while Waipopo Limited Partnership, the owner of South Canterbury’s Waipopo Orchards, went into receivership owing millions of dollars to a bank.
In March, Timaru-based building company New Zealand Carpentry Ltd was placed into liquidation following an application by the company that owns Mitre 10 Mega stores in Timaru, Ōamaru and Ashburton.
Meanwhile, a Mackenzie company with tyre businesses in Fairlie and Twizel has been placed in liquidation with debts of $548,750, about half of which is owed to Inland Revenue.
Mackenzie Country Tyres 2014 Ltd, trading as Carters Tyre Service in Fairlie and Goodyear Autocare in Twizel, received a demand for payment relating to Inland Revenue liabilities but was unable to meet it.