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Aussie company collapses up to 50 per cent since April, Creditorwatch finds

It’s no secret there has been a “massive rise” in Australian companies collapsing but new findings show they have skyrocketed by a whopping 50 per cent since April.

The construction industry has faced a particular crisis with dozens of firms going under this year, but everything from billion dollar tech starts up to grocery delivery companies have become casualties of this “disturbing trend”.

Overall, companies going into external administration are up 46 per cent year-on-year, while court actions are up 54 per cent year-on-year, the latest data from credit reporting agency CreditorWatch found.

The huge jump has been blamed on interest rate rises causing “cheap money” to dry up, while spooked investors are pulling back on spending their cash on start-ups as valuations have taken a dramatic dive, with a slew of staff cuts battering the sector .

Meanwhile many businesses are already suffering depleted cash reserves as a result of the pandemic and the Australian Taxation Office (ATO) has ramped up its debt collection, according to the agency.

‘Ramping up legal action’

CreditorWatch has issued a chilling warning that the rise in business insolvencies will continue this year as multiple impacts batter the economy including ongoing supply chain issues, declining consumer confidence, rising interest rates, inflation and labor shortages.

CreditorWatch chief executive Patrick Coghlan said the hands-off approach to debt collection adopted by the ATO and many lenders during the pandemic is clearly over.

“The massive rise in external administrations is certainly a disturbing trend – now up 50 per cent since April. Our data shows that court actions are back to pre-Covid levels and the ATO has also stated that it is ramping up legal action for outstanding debts,” he said.

“With business and consumer confidence declining and inflation and interest rates on the rise, this doesn’t bode well for businesses, particularly small and medium enterprises whose cash reserves were depleted during the pandemic and are now operating on much tighter margins.”

No longer ‘awash with cash’

Aussie start-ups have been particularly hard hit, with the casualties piling up in the tech sector.

The latest was an Australian tech company called Metigy, which left staff “shell-shocked” by its sudden collapse last week, after it planned to raise money with a valuation of $1 billion.

Businesses that are trying to raise money for growth are particularly at risk in the current environment, added CreditorWatch chief economist Anneke Thompson.

“When interest rates were low and the world was awash with cash, investors were hungry for investment opportunities, and willing to move up the risk curve to find good returns,” she said.

“Now that cash is being consumed by ever-increasing prices and debt costs a lot more, the appetite for risk is dropping.

“Start-up businesses or those in the growth phase are always considered riskier. We have already seen this phenomenon hit the tech sector, and many well-known companies are being repriced to reflect this.”

Other recently failed Australian start-ups include grocery delivery service Send, which went into liquidation at the end of May, after the company spent $11 million in eight months to stay afloat.

There was also a Victorian food delivery company that styled itself as a rival to UberEats and Deliveroo that collapsed in July as it became unprofitable, despite making more than $6 million worth of deliveries since it launched in 2017 and had 18,000 customers.

Meanwhile Australia’s first ever neobank founded in 2017, Volt Bank, went under last month with 140 staff losing their jobs, while 6000 customers were told to urgently withdraw their funds.

A venture capital firm issued a sobering message about the state of Australia’s start-up industry, warning that more new companies would go bust and pulling back on funding as a result.

CreditorWatch also identified five regions where businesses are most at risk of going under with the suburbs of Merrylands, Canterbury and Auburn in NSW on the list, alongside Surfers Paradise and Ormeau in Queensland.

Construction collapses to continue

After four consecutive months of increases to interest rates and inflation continuing to rise, it is now clear that a slowdown in demand in many industries is inevitable, added Ms Thompson.

She said construction companies will continue to be impacted by late payments and reduced demand, particularly smaller operators.

The most recent company impacted was Melbourne-based Blint Builder which collapsed this week with approximately $1 million in outstanding debt owed to 50 creditors, according to the liquidators.

It joined smaller operators like Hotondo Homes Horsham, which was based in Victoria and a franchisee of a national construction firm – which collapsed in July affecting 11 homeowners with $1.2 million in outstanding debt.

It was the second Hotondo Homes franchisee to go under this year, with its Hobart branch collapsing in January owing $1.3 million to creditors, according to a report from liquidator Revive Financial.

Others include two major Australian construction companies, Gold Coast-based Condev and industry giant Probuild, which went into liquidation earlier this year.

There was also Norris Construction Group, which was in Geelong, collapsed in March with $27 million in debt. It owes $3.2 million to around 140 staff that it is unlikely to be able to repay, according to the liquidator’s report.

Meanwhile, Snowdon Developments was ordered into liquidation by the Supreme Court with 52 staff members, 550 homes and more than 250 creditors owed just under $18 million, although it was partially bought out less than 24 hours after going bust.

Other casualties this year include Inside Out Construction, Solido Builders, Waterford Homes, Affordable Modular Homes and Statement Builders.

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Business

Australian IT company Megaport sacks 10 per cent of staff, pays them $1.6m

An Australian tech company sacked around 10 per cent of its staff despite announcing its revenue had jumped by 40 per cent to $109.7 million in the past financial year.

The Brisbane-based telecommunications and IT infrastructure company called Megaport revealed that a whopping $1.6 million was spent paying out employees who had been made redundant.

Around 35 staff members – out of its 345 estimated workforce on LinkedIn – were impacted by the cuts.

“On July 14 2022, management made the decision to reduce its workforce in order to reduce costs and prepare for rising prices and inflation across the group’s key markets,” Megaport revealed in its report to investors.

Its revenue had grown from $78.3 million from the previous financial year, its results showed, while its monthly recurring revenue soared by 43 per cent to $10.7 million in June, mainly as a result of new customers from the US.

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The 10-year-old company, which was founded by multi-millionaire Bevan Slattery, is one of the many Aussie tech outfits that have suffered from a battering on the share market this year.

Its shares have plummeted by 53 per cent since the start of the year, but its results reported on Tuesday helped its stock rise by 9 per cent defying the broader trend of investors selling off loss making tech shares.

Megaport reported a full year net loss of $48.5 million down from $55 million the year earlier, while it increased customers from 2,285 to 2,643.

It currently has $82.5 million in cash, according to its report.

tech bloodbath

Aussie employees from the tech sector have suffered a brutal round of cuts in recent times, with Megaport’s staff the latest casualties.

An Australian social media start-up called Linktree that was recently valued at $1.78 billion is sacking 17 per cent of staff from its global operations, it revealed this week.

Immutable, an Australian crypto company valued at $3.5 billion was facing a fierce backlash last week after sacking 17 per cent of its staff from its gaming division, while continuing to “hire aggressively” after raising $280 million in funding in March.

Australian healthcare start-up Eucalptys that provides treatments for obesity, acne and erectile dysfunction fired up to 20 per cent of staff after an investment firm pulled its funding at the last minute.

Debt collection start-up Indebted sacked 40 of its employees just before the end of the financial year, despite its valuation soaring to more than $200 million, with most of the redundancies made across sales and marketing.

Then there was Australian buy now, pay later provider Brighte, that offers money for home improvements and solar power, which let go of 15 per cent of its staff in June, with roles primarily based on corporate and new product development.

Another buy now, pay later provider with offices in Sydney called BizPay made 30 per cent of its redundant workforce blaming market conditions for the huge cut to staffing in May.

Earlier this year, a start-up focused on the solar sector called 5B Solar, which boasts backing from former prime minister Malcolm Turnbull, also sacked 25 per cent of its staff after completing a capital raise that would inject $30 million into the business

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Business

Australian tech company Appen’s future uncertain as shares plunge by 27 per cent

Shares for an Australian tech company have plunged after their earnings were 69 per cent lower than expected.

On Tuesday, Sydney-based artificial intelligence firm Appen posted its results for the first half of 2022, but that had a detrimental impact on its share price.

The company, which provides important data to tech giants around the world including Facebook, Google and Amazon, has been struggling in recent months.

According to The Australian, when its earnings were taken into account before interest, taxation, depreciation and amortization, it had made 69 per cent less than the same period the year before.

Appen generated $8.5 million in net profit over the last six months compared to $12.5 million in the same like period in 2021.

To top that off, the Aussie firm also posted a net loss of $3.8 million.

In total, it suffered a revenue drop of seven per cent to $182.9 million.

As a result, Appen’s share price dropped 27.3 per cent to $4.15 on Tuesday. At time of writing on Wednesday morning, it had recovered slightly, up by two per cent to come in at $4.24.

Appen’s CEO Mark Brayan blamed the poor performance on global market conditions as well as a weaker appetite for digital advertising.

During the earnings call, Mr Brayan said, per the Sydney Morning Herald: “With no improvement in July trading, there remains uncertainty about a continued slowdown of spending from our global customers and their exposure to weaker digital advertising demand.

“As a result, the conversion of forward orders to sales is less certain this year compared to prior years.”

Mr Brayan added in a statement to the ASX that conditions were “challenging” and that they were seeing a “flow-on effect” as customers spent less on advertising.

With lessening demand for their services, Appen also revealed that costs had blown out as the day to day running of the business became more expensive.

It cited investment in product and technology, heightened employee expenses, recruitment, and IT costs as another avenue where money was lost.

Like many other tech companies around the world, Appen has taken a dive, as its share price has fallen 62 per cent this year following massive gains at the height of the pandemic.

At their peak, Appen’s shares were worth around $43.50, back in August 2020. It is now trading at $4.24.

Appen first started on a downward trend in June, after its rival, Canadian IT firm Telus, scuppered a takeover deal.

The Canadian business had proposed a $9.50-per-share takeover bid for Appen, which would have made the Australian company worth $1.2 billion.

It’s unknown why Telus canned the deal.

News.com.au has contacted Appen for comment.

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Categories
Business

Australian tech company Metigy collapses impacting 75 staff

Staff who worked for an Australian tech company have been left “shell-shocked” by its sudden collapse after it planned to raise money with a valuation of $1 billion.

The company called Metigy was founded in 2015 and offered an artificial intelligence platform that provided insights into customers for small business marketing.

But its demise has impacted around 75 staff, who appeared to have been blindsided when informed on Monday that the company had gone into administration.

Some staff members had joined the company, which was founded by David Fairfull and Johnson Lin, just a few months ago.

One employee, who had been with Metigy for almost 18 months, said two weeks ago she “never thought” that the company would have gone under.

“All of us employees were informed today and we are shell-shocked to say the least,” she wrote on LinkedIn.

“It’s heartbreaking to have our journey cut short so early, when I could see that we were turning a corner with the product in the last few months and what was coming up in the next few months.”

Another staff member revealed plans they were making “for all the great work we could do with a new brand and communications function at Metigy” that she hoped to lead, but instead found herself suddenly unemployed.

“We’re pretty shell-shocked. It’s not because we didn’t care enough or because we did a bad job or the market conditions weren’t in our favor – and that will always be the toughest thing to deal with when you work as hard as we did,” she wrote .

“I am beyond grateful to have met this group of people who I now call friends and I’m so sad that we don’t get to continue on this rollercoaster together.

“My heart is always in start-up land regardless of how hard it gets. It’s an experience that teaches us so much about ourselves and I will always choose it.”

The company’s collapse is a particular shock as it planned to raise money just two months ago.

A recent presentation from a Metigy investor showed the company’s revenue had grown more than 300 per cent in both the 2020 and 2021 financial years, and had more than 25,000 clients across 92 countries, the Australian Financial Review reported.

Meanwhile, Australian private equity firm Five V Capital had recently presented Metigy as a case study showing it was valued at $105 million in October 2020 when it invested and its last evaluation sat at $1 billion in April this year.

Metigy’s collapse came as a “big shock” and had caused “a great deal of sadness”, one employee added on LinkedIn.

He said that the “growth team never failed to deliver” with a list of achievements in their short time, including acquiring roughly 38,000 users from a base of just a few thousand, rebuilding the website leading to significant improvements in conversion rates and a full rebrand .

Simon Cathro and Andrew Blundell of Sydney-based firm Cathro Partners were appointed as administrators on Friday night.

The duo said they are working with investigators and creditors to assess the business commercials and explore the possibility of its sale.

“We are exploring the urgent sale of Metigy’s assets and intellectual property as part of the voluntary administration process and consider a sale could be an outcome in this process,” they said.

Metigy has more than 30 shareholders, according to documents lodged with the Australian Securities and Investments Commission.

Tech companies are struggling in Australia after a share market bloodbath, which has left investors spooked and made funding harder to find.

Other failed businesses include grocery delivery service Send, which went into liquidation at the end of May, after the company spent $11 million in eight months to stay afloat.

Last month, Australia’s first ever neobank founded in 2017, Volt Bank, went under with 140 staff losing their jobs, while 6,000 customers were told to urgently withdraw their funds.

A Victorian food delivery company that styled itself as a rival to UberEats and Deliveroo also collapsed in July as it became unprofitable, despite making more than $6 million worth of deliveries since it launched in 2017 and had 18,000 customers.

A venture capital firm issued a sobering message about the state of Australia’s start-up industry, warning that more new companies would go bust and pulling back on funding as a result.

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