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Metricon QLD GM Luke Fryer quits, national restructure update this week

Metricon QLD GM Luke Fryer quits, national restructure update this week

The Queensland general manager of troubled builder Metricon has resigned, days after the company announced around 225 staff would be sacked in a national restructure.

Luke Fryer, who had been with the company for 15 years starting as a sales estimator in 2007, was previously NSW GM before moving back to his home state of Queensland in 2020.

Metricon director Jason Biasin announced Mr Fryer’s resignation in an email to staff on Friday.

“The last two years have seen more challenges in our industry than ever before,” Mr Biasin wrote.

“Luke’s commitment to our people, to me personally and our business has been unwavering and will not be forgotten. We wish Luke all the best for the future and he will always remain a part of the Metricon family.”

He added, “I know this week has been very difficult for everyone and I thank you all for your professional and compassionate approach to the tasks at hand and looking after each other. I look forward to sharing more positive news with you next week.”

Metricon has been contacted for comment.

Last Monday, Metricon announced it would be shedding 9 per cent, or about 225 of its 2500-strong national workforce, in a restructure “to better accommodate and reflect the requirements of the current market“.

The affected roles are largely in sales and marketing.

The country’s largest home builder was plunged into crisis in May amid reports it was on the verge of financial ruin and engaging in crisis talks with the Victorian government, following the sudden death of its founder Mario Biasin.

Acting chief executive Peter Langfelder has repeatedly shot down those allegations, but a question mark still hangs over Metricon’s future despite the company’s directors injecting $30 million into its business to allay fears about its survival, and a rescue deal being struck with Commonwealth Bank.

Last month, Metricon listed nearly 60 display homes for sale across NSW, Queensland, South Australia and Victoria, worth a total of around $65 million.

Staff who were informed of the restructure during a Microsoft Teams meeting last week said those who had remained with the company rather than jumping ship “basically had the rug pulled out from under them”.

“It has not been received well by some of them,” one NSW staff member told news.com.au. “I’m a little bit burned by the whole situation.”

In a statement on Tuesday, Metricon confirmed it was in the “process of an internal restructure of the business, with an increased focus on delivering homes to more than 6000 Australians whose houses will be constructed this year”.

“To better accommodate and reflect the requirements of the current market and ensure the most appropriate deployment of resources, Metricon is working to appropriately reduce its sales and marketing capability while it focuses on the construction and delivery of more than 6000 homes,” a spokeswoman said .

“We have commenced a consultation process with our people. This process is proposed to lead to a reduction of personnel and redundancies across the national business.”

The spokeswoman said 2020 and 2021 saw record demand for homebuilding and that Metricon “expects demand to settle at pre-pandemic levels”. “As a result, the business will rebalance towards construction on homes it is currently building and the thousands more in the pipeline – the biggest volume in the company’s history,” she said.

The impacted roles will be at the “front-end of the business, predominantly in sales and marketing roles, representing approximately 9 per cent of the national workforce”.

“With the headwinds buffeting the industry, specifically labor costs due to competition for skills, combined with present global material cost hikes and with our very strong existing pipeline of work, we need to carefully balance the current pipeline of new builds with the construction side of the business,” Mr Langfelder said in the statement.

“We are working to restructure our front-end of the business given the current climate and the need to move forward efficiently. We are committed to looking after any of our people who may be impacted by these proposed changes, and they will continue to have ongoing access to the company’s support and mental health services.”

Mr Langfelder said Metricon was rebalancing the business’ focus over the next 18 months on executing builds as quickly and efficiently as possible whilst maintaining equilibrium in the pipeline.

“We have previously said that our company has a proven history of success and remains profitable and viable, with the full support of our key stakeholders – this remains the case today,” he said.

Mr Langfelder said Metricon was still expected to continue to contract on average 100 homes per week, in line with pre-pandemic levels. “Our future construction pipeline shows no sign of slowing down with more than 600 site-starts scheduled for 2023,” he said.

In an email to staff on Tuesday, Metricon said it would be holding a virtual town hall this week “to provide you with further updates on our business, current market conditions and plans for the future”.

“We do not underestimate the effect that this review is likely to have on some of you,” the directors wrote.

“We are committed to working through this process as thoroughly and efficiently as possible, and to keep you updated as we progress… Despite the current challenges across our industry, we remain stable as a business with full support from our key stakeholders.”

The Australian building industry has been plagued with escalating issues that have already seen Gold Coast-based Condev and industry giant Probuild enter into liquidation in recent months, while smaller operators like Hotondo Homes Hobart and Perth firms Home Innovation Builders and New Sensation Homes, as well as Sydney-based firm Next have also failed, leaving homeowners out of pocket and with unfinished houses.

The crisis is the result of a perfect storm of conditions hitting one after the other, including supply chain disruptions due largely to the pandemic and then the Russia-Ukraine conflict, followed by skilled labor shortages, skyrocketing costs of materials and logistics and extreme weather events .

The industry’s traditional reliance on fixed-price contracts has also seriously exacerbated the problem, with contracts signed months before a build gets underway, including the surging costs of essential materials such as timber and steel.

It comes after it recently emerged that Australia recorded a staggering 3917 liquidations or administration appointments across all industries during the 2021-22 financial year.

The construction sector led the charge, representing 28 per cent of all insolvencies, although firms from countless industries also failed in the face of soaring inflation and interest rate pressures, Covid chaos, labor shortages and supply chain disruptions.

There were 1536 collapses in NSW, with Victoria recording 1022, Queensland 665, WA 350, South Australia 196, 91 for the ACT, 29 for Tasmania and 28 in the Northern Territory.

[email protected]

— with Alexis Carey

Read related topics:Brisbane

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Metricon sacks NSW sales staff via Microsoft Teams

Metricon sacks NSW sales staff via Microsoft Teams

Construction giant Metricon has unceremoniously sacked the majority of its NSW sales staff via Microsoft Teams in the latest sign that the struggling company is teetering on collapse.

David Shorten, Metricon’s NSW state sales manager, informed staff at the Monday morning meeting that numbers would be cut to just 18, from roughly 60 currently, with redundancy payouts offered to those unable to be redeployed.

About 15 trainee sales consultants have also been terminated with no offer of redeployment.

“To better accommodate and reflect the requirements of the current market and ensure the most appropriate deployment of resources, we have undertaken an important review of the sales team,” Mr Shorten said in a statement read out in the Teams meeting.

“This is necessary to ensure we remain competitive in both the short and long term. The review was not undertaken lightly and has resulted in proposed changes to the current structure of the team. We understand that you may feel anxious at this time and that you are likely to have a number of questions. Under the proposed structure, the number of new home advisors will be reduced to 18.”

The affected employees were given until midday on Wednesday to offer any “thoughts, insights or feedback you may have regarding the proposed structure and approach”, with employees to be told if they’re being sacked by the end of the week.

Mr Shorten said Metricon would “select the most appropriately skilled individuals to occupy the positions moving forward” but warned “options are limited” for redeployment.

“In the event that you were unable to be redeployed to a suitable alternative position within the notice period, you would receive the relevant redundancy entitlements if they were available to you,” he said.

Employees who are offered one of the remaining roles but choose not to accept may not be entitled to a redundancy payout.

One employee, who asked not to be identified, said he had been expecting the announcement after Metricon closed its HR portal last Friday.

He said there had been some staff turnover recently with “people abandoning ship to go to competitors”, and those who stayed “basically had the rug pulled out from under them” through “no fault of their own” after believing the company’s repeated public denials that it was facing difficulties.

“It has not been received well by some of them,” he told news.com.au. “I’m a little bit burned by the whole situation.”

The company’s largest home builder was plunged into crisis in May amid reports it was on the verge of financial ruin and engaging in crisis talks with the Victorian government, following the sudden death of its founder Mario Biasin.

Acting chief executive Peter Langfelder has repeatedly shot down those allegations, but a question mark still hangs over Metricon’s future despite the company’s directors injecting $30 million into its business to allay fears about its survival, and a rescue deal being struck with Commonwealth Bank.

Last month, Metricon listed nearly 60 display homes for sale across NSW, Queensland, South Australia and Victoria, worth a total of around $65 million.

The Sydney employee said “events have snowballed” since Mr Biasin’s death, adding he was skeptical the company could survive.

“We still don’t have homeowners’ warranty insurance,” he said.

“We have not been taking deposits for the last 10 weeks. It should be known. People are still waiting for builds. I’m glad we haven’t been able to take deposits – do you want to be the guy that takes someone’s $20,000, $30,000 life savings and the company goes bankrupt in three or four weeks’ time?”

Reached for comment on Tuesday, Metricon confirmed it was “process of an internal restructure of the business, with an increased focus on delivering homes to more than 6000 Australians whose houses will be constructed this year”.

“To better accommodate and reflect the requirements of the current market and ensure the most appropriate deployment of resources, Metricon is working to appropriately reduce its sales and marketing capability while it focuses on the construction and delivery of more than 6000 homes,” a spokeswoman said in a statement to news.com.au.

“We have commenced a consultation process with our people. This process is proposed to lead to a reduction of personnel and redundancies across the national business.”

The spokeswoman said 2020 and 2021 saw record demand for homebuilding and that Metricon “expects demand to settle at pre-pandemic levels”. “As a result, the business will rebalance towards construction on homes it is currently building and the thousands more in the pipeline – the biggest volume in the company’s history,” she said.

The impacted roles will be at the “front-end of the business, predominantly in sales and marketing roles, representing approximately 9 per cent of the national workforce”.

“With the headwinds buffeting the industry, specifically labor costs due to competition for skills, combined with present global material cost hikes and with our very strong existing pipeline of work, we need to carefully balance the current pipeline of new builds with the construction side of the business,” Mr Langfelder said in the statement.

“We are working to restructure our front-end of the business given the current climate and the need to move forward efficiently. We are committed to looking after any of our people who may be impacted by these proposed changes, and they will continue to have ongoing access to the company’s support and mental health services.”

Mr Langfelder said Metricon was rebalancing the business’ focus over the next 18 months on executing builds as quickly and efficiently as possible whilst maintaining equilibrium in the pipeline.

“We have previously said that our company has a proven history of success and remains profitable and viable, with the full support of our key stakeholders – this remains the case today,” he said.

Mr Langfelder said Metricon was still expected to continue to contract on average 100 homes per week, in line with pre-pandemic levels. “Our future construction pipeline shows no sign of slowing down with more than 600 site-starts scheduled for 2023,” he said.

The spokeswoman did not address the claim that Metricon was not taking deposits.

The Australian building industry has been plagued with escalating issues that have already seen Gold Coast-based Condev and industry giant Probuild enter into liquidation in recent months, while smaller operators like Hotondo Homes Hobart and Perth firms Home Innovation Builders and New Sensation Homes, as well as Sydney-based firm Next have also failed, leaving homeowners out of pocket and with unfinished houses.

The crisis is the result of a perfect storm of conditions hitting one after the other, including supply chain disruptions due largely to the pandemic and then the Russia-Ukraine conflict, followed by skilled labor shortages, skyrocketing costs of materials and logistics and extreme weather events .

The industry’s traditional reliance on fixed-price contracts has also seriously exacerbated the problem, with contracts signed months before a build gets underway, including the surging costs of essential materials such as timber and steel.

It comes after it recently emerged that Australia recorded a staggering 3917 liquidations or administration appointments across all industries during the 2021-22 financial year.

The construction sector led the charge, representing 28 per cent of all insolvencies, although firms from countless industries also failed in the face of soaring inflation and interest rate pressures, Covid chaos, labor shortages and supply chain disruptions.

There were 1536 collapses in NSW, with Victoria recording 1022, Queensland 665, WA 350, South Australia 196, 91 for the ACT, 29 for Tasmania and 28 in the Northern Territory.

According to consumer credit reporting agency Equifax, “small-scale operators in Australia’s construction industry could well be the canary in the coal mine for the difficulties that lie ahead for this sector”.

The company late last month claimed that “the significant increase in construction company failures since the start of the year shows no sign of abating”, with provisional data indicating that construction insolvencies increased 19 per cent for the month of May, sitting 43 per cent higher than May 2021.

Overall, construction insolvencies have increased 30 per cent over the last 12 months, according to Equifax.

[email protected] with Alexis Carey

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Business

RLB forecasts emerging construction cost inflation will ease in 2023

RLB forecasts emerging construction cost inflation will ease in 2023

The rate at which construction costs are soaring – contributing to a spate of high-profile building company collapses – will ease next year, according to new forecasts from global consultancy firm RLB.

Construction cost inflation in Melbourne is forecast to halve, dropping from 8 per cent this year to 4 per cent in 2023, and in Sydney it is predicted to slow from 6.9 per cent to 3.9 per cent.

An even bigger decline is forecast for the Gold Coast with cost growth dropping from 11.5 per cent to 5.5 per cent. Similarly, in Brisbane it should drop from 10.5 per cent this year to 5.1 per cent in 2023, according to forecasts published this week in RLB’s second quarter 2022 International Report.

RLB research and development director Domenic Schiafone said the expectation that costing will ease through next year was due to curtailing demand, likely to be caused by inflationary pressures.

“This easing of demand should allow manufacturing and logistics to get back to ‘normality’ or pre-Covid levels,” he said.

“The easing of demand should also see a softening of material prices with the high level of ‘demand-led price premiums’ reducing.”

Association of Professional Builders co-founder Russ Stephens, whose clients are residential home builders, agreed to escalate costs could halve next year, but off a much higher base.

He said the cost to build a residential home had increased a lot more than non-residential or commercial builds due to the larger percentage of timber used, and that temporary price hikes created by supply and demand were not reflected in the reports we were seeing.

Australia’s typical house build cost has soared more than $94,000 in 15 months, according to figures revealed in analysis by the Housing Industry Association and News Corp Australia earlier this month.

The national inflation rate hit 6.1 per cent in the year to June with new dwellings and automotive fuel the most significant contributors, new figures released by the Australian Bureau of Statistics this week showed. New dwellings were up 20.3 per cent.

Warning to Australians wanting to build

While construction cost inflation is expected to ease sometime next year, in the meantime the pain will continue.

Mr Stephens said because costs were increasing so quickly, consumers needed to be aware prices quoted for builds would not last long.

“If they’ve had a price quoted that is older than 30 days they should expect to have that price renegotiated,” he said.

He also said consumers would see more builders including rise and fall clauses, also known as cost escalation clauses, in contracts.

“It gives the ability for a builder to pass an increase in cost of materials on to the consumer,” Mr Stephens explained, adding it was common in other countries but Australia didn’t typically use them.

“What I would say to consumers is that’s not necessarily a negative thing because if the builders don’t put those clauses in they’ll have to put more contingency in to the price to protect themselves against potential increases.

“So rise and fall clauses are probably a good thing for consumers because it means they will only pay the cost of the increase rather than an inflated prediction of what increases might be, especially as we’re seeing evidence now that the increases will start to slow down next year.”

Factors contributing to the construction industry crisis

The construction industry is facing challenges so great that high-profile building companies are dropping like flies.

Mr Schiafone said fragmented supply chain issues were not resolved and labor shortages across the nation have continued as a result of the pandemic.

The consultancy’s report noted lead times for some products from overseas were currently

16 to 20 weeks, when traditionally they were half that at eight to 10 weeks.

Additionally, the need for construction labor and materials after recent flood damage will enhance existing shortages across the country, he said.

Mr Schiafone said higher fuel prices, increasing power costs and timber shortages were all symptoms of the war in Ukraine and were likely to linger for some time yet.

RLB global chairman Andrew Reynolds said significant cost escalation, global delivery uncertainty, aberrant weather events causing significant construction delays, and labor shortages were common challenges in the industry across the world.

Failed building companies

The latest company to collapse was prominent Melbourne apartment developer Caydon earlier this week, blaming “one difficult market situation after another”.

The next day, on Wednesday, ASX-listed developer Cedar Woods shelved a major inner-city Brisbane townhouse and apartment project due to rising costs and delays.

It came less than a week after Perth developer Sirona Urban killed off a $165 million luxury tower, where more than 50 per cent of apartments had been bought off the plan, blaming skyrocketing construction costs and labor shortages.

It was the second major apartment project to fall over in Australia last week.

A Melbourne developer, Central Equity, abandoned plans to build a $500 million apartment tower on the Gold Coast, blaming the crisis in the building industry and surging construction costs for making the project unprofitable.

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

The grim list has continued to grow from there as a number of other high-profile companies also collapsed, including Inside Out Construction, Dyldam Developments, Home Innovation Builders, ABG Group, New Sensation Homes, Next, Pindan, ABD Group and Pivotal Homes.

Others joined the list too including Solido Builders, Waterford Homes, Affordable Modular Homes and Statement Builders.

Then two Victorian building companies were further casualties of the crisis, having gone into liquidation at the end of June, with one homeowner having forked out $300,000 for a now half-built house.

Hotondo Homes Horsham, which was a franchisee of a national construction firm, collapsed a fortnight ago affecting 11 homeowners with $1.2 million in outstanding debt.

It is 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.

Meanwhile, a Sydney family face never being able to build their dream home after their builder Jada Group collapsed in March owing $2.4 million and the cost of their home’s construction jumped to $1.9 million, a whopping $800,000 more than the original quote.

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.

Dozens of homeowners and hundreds of tradies were left reeling after a Victorian building firm called Langford Jones Homes went into liquidation on July 4 owing $14.2 million to 300 creditors.

News.com.au also raised questions about NSW builder Willoughby Homes, which is under investigation by the Government after builds stalled and debts blew out to 90 days.

There are between 10,000 to 12,000 residential building companies in Australia undertaking new homes or large renovation projects, a figure estimated by the Association of Professional Builders.

– with Sarah Sharples

Read related topics:Cost Of Living

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