Adelaide home construction business Red Ochre collapses despite a big jump in building approvals

An Adelaide home construction business turning over $11 million has collapsed with more than $1 million in debt, with many building companies still under pressure despite a drop in interest rates and an unexpected rise in building approvals.

The Australian Bureau of Statistics yesterday confirmed approvals had skyrocketed 27% during May, while over the previous year they had risen 9%. The major contributor was a 58.7% rise in “private sector dwellings, excluding houses”.

However, economists have warned the figure is coming off a low base.

Adelaide-based Red Ochre homes was placed in administration on June 18, and placed in receivership the next day. The business primarily focuses on portable homes, but has a number of fixed homes under construction as well.

Red Ochre Homes is referenced as part of a group of five independent companies known as the McCracken Group. Director Charlie Siciliano was contacted this morning, and declined to comment, except to confirm Red Ochre is not technically a subsidiary of McCracken.

Siciliano said the only common threads are cross-directorship, and the fact McCracken offered administrative support.

Red Ochre’s website appears to be offline, although the head office was staffed this morning.

SmartCompany has learned Red Ochre collapsed with bank debt of $1.5 million, and $2.8 million owed to unsecured creditors. There were three employees, working from the company’s leased premises, with most of the work given out to sub-contractors.

The company turned over $11 million in the 12 months to May 2012.

Rob Kirman and Sam Davies of McGrathNicol were appointed as receivers last month. Kirman told SmartCompany this morning the firm is attempting to determine if a plan can be made to keep the company going forward.

Administrator Michael Basedow was contacted this morning, but was not available for comment.

The collapse highlights the fragile nature of the building industry, which has suffered in the past couple of years as property prices drop and consumer confidence has retreated.

However, there is some hope. Yesterday’s ABS figures showing a 27% increase in building approvals for May suggest the first of the RBA’s interest rate cuts may be seeping through.

But economists have warned that after coming off a low base, the reading in June could be weaker.