Updated: The University of Western Australia says it is working with subbies and will seek a new lead contractor at Forrest Hall, after six Jaxon Group entities entered liquidation today.
Updated: The University of Western Australia says it is working with subbies and will seek a new lead contractor at Forrest Hall, after six Jaxon Group entities entered liquidation today.
A spokesperson for the university said they had engaged with Jaxon after construction stopped at the $35 million project earlier this month.
"UWA and Jaxon explored a number of options to keep construction on track and regrettably, following further negotiations, a decision has been made to seek to continue the project with a new contractor," the spokesperson said.
"The university has contacted site subcontractors, as a priority, to provide certainty and advise next steps, with a focus on timely completion of the project.
"The university appreciates the recent challenges faced by Jaxon and the transparent and co-operative manner in which Jaxon’s directors and officers have engaged with us to date."
WA Apartment Advocacy said the liquidation leaves an estimated 600 apartment owners without the six-year statutory warranty period.
Earlier
Ongoing tight margins in construction, and the pandemic, have led to today's decision to put Jaxon into liquidation, although related business Doric is expected to survive.
Liquidators from EY were appointed to six entities of construction business Jaxon Group today, just weeks after cash flow issues brought work at its Forrest Hall project to a halt.
In a statement released this afternoon, liquidators Sam Freeman, Vincent Smith and Justin Walsh confirmed operations of the group had officially ceased and they were urgently assessing its financial situation.
The Western Australia-based builder, which is part of WA-owned DoricJaxon Consolidated, led by chairman Harry Xydas and Demetra Xydas, attributed the failure to the pandemic and tight margins, having lost 60 per cent of its revenue as a result of projects being cancelled or delayed.
Jaxon specialises in commercial and large scale accommodation projects and has four major construction projects under way, including St Louis’ $11.4 million Dean Street Apartments in Claremont.
The company also built the Adnate Hotel, which is now closed. Jaxon was fined $5,000 last year over issues with the fire safety exit.
The entities entering liquidation comprise Jaxon Construction, Jaxon Koombana, Jaxon Management, Jaxon Group Holdings, Skyline Realty (WA) and Doric Jaxon Corporate.
But it is understood Doric's business units will continue unaffected, using separate financial accounts.
There had been previous attempts to combine the business units, but they are operating as separate entities, Business News understands.
It is also understood that chairman Harry Xydas has not taken a dividend from the Jaxon business for 10 years.
It is not clear how much Jaxon owes.
The combined DoricJaxon business had 81 staff and annual revenue of $221 million, along with net assets of $16.7 million as at June 2020, its annual report shows.
While the year was profitable for the consolidated entity, the company had a cash outflow of $8 million.
Tough August
Just two weeks ago, representatives of Jaxon told Business News it had paid a majority of the contractors on its Forrest Hall project, a development funded by Minderoo Foundation as part of a scholarship program at the University of Western Australia.
That followed reports that work had stopped at that site and on other Jaxon projects, with subcontractors unable to be paid, and some owed up to two weeks worth of cash.
Despite the company's claims that work was getting back under way, days later, the site was near empty.
Former general manager Russell Perkins exited the business in recent weeks, following a two month extended notice period.
Tony Morganti left as chief financial officer earlier this year.
The WA-based construction company is the second big firm to collapse in the past four months.
In May, Business News revealed construction company Pindan was on the brink of collapse, with the company entering administration led by EY.
Xydas family statement
"It is with regret and disappointment that we announce the appointment today of Sam Freeman, Vincent Smith and Justin Walsh, from EY, as liquidators of Jaxon Contractors Pty Ltd, effective from 27 August 2021," Harry and Demetra Xydas said in a statement.
"This has been an incredibly difficult decision for our family, as proud owners of Jaxon since 2005, but the only option to avoid further fallout for Jaxon’s staff, contractors and clients.
"There are many reasons for Jaxon’s recent financial struggles, including a tough trading environment and ever-tightening margins that have been hurting the building sector in Western Australia for many years now.
"The emergence of COVID-19 last year saw Jaxon lose about 60 per cent of its forecast revenues as planned work was cancelled or postponed because of the pandemic. The company was also unsuccessful in its bid to secure assistance under the Federal Government’s SME Loan Recovery Scheme.
"Despite best efforts by Jaxon’s management and staff to reduce the company’s cost structure without jeopardising existing clients and our order book, we were unable to sufficiently address the cash flow problem.
"Following constructive conversations with Jaxon’s financiers and key clients, we have come to the regretful conclusion that winding up and liquidating the Jaxon business is the only acceptable path forward.
"It would be inappropriate for us to comment further on Jaxon’s financial status given today’s appointment of EY as liquidators.
"However, we are confident that Sam Freeman and the EY team will be able to deliver a better outcome for all stakeholders than if Jaxon had struggled on.
"The Xydas family has been involved in the WA building and construction industry for more than three decades. During this time, we have worked with integrity, employed hundreds of Western Australians and always sought to add value and deliver on our promises.
"At all times, we have remained true to our values of safety, respect, unity and excellence.
"Today’s news is devastating for all of us, not just the Xydas family but the broader Jaxon community."
