Number of liquidations expected to increase over next six months at least
Tuesday, 3 December 2024
The number of businesses going to the wall in South Canterbury is likely to continue to climb for at least the next six months, according to a finance and credit expert.
Centrix managing director Keith McLaughlin’s comments come as new figures showed the number of companies being liquidated across the country increased by 27% year-on-year, with increases across most regions.
The Centrix November Credit Indicator, which was released on Tuesday morning, showed consumer arrears were up by 3.1% year-on-year and mortgage arrears up 10%.
“We expect these arrears levels to rise over the coming months in line with seasonal trends,’’ he said.
While 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 268 company liquidations during the 12 months to October 31. That was an increase on 230 in the previous 12-month period.
A breakdown of those liquidations by industry showed 32% were in the construction sector, 11% in hospitality, 9% in property, retail and manufacturing both 7%.
Demand for buy now, pay later loans had also started to rise as the holiday season spending spree kicked off, the data showed.
McLaughlin said the impact of liquidations was greater on rural communities, such as South Canterbury, where the economy was smaller and it was more noticeable.
“Liquidations will go up for the next three to six months at least,’’ he said.
Over the past 14 months, The Timaru Herald has reported on several South Canterbury businesses 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.
Late last month, the liquidator said he would take legal action if a satisfactory repayment offer was not made over a shareholders’ account overdrawn by an estimated $685,000.
And on Friday, Cassandra Knox, the owner of now liquidated Trinity Employment Services Limited, appeared in the Christchurch District Court on tax evasion charges.
Knox, who did not enter pleas to the charges, was remanded on bail to reappear on December 20.
Knox, who ran a branch of the recruitment agency in Timaru, is accused of aiding and abetting Elite Employment Limited to withhold a GST return for the periods ending July 31 and September 30, 2024, and to withhold tax for a purpose other than payment to Inland Revenue, court documents showed.
Knox started another agency just three hours after the original was liquidated.
The owner of two Fairlie-based building companies, which owe creditors more than $2.4 million, was recently declared bankrupt.
In their second six-monthly report, released late last month, liquidators Elizabeth Keene and Luke Norman, of KPMG, said KJMB 2022 Ltd owed creditors just over $523,000 while KJ McIvor Building Ltd owed more than $1.9m.
McLaughlin said Inland Revenue had given businesses time to recover following Covid-19, but more enforcement action was now being seen.
“A lot of debts have built up and there can be horrific amounts of debt owing. It starts to add up quickly.’’
He said it was important to do credit checks of businesses before agreeing to do business with them.
“Some of the businesses that do go into liquidation, businesses would have been supplying them oblivious to the fact they were in huge amounts of debt.
“It’s really unfair because one minute they’ll be supplying to the businesses and then they’re gone.’’
This had a domino effect on the community, he said.
“It’s always the small businesses that get caught out being at the end of the food chain.’’
He said his advice was as it had always been - peopled needed to talk through their financial concerns with their lender or other agencies.
“Behind every number there are people,’’ he said.
“The stress of money can be unrelenting. Most Kiwis want to pay their bills.’’