SV PARTNERS says seven major retailers and four major construction companies, all turning over in excess of $100 million annually, are facing "extreme risk of financial failure" in its August 2016 Commercial Risk Outlook Report.
The Brisbane-based liquidator declined to name the companies, but described them as a large clothing retailer, two computer retail giants, one big supermarket/grocery store and a large newspaper/book retailer, plus the four construction companies.
SV Partners says there are another 1,200 retailers of all sizes in Australia whose financial records show they are at high risk of failure over the next 12 months.
In the contruction industry, there are 35 high financial risk companies turning over between $10-$100 million annually, plus the four businesses turning over more than $100 million.
SV Partners examined 20 million financial records from the past five years to make the predictions, including analysis of bill payment histories for businesses from the last two years.
The Report's findings show 17,681 Australian businesses are at high risk of financial failure over the next 12 months.
The top five areas where businesses are most at risk are inner Melbourne (816, 0.8 per cent of businesses in the region), inner south west Sydney (722, 1.9 per cent of businesses in the region), Sydney City and Inner South (684, 1.0 per cent of businesses in the region), Gold Coast (652, 1.2 per cent of businesses in the region), and Parramatta (625, 1.9 per cent of businesses in the region).
SV Partners Managing Director Terry van der Velde on the construction industry:
"This difficulty, combined with rising labour costs, mean that many construction companies are facing unmanageable financial pressure.
"A tight market has seen the establishment of contractual and financial arrangements that severely disfavour construction companies. This has meant these businesses have failed to meet and pay bills in accordance with their contractual obligations, with many facing civil and criminal non-compliance charges.
"Inadequate cash flow, lack of strategic management and trading losses are the top three contributors to financial failure not only within the construction industry, but across businesses Australia wide," he said."It isn't all bad news for the construction industry, many businesses in the sector have a strong outlook or are still in a position to turn things around.
"To keep their financial health in check, we urge all businesses to prioritise financial issues with respect to the short term impacts on the business and adjust business plans to reflect revised projections."Finding opportunities to improve working cash flow and capital as well as stress testing budgets and finances against possible future scenarios are also key to staying in the black and managing financial risk," he said.
Van der Velde on retail:
"We have seen a number of major retailers enter into external administration in recent months, and this unfortunately is not the end of tough times for the industry.
"The financial challenges these companies are facing are reflective of the difficulty that shop front retailers are competing with the online space which doesn't have the same issues with labour costs, rising rents, and limited captive markets.
"Unfortunately, many of these businesses will not be able to hang on for the lucrative Christmas period."It is crucial that retail businesses keep their finger on the pulse - changes in market share, price and demand need to be monitored and reacted to quickly.
"We urge businesses to look at the underlying assumptions of their business plans and projections within the context of the evolving retail space and adjust these key business tools as necessary," he said.
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