Strategic management shortcomings feature in T&L failures


Industry is the third worst in this segment, according to external administrators

Strategic management shortcomings feature in T&L failures
Management skills have been put into sharp relief by the ASIC report.

 

Though it might not be the worst offender, transport and logistics (T&L) has one of the highest rates of failure due to an inability to handle strategic business management.

Proof this is a significant problem for the industry emerges from the Australian Securities & Investment Commission’s Insolvency statistics: External administrators’ reports (July 2014 to June 2015) report.

For ‘poor strategic management of business’ as a reason for company failure, T&L, measured as ‘transport, postal and warehousing’, with 46.5 per cent of reports, came behind only ‘mining’ at 54.8 per cent and ‘agriculture, forestry and fishing’ (49.3 per cent).

The silver lining was that the sector failed to feature in the three worst for ‘inadequate cash flow’ or ‘high cash use and trading losses’, the other two main reasons for company failure.

However, of the 13 causes of failure, ‘inadequate cash flow or high cash use’ equalled ‘poor strategic management of business’ as the stated cause at 213 nominations each.

For T&L, there were a total of 1,225 nominations given.

The report surveys the reasons that liquidators, receivers and voluntary administrators give for firms hitting the wall in the country’s top 12 industries.

It shows 458 T&L firms were lost last financial year, ranking the industry fifth over all, between ‘manufacturing’ at 432 and 5.2 per cent and ‘retail trade’ at 739 and 8.8 per cent.

For reasons that made it into three figures, this was followed by ‘poor financial control, including lack of records’ at 159, ‘trading losses’ 147 and ‘other’ 138.

Criminal misconduct was suspected in 58 cases in the industry, the fifth overall.

Of these in double figures, 20 failed in their obligation to keep financial records, 12 traded while insolvent.

Civil failings were much greater in number, at 792, but the industry’s rank stayed the same.

Insolvent trading was top of the list here, at 294, followed by financial records breaches (207) and directors’ and officers’ duties breaches (152).

Of the top 12 industries, those with the greatest percentage of companies with estimated liabilities of $250,000 or less were ‘other (business and personal) services’ (49.3 per cent), T&L (44.5 per cent), and Information media and telecommunications (43.4 per cent).

Across all industries, 44.4 per cent of reports estimated the shortfall between estimated assets and estimated liabilities of $250,000 or less, while 64.2 per cent of reports estimated a shortfall of 500,000 or less.

When comparing the deficiency estimates between the top 12 industries, the three industries with the highest percentage of estimates of $250,000 or less were ‘other (business and personal) services’ (52.5 per cent), ‘transport, postal and warehousing’ (46.9 per cent), and ‘accommodation and food services’ (45.9 per cent).

Of the T&L 458, 186 had no assets and 204 liabilities of up to $250,000, while liabilities of $250,000- $1 million accounted for 156.

More hefty liabilities were found for $1-5 million at 79 firms, 11 with $5-10 million and eight with $10 million or more.

Though small by comparison with the top two groups, the industry features third in failed firms owing more than $1 million, with 20.

As with most other enterprises, a huge majority of unsecured creditors got nothing back, with the industry’s rate of 427 out of 458 comparatively average.

The full report can be found here.

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