Short circuit as $350 million electrical contractor collapses

Hundreds of electricians are out of work after a major national electrical contracting firm with annual revenues of $350 million collapsed into receivership on Monday. 

At its peak, Pacific Services Group employed 1300 staff nationwide, across 40 active project sites and 14 offices, however the group's headcount fell to around 700 employees by the time of its collapse.

Major projects overseen by Pacific Services Group included works at the Chadstone Shopping Centre and Royal Children’s Hospital in Melbourne, the NBN rollout in Tasmania and the Lotus Glen Correctional Facility in Queensland.

The group, based in North Melbourne with offices across Australia, was created through an initial investment by Wolseley Private Equity in 2006 in a bid to become the nation’s largest electrical, data and communications engineering company.

Between February 2006 and October 2009, Pacific Services Group went on a buying spree, acquiring Elecraft in Victoria, Russell Smith Electrical in Tasmania, Boffa Russo in South Australia, Richard Flanagan & Co in Queensland and RSE Electrical in NSW.

However, the electrical firm soon hit financial hurdles, with The Australian Financial Review reporting Pacific Services Group had lost a major maintenance contract with retail giant Woolworths.

In July of last year, then-chief executive Peter White announced Pacific Services Group had received a $10 million injection from investors, and had secured a deal to restructure its debt from lenders.

“The recapitalisation will inject fresh money into PSG and restructure the group’s debts in a manner that will significantly strengthen the group’s financial position. You will all see the practical impact of this over the following weeks and months,” White said at the time.

“Thank you all for your support over the past few months; it has been a challenging time for us all. The recapitalisation provides us with a robust platform on which to move forward and to bid for the projects that are in the market. We look forward to continuing to work closely with you on both existing and new opportunities.”

Despite the cash injection, by September, Pacific Services Group announced it had appointed former Tyco Fire Protection Services APAC operations director Jeffrey Bretz as its new chief executive.

However, Bretz was unable to turn the company around, with PPB Advisory partner Craig Crosby appointed as an administrator, while Scott Kershaw, Michael Brereton and Craig Shepherd of KordaMentha were appointed as receivers earlier this week.

The Victorian state secretary of the Electrical Trade Union, Troy Gray, blasted the company’s management in a statement provided to SmartCompany, saying the company’s electricians, who had made millions of dollars for the company, including 200 in Victoria, would be left without an income.

“It's not just 200 workers. It's the families of these 200. They don't have an income. They can't get their entitlements, we're told by the government, for 40 weeks. We call on the government to fast-track that,” Gray said.

“Many of these workers will not get re-employed. The construction industry in Victoria isn't fantastic at the moment and they need those entitlements. The annual leave, banked RDOs, they need to live on, to buy food with.”

In a statement, Crosbie told SmartCompany he was still investigating Pacific Services Group's finances, and would report back to creditors by the end of the month.

"We are mindful of the impact on employees and are working with the Electrical Trades Union, the receivers and managers and PSG management to ensure entitlements are calculated as a matter of urgency," Crosbie says.

“We understand the receivers and managers have ceased to trade the businesses. At this stage it is unlikely that funds will be available to meet unsecured creditor claims. In the event the PSG companies are wound up and there are insufficient funds to pay employees, they will be entitled to lodge a claim under the federal government’s Fair Entitlement Guarantee scheme. The administrators will facilitate this process."

“We have notified the Department of Employment that a Fair Entitlements Guarantee claim is being prepared and we will do everything in our power to secure FEG funding and process employee claims as quickly as possible.”

The collapse follows the administration of another multimillion-dollar electrical contracting business called Global Electrotech in July of last year.

This article first appeared on SmartCompany.