The closure of 87-year-old Adelaide-based design firm Woodhead is an early example of the impact of South Australia’s “infrastructure cliff”, says the head of the state’s leading business organisation.
Administrators HBL Mann Judd are working their way through what’s left of one of Adelaide’s most prominent companies after it went into receivership late last week.
The collapse followed the announcement that parts of the company had merged with global engineering firm GHD.
Woodhead had design offices in every mainland capital city as well as Singapore.
The firm had been “on the market” for at least a year, industry sources said.
“It’s a sad thing,” Business SA chief executive Nigel McBride told InDaily.
“The ‘infrastructure cliff’ has been looming for some time and this is an early indication that it’s here.
“Several public funded infrastructure projects have been keeping the services sector ticking over, but when they stop, there’s nothing to fill the gap.
“The construction sector is also under a lot of pressure.”
The ‘infrastructure cliff’ refers to the gap left after design and construction work finishes on the publicly funded South Road Super Way, Adelaide Oval Redevelopment, New Royal Adelaide Hospital and several smaller government projects.
“It’s not a new thing; the government’s Rod Hook has been talking about the infrastructure cliff for two years,” McBride said.
“I know that engineering firms and architecture firms have been worried about it for some time.
“Woodhead is the first prominent example of what happens when there’s a major project slump.
“I suspect we’ll see more closures in the services sector, which is a significant sector in the state economy.”
John Wenzel, a former director of Woodhead, said today the collapse of his old firm reflected tough times in architecture.
He left the company two and a half years ago and in May last year started a new architecture consultancy firm, Practice Design.
“The current directors have had the company on the market for probably 18 months now,” Wenzel said.
“They’ve made various attempts to sell to other architectural firms and that hasn’t happened.
“A number of the architects that had a track history of being able to win big projects left at the same time (as he did, 2.5 years ago).
“They were under-personed in terms of people who were capable of winning large project.
“Architecture and engineering firms have been very concerned about entering into competition with one another because … an architectural firm often relies on an engineering firm to take on projects and vice versa.”
Wenzel said the uncertainty surrounding the unpaid creditors and former staff of Woodhead needed to be resolved.
“The act of bringing in an administrator from day one was obviously orchestrated and was a very silly thing to do.
“My understanding is that they will trade as GHD Woodhead for a period of time … GHD have told me locally that there’s no plan to move away from that,” he said.
“It was the decision of the local Woodhead directors to wind up the company.
“The administrator has got a real job to do to act very quickly.”
Wenzel said “the soul of Woodhead was still in Adelaide”.
“I think that the move that they’ve taken to just act with such clarity and definiteness in terms of winding up the company … it just hasn’t won them any friends and unfortunately that’s going to have a flow-on effect to GHD.”
GHD, a global engineering firm, said last week its acquisition of Woodhead was “a natural extension of a long-standing history of collaboration.”
It’s not clear how many Woodhead staff lost their jobs, nor the impact on contract designers in the sector.
GHD made no mention of Woodhead’s problems in its statement last week. Yet within hours of the merger being announced the doors were shut at Woodhead’s Chesser St offices.
On Friday afternoon valuers from Gray’s Online auction house were onsite valuing what was left of the furniture and fittings.
“HBL Mann Judd have been appointed receivers and we’re here just assessing what’s left,” a Gray’s employee told InDaily.
Woodhead staff who were not required by GHD are unsure of their future.
InDaily understands around 20 employees are waiting on redundancy and termination packages.
“As the structure of the business effectively moved, we were left with the carcass,” HLB Mann Judd’s Todd Gammel told The Australian Financial Review.
“We didn’t have the opportunity to keep employees on, so we had to terminate them. We’re going about realising the assets as soon as possible.”
Staff received a letter from the receiver saying there is no money available to make any immediate payments.
“At this stage, claims are frozen until surplus funds become available,” the letter says.
Woodhead’s recent work in Adelaide includes the SA Police headquarters and Adelaide Airport Plaza and Car Park expansion. Woodhead’s creditors will be given a clearer picture at the first creditor’s meeting scheduled for April 14.
*GHD have yet to respond to InDaily’s queries.
– additional reporting by Bension Siebert
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