Land & Homes Group (ASX:LHM) looks like it won’t be exiting its voluntary suspension anytime soon, with the company entering voluntary administration.
There is, for those paying attention, a fairly unsurprising turn of events here: We’re looking at another construction-facing company going under in a post-COVID 19 world where building material costs have remain inflated.
Even after the rate cutting cycle, a U.S. Fed rate cut, and no shortage of chatter on Australia’s building industry – now Lands & Homes has entered administration in a bid to avoid the worst perils of bankruptcy.
The company also pointed to a lacklustre fundraising environment on Monday.
“Costs associated with the project have escalated since the completion of the initial feasibility study and there is no confidence that construction costs will materially reduce in the short term,” the company wrote of its Barry Parade Project, where it had planned to build 500 apartments.
That hasn’t come to the fore.
“For the project to progress, the group requires significant capital which is not readily available,” LHM added.
The move is a long time coming. Investors have been treated to something of a slow motion train wreck through CY24 (if you’ll permit the dramatic language).
In May the company’s flagship project looked uncertain. Even then management was ‘contemplating feasibility’ – language taken about as well as you’d think.
By June 2024, the company was openly stating its economic modelling that once underpinned the rationality of building nearly 500 apartments at Barry Parade was under threat, with inflationary upside the culprit.
In June, a five week marketing campaign was undertaken as the company looked around the traps for interested buyers. It didn’t find any at that time.
And now, with no way forward, the company has entered voluntary administration – likely to the ultimate detriment of shareholders.
The question is, with no money left and looming bankruptcy – can the company get a good price for its landholding? That off ramp is probably the last exit before a dead end.
LHM last traded at 0.7cps; the stock is currently suspended.
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