Timber flooring business wows no more, as market conditions cause its collapse

A two-year-old Victorian business specialising in timber floors for residential buildings has collapsed, following tough market conditions and growing debts.

World of Wood, trading as WOW Timber Floors, was placed in administration last week with Stewart McCallum and John Lindholm from Ferrier Hodgson appointed to oversee the business.

McCallum told SmartCompany the business suffered because of a soft home building market in Victoria.

“The dwelling approvals have fallen over the last five months and they’ve been hanging on and hanging on, but their creditor terms have been increasing and they entered a payment plan with the Australian Taxation Office,” he says.

While private housing approvals have increased in Australia on the whole over the last few months, with the latest data from the Australian Bureau of Statistics released in May shows housing approvals increased 2.5% (seasonally adjusted) during April, Victoria has defied the national trend.

The dwelling approval trend in Victoria has been on a downward slope for the past nine months, with approvals decreasing by 1.1% in April.

WOW Timber Floors only employed two people and had a relatively small turnover of $500,000.

“The debt level is not huge, it’s approximately $250,000.

“It’s a very small business and the two directors, who were the only employees, have both lost their jobs,” McCallum says.

At this stage, McCallum says the business is unlikely to be salvaged.

“A sale is unlikely, given the size of the business and the soft housing market. There is very little chance of any future other than liquidation for this business,” he says.

Money is owed to a total of 40 creditors and McCallam says the Australian Tax Office is the largest creditor, with some wood suppliers also owed money.

The ATO revealed in 2011 the carpentry industry would be its focus during 2012.

According to IBISWorld figures published in April, the carpentry industry, which includes timber flooring companies, has contracted in the past five years by an annual rate of 1%.

The sector includes 44,000 Australian businesses and generates $7.4 billion in revenue each year.

The IBISWorld report also revealed in the past five years there has been a shift away from timber construction.

“An example is the wide spread use of slab-concrete flooring in housing construction, instead of traditional tongue-and-groove timber flooring… This has resulted in some diminution of the market advantage held by carpenters that are more skilled in specialised work,” the report says.

The report found the level of revenue in the sector was reasonable volatile and influenced predominantly by demand fluctuation for housing construction.