Stream Group Aust’s Don McKenzie acknowledges risk, strategic flaws in collapse
February 1, 2016 1:00am
Liam WalshThe Courier-Mail
THE founder of Brisbane-based insurance claims firm Stream Group has accepted errors in strategy were made leading up to the collapse of its main Australian operations.
Stream Group Aust collapsed in December, owing more than $11 million and costing more than 70 jobs.
In an interview with The Courier-Mail, Don McKenzie has disputed some early-stage lines of investigation from administrators about insolvency and fund-use, saying he didn’t “ believe that it was ever trading insolvent”.
“Nobody like me starts a business and says, ‘Ultimately it’s going to end up like this,’ ” Mr McKenzie said. “As a founder I’m obviously very devastated as to what’s occurred.”
While Mr McKenzie said the collapse had been tough personally, with a large chunk of his wealth tied into Stream, he repeatedly maintained “it’s tougher for staff and creditors”.
Stream Group is a stockmarket listed entity founded in 2007, winner of the Telstra Queensland Business of the Year award in 2011, and has several directors.
Mr McKenzie was sole director of its subsidiary Stream Group Aust, which has ceased operating. Stream’s New Zealand and UK operations continue.
A report by administrators John Park and Kelly-Anne Trenfield of FTI Consulting, obtained by The Courier-Mail, attributed several reasons for Stream Group Aust’s collapse.
These included poor strategic management, a lack of working capital, problems recovering money from debtors and a dispute with RACQ Insurance, which had contracted Stream to administer claims. ‘CAN’T DISPUTE CRITICISMS’
Mr McKenzie said he “can’t dispute their view” but other factors were also at play.
“The lesson for me is probably being far closer to the numbers (and) having a little bit more risk aversion in terms of how complex bits stick together,” he said.
He disputed a line from FTI’s report, which said from initial investigations the company “may” have been insolvent in June 2014. They cited asset ratios and increases in debts as potential indicators of problems.
Mr McKenzie also questioned another FTI theory that RACQ funds “may have been used for other purposes”.
RACQ had put in about $58.9 million in the past 12 months to administer insurance payouts.
“On review of the company’s books and records as well as bank statements obtained, it is evident the company has failed to adhere to conditions agreed upon with RACQ and funds may have been used for other purposes,” FTI said.
Mr McKenzie said Steam Group Aust was not the only Stream Group entity that did work for RACQ claims, which could explain the discrepancy. PROBLEMS MEETING PAYMENT REQUIREMENTS
As The Courier-Mail reported in December, RACQ had concerns about performance issues and it did not extend a contract.
Mr McKenzie acknowledged Stream Group Aust had been behind in key performance indicators with RACQ for payment of suppliers.
Mr McKenzie said he understood payments had fallen behind because of inefficiency in processing and a lack of accessible capital.
The overall group board had taken moves to raise additional capital, he said. RACQ has taken steps to ensure builders and other suppliers are paid.
Stream Group’s shares have been suspended since November at 7.8c. They had traded at 18c in 2015.
According to its last annual report, Stream Group posted a loss in 2015 of $12.8 million, which included large impairments and bad debt write offs.
SGO Price at posting:
7.8¢ Sentiment: Hold Disclosure: Held
