page_title: Great Southern Group
section_title: Fall
hierarchical_section_title: Great Southern Group / Fall
caption_attribution_description: English: Graph showing Great Southern Group total and net assets from shortly after listing as a public company, to last annual report
context_page_description: Great Southern Group was a group of Australian companies that was notable as the country's largest agribusiness managed investment scheme business.
  The company was founded in 1987 and became a public company in 1999. It expanded its MIS business rapidly in the 2000s, supported by favourable tax regulations for these types of investments. Most of the Group's business was in plantation forestry to supply woodchips for the pulp and paper industry, but in the 2000s it diversified into high-value timbers, beef cattle, olives, viticulture, and almond production. The company's after-tax profit peaked at A$132 million in 2006, but by 2008 had deteriorated to a A$63 million loss.
  The Great Southern companies attracted debate and criticism associated with the operation of managed investment schemes generally, and the environmental performance of their Tiwi Islands operation in particular. On 16 May 2009, as a result of worsening economic conditions and regulatory issues, the GSL, GSMAL, GSF and other subsidiaries of GSL entered into voluntary administration. Ferrier Hodgson was assigned as liquidator of Great Southern Group.
context_section_description: In the mid-2000s, Great Southern's business was growing rapidly, with sales and market capitalisation increasing at more than 100 per cent per annum. However, in its 2005 Annual Report, the company disclosed that it was subsidising the returns to its 1994 forestry scheme by approximately A$3 million, and that it expected to have to similarly subsidise the 1995 and 1996 schemes by up to A$12 million in future years. Board chairman Peter Patrikeos and non-executive director Jeffry Mews both expressed concern about the way in which Great Southern was funding shortfalls on the sales of timber products, with the issue leading directly to Mews' resignation. Although the company continued to sell over A$800 million of MIS products in the two financial years after incurring losses on its early offerings, it was not meeting sales targets, and its share price was falling.
  Underpinning Great Southern's decision to subsidise returns to its early investors was a looming problem: its forestry plantations were not performing to expectations. Timber yields were poorer than had been projected. Great Southern's baseline projection had been 250 tonnes of woodchips per hectare, but an assessment in 2003 suggested that in most plantations yield would be reduced: in some cases to less than half the planned figure. The company itself considered that yields were proving to be "disappointing", with actual yields for the woodlots planted in the period between 1994 and 1997 (and thus harvested by 2008) being between 120 and 200 tonnes per hectare. Plantation growth had been limited by drought conditions and issues with the site and seedling quality of early plantings.
  The company's sales of MIS schemes, and its profits, both peaked in 2006, with over A$450 million in sales, and a net profit after tax of A$133 million. However, the 2006 harvest (of 1996 plantations) yielded a return of only A$1500 and $1750 for the woodlots that investors had bought for A$3000. These plantations had not been productive enough to yield a profit for investors, so Great Southern inflated the returns to A$4100 using its own funds.
  In December 2007 Young announced he would step down as managing director, remaining as both non-executive director and major shareholder. Saying that he wanted someone younger to implement the company's five-year business plans, he handed over to Cameron Rhodes, one of Great Southern's existing senior management team.
  In 2008, Great Southern had over 430 employees managing investment schemes on behalf of over 47 000 investors. Industry sectors in which investment occurred included beef cattle, forestry, wine grapes, almonds, and poultry production. Its plantation estate had grown to 179 000 hectares, the vast majority of which was for wood pulp production.
  As MIS sales declined from their 2006 peak, the Group's debt levels rose. By October 2008, business analysts Austock Securities were describing the company as "excessively geared". The Group developed a proposal, known as Project Transform, to restructure the business, in particular through seeking the agreement of investors to swap their MIS investments for shares in Great Southern Limited. The intention was to free up capital to reduce debt, and make the business more attractive to investors. Analysts such as Austock Securities and Macquarie Research Equities supported the strategy.
  The company reported a A$64 million loss in its 2008 financial year. By 2009, the global economic downturn, and regulatory uncertainty associated with MIS schemes, was putting the company under financial pressure, and it was seeking to improve its situation both through asset sales and refinancing of debt. Its debt levels had risen significantly: it had extended its debt financing with its banks from A$245 million to A$350 million in 2007. By September 2008 its total debt had ballooned to A$820 million, of which A$376 million was owed to its lead bankers, ANZ, Commonwealth Bank, BankWest and Mizuho. Great Southern had also been hoping to see a rise in the price obtained for its woodchips, but was unsuccessful 
caption: Great Southern Group's assets. Net assets were ultimately limited by the company's "unsustainable levels" of debt.[4]
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