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Clubs & Gaming Industry

Clubs & Gaming Industry. Presented by Daniel Zadnik – General Manager, Finance McLean Delmo 19 May 2010.

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Clubs & Gaming Industry

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  1. Clubs & Gaming Industry Presented by Daniel Zadnik – General Manager, Finance McLean Delmo 19 May 2010 Disclaimer: The contents of this presentation are based on the experiences of the presenter and do not necessarily reflect the actual credit polices of financial institutions mentioned. The examples detailed are for illustrative purposes only. Companies, organisations, associations and individuals should always seek professional accounting and legal advice in respect to their own financial circumstances prior to entering into financial contracts.

  2. Agenda • An industry in transition • The lending environment pre the credit crisis • The lending environment post the credit crisis • Implications for Clubs & Gaming • Implications for Financiers • Potential changes to financing clubs and gaming • Tips for successful financing • The Good News • Questions

  3. An industry in transition New South Wales • IPART - Review of the Registered Clubs Industry (Report June 2008) • Seven key recommendations:- - Financial reporting & benchmarking - Club Viability Panel - Corporate Governance - Diversifying Income Streams - Consolidation & Amalgamation - Removing Regulation - Establishment of New Clubs

  4. An industry in transition Victoria • 2012 commencement of gaming entitlements. Bidding closed May 10. • The power of the Victorian Commission For Gambling Regulation • Taxation changes including a tiered system • Venue Operator’s Agreement with Tabcorp and Tattersalls

  5. Lending pre the credit crisis • High growth and significant competition • Banks were lending centric • Irrational pricing • Relaxed lending principles and credit standards (sub prime) • Cross selling or bundling of products/services • Fixed interest rate facilities to “hedge” from interest rate movements and competition

  6. Lending post the credit crisis • Financiers selective on the industries and asset classes funded • Reduced loan to valuation ratios • Reduction in low document lending • Little value attributed to stock and debtors unless audited financials • Caution with enterprise values of businesses • Repricing of loan facilities

  7. Security Extension Ratios *Excludes Debtor Finance Facilities

  8. Lending post the credit crisis Turnover $ Retail deposits are the number one priority for banks Loan amount Time

  9. Implications for Clubs & Gaming • Price of gaming machine entitlements in Victoria? • Outcome of IPART Recommendations • Increased compliance, supervision and fees • Relationships with suppliers/sellers of machines • Better governance of licenses. • Maintenance of premises to retain patronage and members.

  10. Implications for financiers • Serviceability testing of EBIT/Interest to increase • Funding linked to length of entitlements and leasehold terms • Smaller Clubs & Hotels under pressure if entitlements are lost or kpi’s not met • Demand for better and more detailed financial reporting • Maintain statutory payments - GST, PAYG & Employee Superannuation

  11. Implications for financiers • Time since refurbishment and future capex requirements • Stock verification and Retention Of Title (ROT) • Public liability and loss of profit insurance • Charges over the company, entitlements and liquor licenses • Non negotiable charges over lease/right of entry • Experience of operators • Reputational risks • Restricted trading hours, promotions and advertising

  12. Potential changes to financing Clubs, Hotels & Gaming venues • Banks will want to fund the bigger players • Possible consolidation of the number of clubs and hotels • Increased levels of financial reporting and loan covenants cover risk • Accredited accountants and advisors to prepare, oversee and audit operations.

  13. 5 Tips for successful financing • Provide accurate and timely financial information to give confidence to your Bank. • Consider greater financial support from members / Diversify income streams. • Strategic alliances may enable a better risk profile • Use a professional to negotiate with the bank on your behalf. The savings can be considerable. • Talk to your accountant and professional advisors to get the right advice.

  14. The Good News • Clubs & Gaming is a significant industry • Banks want to capture the retail deposits generated by the • industry • Reputable Clubs & Gaming venues facilitate community • involvement (CDSE Scheme) • Banks like to align their brands with successful community • clubs • Opportunities for smaller regional banks to build relationships • with Clubs.

  15. McLean Delmo Finance Daniel Zadnik General Manager Finance 03 9018 4665 0430519073 daniel.zadnik@mcleandelmo.com.au

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