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.
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
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
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
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
•
•
•
•
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
Security Extension Ratios
Asset Type
2007
2010
Residential Property
80%
80%
Luxury Property > 3M
75%
70%
Commercial Property
70-75%
65-70%
Rural Property
60%
50%
Pubs & Clubs
(Freehold)
65% metro
50% regional
60%-55% metro
50% -35% regional
Debtors*
60%
0-25%
Plant & Equipment
25%
Nil
*Excludes Debtor Finance Facilities
Lending post the credit crisis
Retail deposits are the number one priority for banks
$
Turnover
Loan
amount
Time
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.
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
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
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.
5 Tips for successful financing
1. Provide accurate and timely financial
information to give confidence to your
Bank.
2. Consider greater financial support from
members / Diversify income streams.
3. Strategic alliances may enable a better
risk profile
4. Use a professional to negotiate with the
bank on your behalf. The savings can be
considerable.
5. Talk to your accountant and professional
advisors to get the right advice.
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.
McLean Delmo Finance
Daniel Zadnik
General Manager Finance
03 9018 4665
0430519073
[email protected]