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  • Fund battle not lost on media boss

    26-11-11
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    The Australian Financial Review Paulina Duran PRINT EDITION: 26 Nov 2011, page 17 Seven West Media chief financial officer Peter Lewis is one of many executives who have experienced the dire consequences of ...

    The Australian Financial Review
    Paulina Duran
    PRINT EDITION: 26 Nov 2011, page 17

    Seven West Media chief financial officer Peter Lewis is one of many executives who have experienced the dire consequences of the European debt crisis first hand. 

    Through this volatile period, Seven West successfully refinanced $2 billion in debt but, in the process, Australia’s largest media company lost BNP Paribas as a key lender, ending a relationship going back more than 15 years.

    “We all know at the moment some banks, especially the European banks, are having a difficult time,” Mr Lewis told the Financial Review CFO Conference during the week.

    “All but one of the banks that we dealt with were very prepared to step up.”

    The anecdote is a reminder to companies that while, geographically, Europe cannot be further away from home, its problems are causing the availability of funding to shrink and the cost of debt to rise.

    Seven West was ultimately banked by 12 local and international banks, including all four majors, which have demonstrated an appetite to lend to good companies.

    Grant Samuel director Guy Fergusson told the conference it’s not all doom and gloom.

    “Whilst it has been a challenging market at times, borrowers with a good profile have been well covered,” he said.

    But with an estimated $100 billion “debt wall” due to be refinanced over the next 18 months, not only is the financial industry worried that the local banks’ balance sheets will not be sufficient to deal with the funding task, it is concerned this could affect the broader economy.

    National president of the Turnaround Management Association of Australia John Nestel told the Weekend Financial Review: “The withdrawal of credit is the single biggest catalyst for converting struggling business conditions into business failures and loss of employment.”

    In the past week, the Financial Review revealed Europe-based banks were reducing their local balance sheets by offloading their loans in the secondary loan market.

  • Turnaround winner can smile now

    15-09-11
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    The BRWLeo D’Angelo FisherPRINT EDITION: 15 Sep 2011 Equipment hire company Australian Industrial Rental was formed in 2007 amid boom conditions and enjoyed rapid growth. And then, as the familiar refrain ...

    The BRW
    Leo D’Angelo Fisher
    PRINT EDITION: 15 Sep 2011

    Equipment hire company Australian Industrial Rental was formed in 2007 amid boom conditions and enjoyed rapid growth. And then, as the familiar refrain goes, came the global financial crisis. But AIR lived to tell the tale and has been recognised in the Turnaround Management Association’s annual awards as the Turnaround of the Year for Queensland.
    AIR chief executive Simon Mair can smile at the near miss now, “but at the time it was a scary ride”.

    AIR specialises in renting air compressors, power generators and light towers. In the 2008-09 financial year, even as the GFC was causing economic havoc, AIR recorded growth of 60 per cent on the previous year.
    AIR debuted as a BRW Fast Starter company in 2009 but by the end of that year the GFC had caught up with it and the company’s revenue was more than 50 per cent below target. The company was struggling to service loans with seven banks and several suppliers. “We started well and were becoming established in key strategic locations but then we were blindsided by the GFC,” Mair says.

    When AIR sought the assistance of Brisbane-based turnaround specialist Vantage Performance, one of the creditor banks was one week from appointing an administrator. Once Vantage was appointed, the decision was made to close AIR’s NSW head office and assets were redeployed to the Queensland towns of Townsville and Mt Isa. “We’ve benefited from a very deliberate strategy to focus on opportunities in the regional mining sector,” Mair says. It has since opened an office in Mackay.

    Mair says the near-death experience and the salvage operation that followed taught him many valuable lessons. They included: to be prepared to say no to new work if you don’t have the cash flow to handle the project; to be more astute with who you surround yourself with in the business; and to have the right systems and processes in place.

    Vantage director Steve Hogan, who sits on AIR’s newly formed advisory board, says the value of the business has increased from $9.7 million to $15.5 million since the turnaround strategy was implemented.

  • Companies face $100bn debt bill

    06-09-11
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    The Australian Financial ReviewPaulina DuranPRINT EDITION: 6 Sep 2011 page 1 & cont page 16 Australian companies are facing an uphill battle to refinance more than $100 billion of debt over the next 18 months as ...

    The Australian Financial Review
    Paulina Duran
    PRINT EDITION: 6 Sep 2011 page 1 & cont page 16

    Australian companies are facing an uphill battle to refinance more than $100 billion of debt over the next 18 months as jitters in global credit markets force banks to cut funding lines to industries such as retailing and manufacturing.

    Two years on from the end of the global financial crisis, heavily indebted companies in real estate, media, utilities and infrastructure industries such as Reliance Rail, BlueScope Steel, Nufarm, Infigen Energy and Nine Entertainment Co are still operating under a degree of stress as they look to pay off debt. Several are even engaging in what debt specialists call “pre-insolvency” discussions with creditors.

    “There is a combination of publicly listed companies, large LBOs [leveraged buyouts] that were done in 2006 and 2007, and infrastructure and property developments that have hefty debts that need to be refinanced, and there is simply a lack of liquidity to do that in the market,” Deutsche Bank head of strategic investment group George Wang said.

    The so-called “debt wall’’ of more than $100 billion mirrors the amount of equity raised by Australian companies in 2009 in a rash of “rescue raisings’’ to pay off debt and get companies on a more secure footing.

    But with difficult conditions in some industries and debt worries in the northern hemisphere, banks are being more cautious. Business credit growth fell by 1.9 per cent over the year to July, while system credit growth stalled at 2.7 per cent.

    Equity capital markets have not been able to take up all the slack. At $US17.8 billion ($16.8 billion) this year, it is running ahead of last year’s total. But a number of vendors such as cinema chain Hoyts, Nine and mining services firm Barminco have had to shelve initial public offerings while others, such as A J Lucas, have been forced to consider asset sales to pay off debt.

    “Investors are pretty apprehensive about what the future might bring,” JPMorgan head of equity capital markets David Gray told The Australian Financial Review . “Obviously, that makes it a challenging environment in which to raise money.”BT Investment Management’s head of fixed interest, Vimal Gor, who oversees about $13 billion in assets, told clients on Monday that despite the recent economic instability, credit markets had not frozen to the extent witnessed in 2008.

    “But this could yet happen if the building pressure in the European banking system continues,” he said.

    If debt markets were to deteriorate to that extent, both the volume of the debt due over the next couple of years, and a significantly higher price for that debt, could compound the problems of companies already struggling with difficult economic and trading conditions.

    Credit-worthy companies can still get five-year bank loans at margins of about 2.5 percentage points above benchmark rates.

    But less credit-worthy companies that need funds must look for more “creative solutions”, such as mezzanine debt and private capital from special situation funds and hedge funds, debt market specialists say.

    Lazard director David Wills said the “visible dislocation’’ in debt markets meant company boards needed to consider the full gambit of options available to them, including convertible debt, or mezzanine debt.

    Many of these instruments were abused at the height of the last economic cycle, but their flexibility and autonomy make them ideal tools for viable companies seeking to fix and de-lever their capital structure.
    Mezzanine financing for leveraged acquisitions has recently been offered to companies at rates of more than 12 per cent.per cent.

    But the offers are even less generous for companies that are under financial stress. Their options are usually more akin to equity-like vehicles that, while flexible, are often dismissed as too expensive.

    Gresham Private Equity-owned specialist contractor Barminco secured a $50 million preference-share-like facility from Goldman Sachs to bridge its funding gap before a float that was later pulled. Restructuring specialists gathered at the Turnaround Management Association conference in Melbourne last week said the refinancing task has been made more difficult by the lack of a market for high-yield corporate debt
    issues.

    In other developed countries, these markets allow companies to find alternative funding when banks pull back lending lines and reduce the amounts they are prepared to lend. Losses incurred by private equity firms that relied on cheap debt have been felt across the market.

    Gresham Partners was forced to cede equity upside from its investment in trans-Tasman printing business GEON Group to its lender in exchange for a cut to its debt load.

    CVC Asia Pacific has already lost radiology provider I-MED to hedge funds and is fighting to keep some equity value in media giant Nine Entertainment Group. Affinity Equity Partners appointed administrators to the Colorado Group, while Ironbridge Capital is trying to engage with lenders to MediaWorks.

    Sales of distressed debt by banks to hedge funds and private equity investors have also led to changes of control at companies, with TPG leading a $2 billion debt-for-equity swap for the listed utility Alinta Energy.

    “So over the past five years, you have seen a huge amount of distressed debt opportunities, and as that tails off in Australia . . . I guess we are going to see more primary restructuring sort of opportunities,’’ said Mr Wang, who manages Deutsche’s illiquid investments, focusing on distressed debt and special situation investments in Australasia.

    After two decades of uninterrupted economic growth, many Australian boards and executives facing this wall of debt lack experience and expertise in corporate restructuring.

    Pacific Equity Partners saw its investments in book retailer REDgroup collapse into bankruptcy, while watching a bunch of hedge funds and investment banks take control of its vacuum-cleaner business Godfreys.

    CHAMP Private Equity also recently injected capital to refinance printing business Blue Star, while Crescent Capital Partners and Catalyst Investment Managers have also lost control of New Zealand’s Metroglass to hedge funds.

    Unitas Capital and Ontario Teachers Pension Plan also lost New Zealand Yellow Pages, and the situation could face a second restructuring in the medium term. “One of the things that I think is still evolving in Australia is the dialogue between advisers, companies, funds, and banks in these situations,” Goldman Sachs’s head of restructuring, Asia-Pacific, Lachlan Edwards, told the TMA conference. “People are still learning how to live with each other.” He said companies were forced to consider a wider range of refinancing options. “The reality is that a company entering a turnaround phase is in transition where cash flow and timing are  uncertain,” he said.

    “So this is where those instruments – which were effectively used as a proxy for equity in the last boom, like payment in kind, and pay-if-you-can structures – have a proper place.

    “It is at that point where those types of instruments, which offer an equity-type return to investors, are appropriate.

    Because, as the company gets back on its feet and its cash flow and profitability regenerate, it becomes more able to pay cash on its interest. Then the debt can be refinanced with interest at lower margins.

    But, Mr Wang said, the universe of companies seeking capital is expanding rapidly while there was a limited capacity in the market.

     “I think part of the advice should be that the right approach is not always the cheapest approach,” he said.

    “Companies need to be more strategic about how to face these things, and they cannot always wait until the last minute to see if they can find the optimum, best-of-breed restructuring or refinancing options, or equity capital raisings. Perhaps, they now need to move faster.”

    CVC Asia Pacific-owned Nine Entertainment Group is currently undergoing tough negotiations with a subsidiary fund of Goldman Sachs, which owns most of the $950 million of Nine’s mezzanine debts, and its numerous other senior lenders.

    The company has about $2.7 billion of senior loans that are heavily traded in the secondary market, as hedge funds seek to position themselves to take ownership of Nine through a “loan-to-own” deal that would wipe out the company’s equity and mezzanine holders.

    These lenders – already occupying about 40 per cent of Nine’s senior lending register – are unlikely to agree to any refinancing proposal which, for it to be consensual, would need unanimous consent.

  • Flagship turnaround deals applauded

    05-09-11
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    The Australian Financial ReviewPaulina DuranPUBLISHED: 05 Sep 2011 - Deal Book If there was one message from the 8th Turnaround Management Association conference last week, it is that Australians and New Zealanders ...

    The Australian Financial Review
    Paulina Duran
    PUBLISHED: 05 Sep 2011 - Deal Book

    If there was one message from the 8th Turnaround Management Association conference last week, it is that Australians and New Zealanders are tough and about to get tougher.

    The last couple of years have been paved with faltering companies on the brink of bankruptcy. From infrastructure projects, to services, retail and manufacturing companies, property enterprises, and private equityowned portfolio companies - executives, bankers and advisors have worked hard to try to restructure these companies and save them from liquidation.

    But only those with a viable business model have successfully manoeuvred out of insolvency and returned to profitability, showing the way for those who will have to deal with similar problems in coming months.

    Success has many fathers, and to celebrate those involved in the top turnarounds of 2011, the restructuring community gathered in the hundreds in Melbourne for the TMA Awards dinner of 2011 on Thursday night, flying in from the US, Europe, Hong Kong, Thailand, and New Zealand.

    In an exquisite mix of bankers, advisers, accountants and lawyers, the TMA – chaired by Ian Johnson from Helmsman Funds Management, a local turnaround capital fund – awarded flagship deals in three categories: large company turnaround of the ear, SME turnaround of the year, and the newly created award, restructuring deal of the year.

    The landmark restructuring of Alinta Energy, the utility retailer, won the 2011 restructuring deal of the year award. The award specifically acknowledges the significant challenges involved in that standout restructuring transaction. Indeed, several deals have been completed following on the guiding precedents Alinta’s restructure brought to the market, and a number of ongoing restructuring deals continue to follow it’s footsteps.

    SHOW OF FORCE

    The Australasian large company turnaround of the year, which is awarded to companies with a turnover of over $50 million, was for Force Corp, a provider of machinery finance for some of the largest commercial industrial and infrastructure projects.

    Founded in 1994, Force Corp went in default in 2008 for about $100 million dollars in bank debt. At the time, that debt was supported by only $14.6 million earnings. With the support of Helmsman, GE Capital, and the legal advice of Norton Rose, the company overcame management, strategic and family shareholder issues to develop a solid turnaround strategy.

    The company reduced debts by $57 million over a two-year period , increasing earnings to the current $46 million, while also achieving significant margin improvements and a larger fleet. Equity grew by about $150 million in four years.

    Turnarounds, whether large or small, are never easy. And in recognition that smaller deals can have very significant complexities, the Australasian SME turnaround company of the year, which is awarded to companies
    with a turnover of $50 million or less, was for Discovery Holiday Parks, the largest owner and operator of accommodation parks in Australia.

    Discovery became heavily over-geared and faced numerous operational issues as a result of the GFC. Allegro Funds, a private equity and turnaround investor, invested in the company and refinanced it’s capital structure. Minter Ellison and Rothschild Australia were advisors on the transaction.

    In 2008, earnings grew 39 per cent and leveraged was reduced from 12 times earnings to only 5 times earnings. The turnaround has generated over $65 million of equity.

    EYES ON NINE

    Not considered for an award, but a noteworthy mention by some conference speakers nonetheless, was the happy ending of the turnaround story of luggage business Samsonite this year. This raised hopes with some
    delegates that the possible workout of the also CVC-controlled Nine Entertainment Co, brings similar returns.

    After being acquired by CVC Capital Partners in July 2007, the company underwent a rollercoaster ride that saw its earnings plummet to only $US40 million ($37.6 million) from about $US160 million. The company filed for Chapter 11 protection in September 2009.

    Through the implementation of a debt-for-equity swap, about 30 banks (many of which are also lenders to Nine) wrote down millions in debts and took equity in the company. But helped by Goldman Sachs, UBS, Morgan Stanley, RBS and HSBC, Samsonite was successfully listed in the Hong Kong equity market for $US1.25 billion earlier this year, achieving a staggering multiple of about 14 times, according to lenders to the company.

    Observers of the difficult situation being faced by the debt-laden Nine, are no doubt interested to see how CVC and its investment banks deal with the new challenge at hand.

  • Large company turnaround of the year

    05-09-11
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    The Australian Financial ReviewPUBLISHED: 5 September 2011 The Australasian Large company turnaround of the year, which is awarded to companies with a turnover of over $50 million, was for Force Corp, a provider ...

    The Australian Financial Review
    PUBLISHED: 5 September 2011

    The Australasian Large company turnaround of the year, which is awarded to companies with a turnover of over $50 million, was for Force Corp, a provider of machinery finance for some of the largest commercial industrial and infrastructure projects.

    Force is Australia’s second-largest provider of powered access solutions with a fleet of 4,100 machines which grew organically until 2005 when it accelerated its growth aspirations acquiring five businesses in two years. These acquisitions coupled with an aggressive capital expenditure program that was solely funded with inappropriately structured debt led quickly to the business suffering financial stress and becoming cash flow constrained.

    Helmsman Capital initially invested $10 million in Force to stabilise the business and restructure the balance sheet. Subsequently Helmsman has provided a further $7.5 million to support debt covenants, fund a small acquisition in February 2010 and then worked with senior management to right size the business, reshape the management team, and introduce corporate governance disciplines, financial and other measures to properly manage this business.

    As a result, Force reduced its debt by $57.5 million in two years from operational cash flow before embarking on a growth investment program and d increased EBITDA by $11.6 million to $34.2 million. All of this was achieved while contending with the challenges of the financial crisis and an increasingly competitive marketplace.

    The company is now poised for substantial growth in revenues and earnings in fiscal 2012 which are underpinned by investments already made and funded in fiscal 2011.

    TMA Member Firms Involved: GE Capital, Helmsman Capital, and Norton Rose.

  • SME turnaround of the year

    05-09-11
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    The Australian Financial ReviewPUBLISHED: 05 Sep 2011 The Australasian small and medium enterprise (SME) turnaround company of the year, which is awarded to companies with a turnover of $50 million or less, was ...

    The Australian Financial Review
    PUBLISHED: 05 Sep 2011

    The Australasian small and medium enterprise (SME) turnaround company of the year, which is awarded to companies with a turnover of $50 million or less, was for Discovery Holiday parks, the largest owner and operator of accommodation parks in Australia.

    Discovery formed part of the ABN AMRO portfolio of companies that was taken over by Allegro in September 2008. At that point, Discovery was heavily overgeared, with debt representing 12 times earnings before interest tax depreciation and amortisation (EBITDA).

    As well as facing numerous internal operational issues, the domestic tourism industry was also under threat and the ability to raise capital was severely impacted by the financial crisis.

    Discovery ’s solution to its balance sheet and operational issues was to operationally transform itself into the best in class caravan park operator in Australia, using only internal resources. This enabled earnings to grow despite balance sheet issues and difficult external environment. This in turn provided the basis to attract capital and restructure its balance sheet.

    Since 2008, Discovery has improved EBITDA by 39 per cent, reduced gearing from 12 times earnings to five tiems earnings and improved return on capital employed from seven per cent to 12.4 per cent.
    The turnaround has generated over $65 million in equity value since 2008. In 2011 Discovery parks won two wellregarded tourism awards, and the company is highly respected by its guests, staff, shareholders and lenders.

    TMA Member Firms Involved: Allegro Funds, Minter Ellison, Rothschild Australia.

  • Shops will keep shutting: survey

    29-08-11
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    www.smh.com.au Bussiness Day SectionBen Butler29 August 2011 GRIM retail conditions are forcing more under-pressure companies to shut down operations, according to a new survey. And those responsible for ...

    www.smh.com.au Bussiness Day Section
    Ben Butler
    29 August 2011

    GRIM retail conditions are forcing more under-pressure companies to shut down operations, according to a new survey.

    And those responsible for turning around ailing businesses believe Australia's retail and manufacturing sectors will continue to decline this financial year, the survey shows.

    Conducted by insolvency firm KordaMentha's advisory arm 333 Consulting and the Turnaround Management Association, the survey analysed 110 embattled businesses involved in ''turnarounds'' last year.

    Advertisement: Story continues below It found 92 per cent of retail turnarounds involved closures, or cutting down on products, compared to 75 per cent in the previous year.

    Unsustainable debt and lack of financial controls were the two biggest causes of business failure, pushing the previous year's top cause, sub-par management, to sixth.

    Mick Calder, 333 Consulting's executive director, said businesses were swinging the axe after spending 2008 and 2009 toughing out the immediate aftermath of the global financial crisis.

    ''We're just in this cycle now where people have realised not only are we in this cyclical downturn, we are in some sort of structural shift as well,'' he said. ''There's a lot of site exiting, site renegotiations going on, there's a lot of product and category rationalisation - it's happening across the board, in good businesses and in distressed businesses.

    ''I don't think that happened en masse in the '08-'09 period, and I think that's been the real shift that we've seen in the last 12 months.''

    Mr Calder said banks that had extended credit to struggling businesses after the financial crisis were evaluating whether managers had lived up to their promises.

    ''The small-to-medium enterprise space is lagging - we saw all the big restructures go through in '08-'09.

    ''Businesses that did get into some trouble in '08-'09 … have gone back to their financiers and haven't delivered on their two-year plan, and second time around it's a whole different story.

    ''They don't have the trust and the credibility to go back second time round,'' he said.

    Landlords are also starting to feel the tough times their retail tenants have been living through, with Premier Investments last month blaming high rents for its decision to drop 50 stores when leases expire.

    ''It's a natural progression that we're going to see some pressure,'' Mr Calder said.

    ''I think the primary focus of landlords at the moment is keeping the rent coming in and keeping their centres full. There is a bit more preference for just filling the centre and maybe having a shorter-term lease.''

    The full survey, which interviewed professional advisors, executives, financiers and equity holders involved in turnarounds in the 2010-11 financial year, will be released on Wednesday.

  • Merrill Lynch downgrades 2012 and 2013 earnings forecasts

    29-08-11
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    The Australian Richard Gluyas August 29, 2011 12:00  AMCUTS in corporate earnings forecasts have already started after a weak 2011 profit reporting season, with 80,000 job losses expected before the end of the year ...

    The Australian
    Richard Gluyas
    August 29, 2011 12:00

     AMCUTS in corporate earnings forecasts have already started after a weak 2011 profit reporting season, with 80,000 job losses expected before the end of the year as manufacturers and retailers adjust to slower growth and a strong currency.

    Merrill Lynch has downgraded 2012 and 2013 earnings forecasts by 2.2 per cent and 2.3 per cent, despite the number of companies exceeding profit expectations in the year to June overshadowing those that fell short.

    While the investment bank said it was surprised to see profit numbers hold up, many companies had relied on one-offs to get them over the line.

    Examples included Woolworths, which used capitalised interest, while Aristocrat Leisure relied on tax benefits, and Origin Energy had a writeback of provisions. A host of other companies, including Qantas, Asciano and Toll Holdings, were assessed as having low-quality results.

    Merrill Lynch said a lot of corporates were avoiding specific guidance and relying on general commentary, such as 2012 was expected to be up on 2011.

    "Despite this, Merrill Lynch analysts have downgraded 2012 and 2013 earnings by 2.2 per cent and 2.3 per cent," the report says.

    The earnings season was also marked by announcements of big layoffs by companies such as steelmaker BlueScope, Qantas, OneSteel and Westpac.

    While the number of announced job cuts by major companies in the past month was 9000, this was seen as the tip of the iceberg.

    AMP Capital Investors head of investment strategy Shane Oliver said he expected unemployment to kick up from 5.1 per cent to 5.5 per cent by the end of the year.

    "Australian companies hired quite aggressively through 2010, expecting the economy to grow strongly," Dr Oliver said.

    "But instead of sales growth of about 6-7 per cent, we've only seen 3 per cent growth in the reporting season.

    "The housing sector has deteriorated quite sharply, and the strong dollar has resulted in a loss of competitiveness. We've now reached a watershed on employment."

    There was more bad news for the retail sector yesterday, with shoppers told to expect more store closures, even by retailers that survive. A survey of 110 industry turnarounds said retailers under stress were more likely to downsize through site and product rationalisation than in the past.

    The survey, by turnaround consultant 333 and the Turnaround Management Association, said that, unlike the 2008-09 crisis, there was no stimulus package to cushion the retail downturn.

    "Most people acknowledge that we're in a cyclical downturn, but we're also in the middle of a longer-term structural shift, and this requires a fundamental rethink of strategy, real estate footprint and cost structure," 333 executive director Mark Calder said.

    Expectations of rising unemployment will concern the banking industry, with job losses a major factor behind mortgage delinquencies. UBS said in a report that 90-day delinquencies peaked last May and had improved since then.

    "We would argue this has been supported by a period of stable interest rates, rather than rising interest rates, which had been the case through late 2009 and 2010," the investment bank said.

    But Dr Oliver said arrears would again start to rise if unemployment increased to 5.5 per cent.

  • Retailers under stress are pulling the trigger

    28-08-11
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    PRESS RELEASE 333-TMA SurveyMedia enquiries: Michael Smith 0411 055 306 Australian shoppers should prepare for more store closures, even by retailers who survive, as the retail sector continues to restructure, according to a ...

    PRESS RELEASE

    333-TMA Survey
    Media enquiries: Michael Smith 0411 055 306

    Australian shoppers should prepare for more store closures, even by retailers who survive, as the retail sector continues to restructure, according to a national survey.

    The second annual 333-TMA Survey of Australian corporate turnarounds shows that retailers under stress are more likely to downsize their operations through site and product rationalisations than in the past. Ninety-two per cent of retail turnarounds in this year’s survey used the axe, compared to 75 per cent in last year’s survey.

    The survey also showed that 75 per cent of the survey respondents believed the retail sector, along with manufacturing, would decline further during this financial year.

    The survey analysed 110 turnarounds by interviewing professional advisers, executive management, board members, debt holders, and equity holders involved in the stressed businesses. The survey was conducted by 333 Consulting, a leading turnaround advisory firm, in conjunction with the Turnaround Management Association. The survey will be released at the TMA National Conference, beginning in Melbourne on Wednesday (31 August).

    333 Executive Director Mick Calder said that during the 2008-09 crisis, retailers were propped up by the stimulus package and a relatively soft fall in discretionary spending. The sector limped through that phase of the downturn with many companies aiming to grow their way out of trouble. “But in 2011/12, there is no stimulus package or across-theboard growth strategy, and businesses are responding more aggressively and realistically,” Mr Calder said.

    “It’s a different ball game this time. Many retailers and landlords will continue to be placed under pressure with consumer confidence at a low point and household saving at a 25-year high. Most people acknowledge that we’re in a cyclical downturn, but we are also in the middle of a longer-term structural shift and this requires a fundamental rethink of strategy, real-estate foot print and cost structure.

    “While this situation sounds dire, the fundamentals of sound business turnaround remain. Manage the business for cash in order to ‘buy time’ to restructure or re-position; get the right advice and skills at the table; and address the ‘whole-ofbusiness’ issues in a logical sequence depending on the funding and cash constraints. Ultimately, an exit strategy is generally part of this strategy, be it immediate or longer term. The results of this second survey have continued to reenforce this approach by successful turnarounds and stakeholders.”

    Other highlights of the 2011 survey were:

    • “Unsustainable debt levels” and “inadequate financial control” were ranked as the largest causes of business distress, replacing “sub-par management” which topped the list in last year’s survey.
    • 88% of equity holders and boards believe Australia’s regulatory environment is hampering turnarounds, with most citing directors’ obligations and insolvent trading as the key issues hampering their ability to turn businesses around.
    • 59 per cent of turnarounds used at least one significant initiative from each of the four major categories of solutions – balance sheet, pricing and revenue, working capital and operations/costs – indicating businesses continue to take a holistic approach to business repair.