The second half of 2007 saw the next phase of the New South Wales Government’s smoking bans take affect.
Whilst the air may have been cleared, apparently so too have the gaming rooms, with four out of the last five months in 2007 showing that half the clubs in the industry suffered a drop in gaming revenue in excess of 20%. Increased poker machine tax rates have also added fuel to the fire.
This snapshot identifies an alarming trend with many clubs unable to absorb that sort of drop in revenue. In fact, market research indicates that around a third of registered clubs won’t have the resources to remain viable in the short to medium term and many clubs are considering ways to restructure now.
Auditors ought to remain diligent when evaluating a club as a going concern, as too should board members before signing a director’s solvency declaration as part of a club’s annual financial statements.
Hotels are not immune to the drop in gaming either and heavily geared establishments are at further risk given the recent decisions by the Reserve Bank to lift interest rates, with the forecast being for more rises during the year.
Our 6 point checklist will help you identify whether your clients are in the high risk category:
1. Falling gaming revenue
2. Decreasing membership or patronage numbers
3. Sale of assets or third party advances to fund operations
4. Poor profitability or declining EBIT
5. The absence of or inability to meet financial forecasts
6. Increased competition in your local area
Lawler Partners Business Recovery and Insolvency team can provide you or your clients with a business health checklist to assist in developing proactive solutions. For further information, please contact our Business Recovery and Insolvency team.
