Melbourne: A difficult trading outlook may force many companies to restructure, or face possible collapse in the New Year.
However, a the market survey of senior Australian lenders by accounting and advisory firm Grant Thornton, found that in the face of difficult trading conditions the banks were generally more willing to support company restructuring to avoid insolvency.
As part of its 12th annual Australian Banking and Financiers’ conference, Grant Thornton surveyed 156 senior lenders from 22 institutions to assess market sentiment towards trading conditions and company performance. The report, titled Lenderview, found that lenders anticipated further tough economic conditions in the next 12 months due to slow growth, a high Australian dollar and rising costs, with the automotive, manufacturing, printing and retail sectors most impacted.
Matt Byrnes, Grant Thornton’s National Head of Recovery & Reorganisation said many businesses are struggling to raise equity finance or access further debt funding.
"Banks are more open to considering proposals for financial and operating restructures. Forbearance and debt rollovers within agreed terms will continue to be used. Enforcement action appears to be the tool of last resort,” said Byrnes.
The report found turning around a business may not just depend on traditional measures, such as cost-cutting, which the survey found was the usual approach taken by managers of companies under stress. “Fewer businesses are looking for opportunities to re-align strategies to grow sales, and this may mean missed opportunities for many businesses,” said Byrnes.
The respondents overwhelmingly stated that the major cause of business distress is poor management. According to Byrnes, this highlights the importance of having a strong management team, supported by sound financial systems and processes that enable business decisions to be made based on reliable financial information and analysis.
“This will assist management in identifying potential issues facing the business at an early stage. The ability of management to work closely with their financier is important, and the role of quality external advisers will be critical in assisting businesses through these lean times,” Byrnes said.
Many lenders were confident that efficient and well-organised companies can survive and thrive in difficult times if they have a strong management team and are prepared to innovate.
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Grant Thornton Australia provides audit, tax and advisory services to dynamic, growing organisations and is a single national firm operating from eight offices, with over 150 Partners, more than 1,200 people across Australia and national turnover of AUD $232 million. Grant Thornton International is the fastest growing international accounting network in the world, with a global turnover of US$3.7billion and more than 30,000 people and 2,500 partners.