The mining services industry is an essential pillar of the Australian economy but has unique financial challenges. In a recent seminar in Perth hosted by the Lunch Money Podcast, industry experts gathered to discuss strategies for overcoming these barriers, offering valuable insights for SMEs in the mining sector. Here’s a summary of the key points covered during the discussion.

Ben Gibson, Head of Advisory at Pickles, highlighted the evolving landscape of mining equipment valuations. He noted a dramatic shift in secondary market pricing post-COVID as supply chains normalised. With big original equipment manufacturers (OEMs) now meeting demand, used equipment prices have dropped, and clearance rates have declined significantly.

Additionally, Gibson discussed how technological advancements, particularly around emissions reductions, have disrupted traditional equipment markets. Equipment compatibility, parts reuse, and emerging technologies like battery-electric and hydrogen-powered systems reshape market dynamics. These changes underscore the need for mining operators to carefully plan for the future lifecycle of their assets.

Richard Tucker, a Partner at KordaMentha, emphasised the challenges small-to-medium enterprises (SMEs) face when dealing with large mining corporations. Mining contractors often serve as de facto working capital providers, with extended payment terms of 60 to 90 days being the norm. This imbalance can lead to financial strain, mainly when contractors are slow to collect receivables or fail to leverage their position.

Dave Osmond of Acid Plant Maintenance Services (APMS) shared his company’s experience with client concentration risk. At one point, 60% of their revenue depended on a single mining corporation. Recognising the risk, the company diversified its client base geographically and by industry, significantly reducing its vulnerability. This proactive approach safeguarded the business and positioned it for sustainable growth.

SMEs should negotiate for shorter payment terms whenever possible. Osmond revealed how his team successfully secured 14-day payment terms for high-stakes projects by emphasising the unique nature of their services and building strong client relationships.

Tucker highlighted the importance of maintaining robust financial records and cash flow management discipline. Mining contractors should ensure their financing and operational plans account for cyclical market swings, commodity price fluctuations, and operational interruptions.

A “Plan B” is critical for handling payment delays or unexpected financial shocks. Options like invoice financing or overdraft facilities can provide a financial safety net. Open communication with financiers and having up-to-date financial records can facilitate faster access to emergency funding.

The push for net-zero emissions will radically impact the mining industry. Gibson cautioned that diesel-powered equipment, which dominates current operations, may become obsolete faster than anticipated. Contractors must stay informed about emerging technologies and plan their capital expenditures accordingly to remain competitive in the long term.

Tucker and Osmond stressed the value of early engagement with experts for contractors facing financial distress. “Hope is not a strategy,” Tucker remarked, urging businesses to seek help before a crisis spirals out of control. Proactive decision-making, such as formal restructuring or putting non-core operations on care and maintenance, can save a business and enhance its long-term value.

Conclusion

The mining services industry is inherently cyclical and challenging. Success hinges on effective financial management, strategic diversification, and staying ahead of technological advancements. By leveraging these insights, SMEs can build resilient operations that thrive even in volatile markets.

In our recent seminar, “Powering Production: Overcoming Capital Challenges in Manufacturing,” industry experts tackled the financial hurdles that small to mid-sized manufacturing businesses face in Australia. The panel, led by Nicholas Samios from Hermes Capital, included David Mansfield (DEI), Gary Tescher, (Promentor), and Josh Hallowell (Pickles), each bringing unique insights into funding, restructuring, and asset management.

The discussion began by addressing common financial challenges, especially for family-owned enterprises and SMEs. These businesses often struggle with:

• Asset-heavy operations: Manufacturing requires significant investment in equipment, which can be a barrier for businesses when capital is tight or machinery needs updating.
• Inconsistent cash flow: Long lead times and high upfront material costs lead to cash crunches, especially when payment terms from customers are extended.
• Capital access issues: Traditional banks may hesitate to lend to businesses with a limited track record or specialized equipment, creating a funding gap for these manufacturers.

The panel explored solutions to these challenges, from asset-based lending to restructuring options:

• Understanding and Valuing Assets: Josh Hannay discussed the importance of regularly assessing equipment value, including surplus items that could be sold to free up capital.
• Streamlining Production: Gary Tesar shared examples of manufacturers optimizing production processes and reducing waste to cut costs, particularly when new equipment isn’t feasible.
• Early Intervention and Restructuring: David Mansfield emphasized that timely restructuring and maintaining clear communication with stakeholders, especially banks, can prevent severe financial distress and preserve business value.

Panelists noted the growing demand for niche, high-value manufacturing, such as medical and defence products, which allows Australian manufacturers to compete despite high labour costs. However, government support was highlighted as critical for fostering growth and innovation in the sector.

Watch the full recording for a deep dive into these discussions, including practical strategies to navigate financial challenges and leverage existing assets in the competitive manufacturing landscape.

Interested in future seminars by Hermes Capital?

Check out our upcoming events here.

In this episode, recorded live at the Royal Exchange Club in Sydney, experts from the transport and finance industries come together to address the significant financial challenges currently faced by the Australian transport sector. The panel explores key issues such as the decline in asset prices, difficulties in capital raising due to aging equipment, increasing ATO debt, and tighter profit margins caused by stricter payment terms from suppliers.

The panel includes industry leaders:

• Nicholas Samios (Hermes Capital)
• Ben Gibson - (Pickles)
• Luke Andrews - (BDO)
• Roman Tepes - (Balance My Books)

Topics discussed range from asset valuations, equipment maintenance, and cash flow management to debt restructuring and stakeholder management. The seminar provides actionable advice on how businesses can navigate financial distress and make informed decisions in the current climate.

If you’re in the finance or transport sector, this seminar offers valuable insights into the unique challenges facing the industry, as well as practical strategies for overcoming them.

Key Topics Covered:

• Impact of COVID-19 on asset values and equipment availability
• The role of maintenance and fleet management in asset value retention
• Common financial pitfalls in the transport industry
• Strategies for restructuring and refinancing to maintain business viability
• Navigating ATO debt and managing stakeholder relationships effectively

Tune in to gain expert insights and practical advice on how to tackle the evolving financial landscape in the transport industry.

What is Small Business Restructuring? What do finance brokers, accountants and other business advisors need to know about it? It’s now over two years ago when small businesses really started implementing Restructuring as an insolvency alternative - what can we learn from its brief history thus far? In this #LunchMoney Episode, Nick speaks with Louisa Sijabat. Louisa is a thought leader in SBR and corporate restructuring, it was great to have the opportunity of putting your questions to her!

Lunch Money is produced by Hermes Capital Partners https://hermescapital.com.au/

This podcast episode was recorded live at our Breakfast seminar in Brisbane.

The seminar, titled "Breaking Ground: Debt Capital Challenges and Opportunities in Construction and Mining Services," featured a distinguished panel of experts who discussed a range of issues and opportunities within the construction and mining industries.

The seminar emphasized the capital-intensive nature of these sectors, underscoring the importance of securing quality contracts and addressing supply chain issues, which were particularly highlighted during the COVID-19 pandemic.

Panelists

• Nicholas Samios: Fund Manager and Director at Hermes Capital, discussed the private credit market and asset-based lending, particularly in contracting.
• Ian Hyman OAM: Founder of Hymans, shared insights on business valuations, project management, and the challenges faced due to government regulations and indigenous land issues.
• Mark Rainbird: Chairman and Founder of BlueMount Capital, addressed the impact of commodity price fluctuations, labour shortages, and cash flow management on capital raising and business operations.
• Harry Mostert: Independent consultant with extensive experience in mining, construction, and infrastructure, discussed operational challenges and market entry strategies.

The seminar highlighted several current challenges. Persistent supply chain disruptions have created a bullwhip effect, leading to overstocking and subsequent price drops. Increasingly complex government regulations are causing delays in project approvals, particularly in construction. Indigenous land issues, involving competing claims and legal battles, are contributing to significant project delays and increased costs. Additionally, labour shortages and inflation are straining budgets, while rising interest rates and economic uncertainties are impacting asset values and business operations.

Despite these challenges, the seminar also identified several opportunities. There is ongoing merger and acquisition activity driven by strategic growth needs and capital requirements. Positive developments in certain sectors, such as gas, where government support is facilitating growth, were noted. Opportunities for capital raising exist for businesses with strong management and strategic planning.

Expert Insights

• Ian Hyman highlighted the deteriorating business conditions due to governmental indecision and indigenous disputes.
• Mark Rainbird discussed the effects of commodity cycles and market volatility, using nickel as an example of market disruption.
• Harry Mostert shared his experiences with multinational and private companies, emphasizing the importance of operational efficiency and strategic market entry.

The seminar concluded with a focus on the importance of understanding market dynamics, managing cash flow effectively, and leveraging strategic opportunities to navigate the challenges in the construction and mining services sectors. Lunch Money is produced by Hermes Capital.

This episode of Lunch Money was recorded live at our Sydney breakfast seminar.

Welcome to our in-depth seminar on mastering business acquisitions! In this video, we bring together industry experts Nicholas Samios, Ian Hyman, Andrew Casson, and Malcolm Campbell to share their expertise and experiences in the world of mergers and acquisitions (M&A). We cover a wide range of topics essential for finance professionals, business owners, and anyone involved in the acquisition process.

Key Highlights:

• Economic and Situational Impacts: Understand how major events like GST and COVID-19 have influenced business owners' decisions to sell and the current state of the market.
• Growth Strategies: Learn about the benefits and challenges of growing your business through acquisitions versus organic growth.
• Legal and Regulatory Insights: Discover the legal bear traps in business acquisitions and how to navigate them effectively.
• Valuation and Sale Preparation: Get tips on how to prepare a business for sale, including realistic valuations and addressing potential red flags.
• Buyer's Perspective: Hear about common mistakes buyers make, such as overpaying and strategic misalignment, and how to avoid them.
• Financing Acquisitions: Explore different ways to structure the financing of acquisitions, leveraging assets and ensuring adequate working capital.

Expert Panel:

• Nicholas Samios: Director of Hermes Capital, specialist provider of cashflow finance
• Ian Hyman: Principal of Hymans, specialising in property and equipment valuation.
• Andrew Casson: Founder of Castle Advisory, with over 20 years of experience in M&A, focusing on the sell side.
• Malcolm Campbell: Principal lawyer at Carmen and Greg, with extensive experience in business transactions and commercial law.

This seminar is packed with actionable advice and real-world examples, making it a must-watch for anyone looking to enhance their understanding of business acquisitions.

Listen now and gain the knowledge you need to succeed in your next acquisition!

This episode was recorded live at our Sydney breakfast seminar.

The ATO was generous during Covid, allowing Australian small businesses to add $15B to its pre-Covid undisputed arrears, bringing the total to $30B. However, playtime is over, and the ATO now wants to collect. In taking measures ranging from credit agency default listings to the initiation of winding-up proceedings, the ATO poses a significant threat to individual SMEs facing cash flow issues and trying to raise capital. This, however, presents an unprecedented opportunity for finance professionals. In this seminar, we will delve into the intricacies of this financial landscape, equipping you with the knowledge and strategies to navigate ATO arrears when raising capital.

This episode featured guest expert panel:

• Michael Moon
• Shannon Cavanagh
• Sule Arnautovic

In this episode, we covered:

• ATO's Approach and Stats:

  • ATO has become more active post-COVID, with a significant increase in tax debt.
  • Key tools include credit reporting and Director Penalty Notices (DPNs).
  • Tax debt has substantially increased, affecting small businesses the most.

• Client Evaluation and Financing:

  • Evaluating clients' overall financial picture beyond short-term debt.
  • Blended rates and diverse financing options are essential for managing debt effectively.

• Corporate Restructuring:

  • Formal restructuring options to manage ATO and other debts.
  • Corporate restructuring primarily addresses unsecured debt, with equipment finance companies often being cooperative.

• Negotiation Strategies with ATO:

  • Early engagement and proper engagement with the ATO are crucial.
  • Compliance with ATO's legal practice statements is essential for favourable outcomes.

Interested in future breakfast seminars by Hermes Capital? Check out our upcoming events here.

In this episode of Lunch Money, we interview the CEO of Spartan Race Australia, Russell Nelms. If you haven’t yet experienced the adrenaline rush of tackling a Spartan obstacle course, you’re missing out on a transformative journey that extends far beyond the finish line. In this blog, we dive into the heart-pounding world of Spartan racing, exploring its profound impact on individuals, families, and communities worldwide.

Lunch Money is produced by Hermes Capital Partners

https://hermescapital.com.au