In a letter to creditors issued last week (9 January), KPMG announced that its administrators Gayle Dickerson, Ryan Eagle and Tim Mableson had been appointed as administrators for McWilliam’s Wines Group Ltd and its associated company Mount Pleasant Wines Pty Ltd.
According to its website, McWilliam’s Wines is a sixth-generation family business that was established back in 1877 with the planting of vines along the Murray River in NSW.
“As administrators, we now control the Group and are urgently assessing the Group’s financial position,” the letter said.
It noted that a first meeting of creditors will be held at 11am on Monday, 20 January, at the Wesley Conference Centre in Sydney, and said that “the administrators intend to continue to trade the Group”.
In a separate letter to the company’s employees, the administrators said their assessment will look to “determine the best course of action to preserve the Group’s assets”, which includes “proposals for an urgent recapitalisation of the Group” or a sale of the business and its assets.
Tough trading conditions continue to bite
Commenting on the company going into administration, CreditorWatch CEO Patrick Coghlan said the demise showed even popular and well-known businesses are not immune to the difficult marketplace confronting retailers and consumer goods makers.
“The unfortunate news that McWilliam’s Wines has entered administration is testament to the increasingly tough conditions that retail and consumer brands find themselves in,” he said.
According to Mr Coghlan, it is also a worrying sign that administrator appointments are coming earlier in the year than has typically been the case.
“Whereas five years ago, FMCG [fast-moving consumer goods] brands and retailers would typically show struggle signs in February or March, but now the shift of Boxing Day sales to Black Friday means cash-flow issues appear earlier,” he said.
And the picture going forward remains bleak, he suggested, pointing to his firm’s Small Business Risk Review finding “significant increases in default rates for food and retail companies” in the December quarter of 2019 as evidence that many SMEs are feeling the pinch. This is even before the impact of this summer’s bushfires on local businesses are factored in.
“These default figures are often a ‘canary in a coal mine’, preceding increases in insolvencies, since defaults will reverberate around complex supply chains,” Mr Coghlan explained.
“Modern accounting software can help even the smallest businesses keep tabs on their cash flow, but McWilliam’s Wines shows that even firms with sophisticated processes can fall victim.”
He added: “For any company taking or supplying stock, careful management of stock levels and communication with customers and suppliers is even more crucial during tough times.”
Danger signs to look out for
The CreditorWatch boss said that recent examples of well-known businesses falling into administration offer some important insights on what other businesses can look out for when determining who they deal with.
Mr Coghlan said that some of the biggest red flags on a credit report are:
- Black marks, this could be either court actions, payment defaults, poor credit scores or insolvency notices
- Poor payment history — “if a business is consistently listed as a slow payer or a trend is emerging showing the business paying invoices slower and slower,” he said.
- Directors with a history of failed or failing companies — “statistically this is a warning sign shows it will happen again.”
- Directors who have run similarly named companies — “this is a big red flag as it is a potential indicator of phoenix activity.”
“As a supplier, there are also a number of warning signs to look for directly in the business,” he added.
- If there is an unusual spike in orders – “time has shown that companies on the verge of administration will often order unusually large amounts of goods to sell at a discount elsewhere and pocket the profits themselves.”
- Poor accounting or administration practices, which can show the company is not on top of its financial positioning
- When the business is slow at paying its invoices
- Not having a website