Key achievements by our turnaround experienced Virtual Finance Director:
* Experience of Swedish chapter 11 and subsequent re-launch via an MBO.
* Downsized business with a 50% reduction in service personnel
* Recommended the Board took tough decision to close a subsidiary
* Business restructuring from 2 businesses and 25 sites to one business and one central store – resulting in a £1m pa Profit increase
* Accelerated Group month end cut off from 5 days to 1 day
* Justified business continuation via numerous independent reviews
* Reduced the number of qualified accountants from 10 to 4.
* End result a successful Business Sale, which repaid lenders and satisfied Shareholder expectations!
Major Acquisition and business turnaround
The large EPoS business which I joined (as UK FD) had just acquired a significantly larger cash register business with operations across Europe and the Americas. The acquired business had deteriorated rapidly prior to acquisition, and many problems came to light following the acquisition. These problems and the resulting pressure from the banks resulted in The Americas being sold very quickly after the acquisition and daily focus on cash across the group. There were many other issues that needed fire fighting. In particular there were significant issues with the Swedish & German subsidiaries which I became involved in.
Swedish subsidiary – Chapter 11 and MBO
Due to heavy losses in Sweden local management had put the company into the Swedish equivalent of Chapter 11, which required either a substantial capital injection or within 9 months the business was subject to a receivership. Due to the large amount of capital required and the heavy cost of redundancy established following meetings with local Lawyers, it was agreed to allow the subsidiary to go into receivership and put together a business plan to restructuring the business and allow a much leaner business to emerge.
I spent considerable time in Sweden, working with the local FD, a consultant, to build a business plan that would allow a profitable business to emerge. A significant part of the business was servicing cash registers, and due to local
employment law the structure had become bloated. This meant that the major part of the restructuring was right sizing the service department from around 240 people to 120 people and closing many of the 30+ small branches that had become the norm. These cost reductions allowed a corresponding turnaround in profitability. This revised plan formed the basis of a successful MBO funded by Swedish backers and led by the FD who became MD. The successful sale saved annual losses of £750k.
German Subsidiary – Business Closure
I carried out a review of the cost of right sizing the business (employment law in Germany required very substantial redundancy payments, approximately £4m), assessing the business opportunity in Germany, and given the group cash position the review concluded that the best outcome for the group was to close this subsidiary. This reduced losses and the on going cash burn.
UK Subsidiaries – Significant Restructuring
In the UK, we combined two separately located businesses into one business with overall turnover of approximately £40m, located at the group’s UK head office. This involved significant redundancy programs involving the Chairman & MD running “village hall” meetings to keep all staff informed of the direction of travel of the combined business. As part of this restructure I was heavily involved again in re sizing the Service business from approximately 25 sites to a central stores making use of overnight parcel delivery to engineers in the field. I recruited into my team an accountant to manage the re-stocking, creating a comprehensive inventory of all spare parts that was immediately available at a central location. This enabled a significant reduction of bought in spares and resulted in an improvement in gross margin, increasing profit by over £1m.
UK & Group Finance function – Strategic Reviews & re-Financing
As part of the group restructure I lead a team to create group reporting for the Board & the banks. This required implementation at all businesses across Europe and resulted in Group reports being available within an hour of cut off rather than 5 days. At the same time putting all subsidiaries on a common platform so that real comparisons of performance could be achieved. Having accurate and timely Group data was essential in keeping the banks on side.
During a three year period the Group went through a number of strategic reviews by reporting accountants (instigated by the banks and one major investor). I was heavily involved in providing the requisite information for the accountants report which allowed the banks to determine terms for funding renewals and at one point a debt for equity swap that eventually allowed the balance sheet to be improved.
As UK FD I implemented changes to processes and procedures that over 4 years further reduced the need for expensive qualified accountants. From 10 at the acquisition, this reduced to 3 when I suggested my accountant was now skilled enough to take in my role.
Outcome – Successful Business Sale
After a long recovery the business was eventually sold at a price that allowed full recovery not only for the banks but for shareholders as well.