Sector: Transport/Logistics
Owner Type: Family
Turnover: £30m

Background:

• £30 million turnover transport logistics and warehousing business trading for half a century.  Expanded in both turnover and earnings through to June 1995 then lost profitability.
• Financial and management accounts were nine months in arrears breaching the bank’s covenant.
• Forward forecasts predicted £1m profit, however in reality the business was making a loss.
• Gearing had increased to 230%.
• Creditors were on extended terms.

Causes

• The management team lacked experience.
• Significant investment in new premises greatly increased the overhead cost base and operational and financial gearing.  The result was a step change the business was not prepared for.
• The business started to chase sales volumes at any cost.
• Excess capacity and owner operators created a highly competitive environment in general haulage.
• The expected growth in earnings did not materialise.
• Financial controls were weak and the financial controller was failing to keep up with the workload.
• Management information was inaccurate and could not provide a basis for informed decisions.

Turnaround

I was brought in in December 2006.  In ten weeks I prepared a summary of the business presented as a short plan:

• The business was in serious difficulty.
• The inexperience of the senior management team was a key issue.
• Financial controls and analysis were poor.

Over the next six months a turnaround route map was developed.  This translated into the following areas over the following period which led to a comprehensive strategy aimed at repositioning the business in its market channels and segments.

Short-term Cash

• £500,000 cash generation opportunity in receivables identified and pursued to fund projected activity.

Costs

• £200k cost reduction programme developed and implemented.
• Realigned cost base to the new strategy.

Optimising Revenue

• Clear action plan for market channels and segments. Competitive analysis indicated the need to reposition the business, competitive position being eroded in general haulage.
• Growth opportunities to be developed in new markets such as automotive and construction.
• Management information systems strengthened to provide:
  • Detailed customer profitability analysis.

Shareholder Management

• Open and honest stakeholder communication.

Finance

• Robust financial forecasts developed in support of the turnaround plan.
• Banking facilities provided to support the turnaround plan.
• Balance sheet restructuring required on financial and commercial grounds.

People Effectiveness

• New Finance Director followed by Operations Director, Business Development Director and support staff.
• Clearly identified individual’s roles and responsibilities.
• Instilled discipline and regular reviews of performance and action planning meetings.
• Implemented key measures in the business including weekly profit and loss, cash reporting, operational KPI’s and comprehensive sales and development pipeline management aimed at growth.

Outcome

• The business implemented its market repositioning strategy gaining profitable growth.
• Five year contracts were secured with a major automotive client and a major player in construction.
• The business grew by 50% in sales.
• OTIF results were moved upwards to 99.7% and non-conformances reduced.
• EBIT moved upwards to £680k.  Gearing reduced to 60%.