Case Study 1 - Turnaround Management
Project Pulp
Background
- Multi-site manufacturer supplying the beverage industry
- Annual turnover $22M with 85 employees
- Blue chip client base
- Bought a competitor in 2005
- Aborted merger with another competitor in December 2008
- FY08 loss of $1.6M, FY09 loss of $1.4M
Key issues
- 7 days away from closing doors
- Major customer contributing -$1M p.a.
- 53% utilisation across both sites
- Aborted merger distracted management
- $1M in working capital needed and additional finance not an option
- Poor visibility of contribution margins
- Lack of sufficient management depth
Major Initiatives
- Negotiated payment plans to plug $1M gap
- Moved major customer to 14 day terms
- 18% reduction in workforce (savings of $780K pa)
- Ceased unprofitable products ($350K benefit)
- Price increases 3%-5%
- New CFO, GM and HR Manager
- Capital injection & sale of non-core assets
- Negotiate better pricing - suppliers ($290K pa)
Outcome
- Sale of non core assets - $2.45M for debt reduction
- Refinanced debt of $4.7M
- New CFO, GM and HR Manager
- Injection of $1M in fresh capital
- Secured additional revenue of $4M p.a. or 18%
- EBIT of $1M for FY10 versus a $1.4M loss for FY09