Case Study 7 - Turnaround Management
Project Drott - Turnaround Management
Background
- Earthmoving contractor that decided to expand into construction
- The first two contracts incurred losses of $500k due to inadequate project management
- Severe cash flow shortage
Key issues
- Business unable to refinance to another bank
- Financial covenant breaches & cash flow crisis
- Bank was "under water" after reviewing security statement position
- Poor management of working capital and other KPI's
- Restoration of bank relationship essential
- Back to basics mentality required
3 Phases
- Stabilise the business and assess short and long term cash flow requirements
- Strategic review and turnaround plan to maintain bank support
- Implement and monitor turnaround strategy
Outcome
- Debtor finance facility used to extinguish bank overdraft and provide additional cash required to fund turnaround
- Turnaround plan implemented concentrating on their core business of earthmoving and haulage
- Overhaul of working capital, financial and operational reporting structure
- Crisis averted and bank relationship restored
- 97% increase in revenue in 12 months
- Turnaround in profit from a loss of (7%) to a profit of 6% of revenue
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