Vantage Performance acted as the Chief Restructuring Officer (CRO) for this project.
Rapid growth exposes group to industry downturn
A group operating in the electrical construction and facilities management industries had grown in just 8 years from a $2 million enterprise into a company turning over $97 million a year. But unfortunately this seemingly healthy growth came at a heavy cost.
The company’s growth was party organic, but also involved the acquisition of three businesses utilising a combination of debt and equity. When business took a downturn, the company faced a $22 million decline in revenue resulting in losses of $4 million.
As a result, the business breached its banking facilities, had an immediate working capital requirement of $3 million and its bank debt was 8 times EBITDA.
This extreme growth followed by a period of unpredicted and rapid decline placed extreme pressure on the board and its management team.
How we turned things around.
As in many such cases, our first step was to conduct a strategic review, implement a stabilisation plan, develop a turnaround plan and assist with its execution. As part of the plan, loss-making contracts were exited and operating costs reduced in line with the decline in revenue. An aggressive 100 day working capital management plan was executed to improve cash flow by $5.1 million.
Once we had negotiated an initial $4 million partial refinance of the lead financier, we project managed a full refinance of the lead financiers’ facilities to the value of $17 million. We also negotiated a creditor compromise to the value of $4 million.
Our turnaround plan worked. The group’s revenue increased from $75 million to $100 million, earnings improved by $5.2 million, and enterprise value increased by $20 million.
Our work with this company received the 2014 Turnaround Management Association Turnaround of the Year Award in the Queensland, Large Company category.
I want you to know how personally grateful I am for what you did for us. I will never forget it.