THREE case studies
+61 419 394 653 brian@xec.com.au PO Box 542, Kew VIC 3101 www.xec.com.au
01
Business Transformation Post-GFC Turnaround
BACKGROUND
2009 current & new business pipeline all but dried up; Carrying an overhead structure for a historically larger revenue business; 2 high volume supplier insolvencies contributing a $4M loss; $4.5M cash reserves and insecure revenue stream; Nil debt, and couldn’t raise debt; From $110M to $80M rapid revenue decline and insolvency question mitigated.
OUTCOME
Profit turnaround $7M in Yr1 & industry benchmark maintained thereafter; 100% of forecast future revenue secured prior to FY start; Overhead reduced 25% each of 3 consecutive years, Sustainable business in an unsustainably competitive market; A minimum cash reserve level restored; Acclaimed customer & supplier loyalty as a turnaround success story; JV with global public company subsidiary; Nil debt.
ACTIONS
Designed 3yr turnaround plan, re-assessed in advance of each year; Assign Leadership Team the distressed areas to lead by example; Face to face regular client engagement reassuring mitigation success; Regular internal face to face business improvement updates; Re-designed commercial disciplines & delegated authorities; Progressively reduced overhead in order to meet forecast declining sales; Secured short-term interest free capital, repaid inside 2yrs; Business development initiatives escalated.
SKILLS
Financially modelled every conceivable business scenario, weekly; Regular face to face communication on the basis of telling it how it is; Structured and disciplined, methodical approach – urgency without panic; Simplistic yet informative to manage various expectations consistently; Enthusiasm & passion regardless of feeling like you’re at war.
TAKEOUTS
Map out a course, be flexible to a point yet conscious of the damage deviation or inconsistency will do to business momentum; A benevolent dictator approach wont hurt in survival mode; Employee livelihoods are at stake, the real performers will excel; Tell it how it is – the ones that don’t like it weren’t on your side anyway.
+61 419 394 653 brian@xec.com.au PO Box 542, Kew VIC 3101 www.xec.com.au
02
Business Transformation From Small Business to Corporate SME
BACKGROUND
SME construction $40M revenue, 6% PBT & $600k retained earnings; No system or process discipline, more a method to get it done; No IT platform, manual financial management process; Performance management regime based on work hard play hard; Nil debt; [Independent] Enterprise Value $4M.
OUTCOME
30% YOY growth to $110M revenue in 4 years, 6% PBT & $8.8M retained earnings; Expansion through quality product, not expansionary capital; Preferred Government supplier; Corporatised business with best practice AS compliances Nil debt; [Independent] Enterprise Value $28M.
ACTIONS
Clearly articulated & measurable strategy around growing entity value as opposed to annual profit distribution; Mapped out risk origins and mitigators as a business standard; Introduced IT & centralized electronic financial reporting & management; Development based people policies & performance benchmarks; Delegated authorities & cash flow disciplines; Continuous personal interaction at every stakeholder level.
SKILLS
Detailed financial analysis, modelling & forecasting; Cash management strategies supported by banker relationships; Tell & sell a story – face to face authentic engagement; Disciplined technology based systems and processes; Learn / know / measure operational drivers of each department; A clear picture of what success looks like every day, not just EOFY.
TAKEOUTS
Not everyone wants and/or accepts change; People can be the ultimate enablers if they know the why & what success looks like for them not just the business; Don’t be a ‘post box’, drill down especially financials & customer; Regular, transparent & loyal relationship with finance & risk stakeholders; Business exists to seek & retain customers, not the other way around.
+61 419 394 653 brian@xec.com.au PO Box 542, Kew VIC 3101 www.xec.com.au
03
Project Risk Advisory Risk Managed Award Winner
BACKGROUND
Major heritage refurbishment plus new large scale build. Prominent high profile CBD fringe project. Construction value approx. $30M. Fully documented construct only project secured under competitive tender.
UNIQUE RISKS
The Client appointed the project Architect as the contract’s Superintendent ultimately directed by an internal Client representative. Hazardous material remediation was not fully investigated and scoped by the Client, nor tendered by Contractors. Latent conditions by way of underground conditions and obstructions was not fully investigated and scoped by the Client, nor tendered by Contractors. The detailed engineering documentation of one of the buildings had not progressed from Town Planning issue, and in fact by admission, had been overlooked.
DISPUTE
$1.3M variations claimed, equivalent to approx. 5% of trade cost 100 days extension of time claimed being 30% of the original contract duration and related delay costs claimed approx. $1.4M or 4% of original contract sum. Party + party legal fees approx. $500k without resolution.
INTERVENTION
Each party finalise legal advice to separate position statements to facilitate executive level face to face discussions, negotiations and potential resolution. Remove conflicted Architect Superintendent role from ongoing discussions and negotiations. Payment on account for unpaid variations avoided stop-work and further dispute escalation, enabling works to progress to best possible time frames, and creating an appetite for resolution.
OUTCOME
Variation account settled at 90% of claim. Delay costs resolved at 35% of extension of time claimed. Project delay the subject of dispute reduced 55% Additional legal fees $30k only. The Client was awarded the 2013 Master Builders Award for Construction Excellence in Commercial Buildings $20M - $30M. The Contractor achieved the annual 2013 Master Builder of the Year Award for this project.
+61 419 394 653 brian@xec.com.au PO Box 542, Kew VIC 3101 www.xec.com.au
Often it is at the end of the project where commercial outcomes have not been achieved, or the project is at a point of dispute, that the now obvious lack of meaningful strategy at origination is diluting any opportunity for success. Further, it is this common scenario that more than ever justifies engaging an experienced, independent, best-for-project, governance based, risk focused advisory to optimise the development supply chain end to end. Ultimately as the above case study illustrates, were the client to engage xec from the outset it is assured that site based risks would have been mitigated and remediated pre-construction, that documentation process quality assurance would have been one of many consultant metrics and a pre-condition to payment, and that the Architect-Superintendent conflict would have been separated. The project specific cost benefits of these additional earlier interventions would have exceeded the cost to engage the project risk advisory, further enhancing a high quality, awarded project, delivered on time.
+61 419 394 653 brian@xec.com.au PO Box 542, Kew VIC 3101 www.xec.com.au
+61 419 394 653 brian@xec.com.au PO Box 542, Kew VIC 3101 www.xec.com.au