Capital Equipment Production


Summary:

Re-establish strong and profitable growth without consuming cash and transform team-working

Date:

1999 – 2000 (6 Months)

Assignment:

Capital Equipment Producer: Positive Growth and Cash Generation

Role:

Interim Managing Director (process equipment division)

Assignment Length:

6 Months

Background:

The parent company (GEI plc) was an international, UK quoted plc which had serious financial difficulties when it was revealed that it had debts of 44% of group turn over, across 10 separate banks. The process equipment division had to remove cost from the business to support the debt reduction programme, placing undue stress on its operational performance. The MD chose to leave the group.

 

The Brief:

As interim Managing Director the 6 month assignment was to re-establish profitable growth without consuming cash & improve management teamwork.

 

Outcomes:

  • In month 1, the second half-year monthly forecasts were resubmitted to head office for inclusion in the reporting position to the bank consortium led by HSBC. Rolling 13 week cash flow forecasts were provided on a weekly basis, along with emergency work to improve radically all aspects of working capital control.
  • A company 3-year plan was produced for the continued bank business reviews, based on a conservative approach to sales with an improving profit line. Year 1 Operating Profit was 25% up on the current year forecast, with product mix & margin gains identified. Conservative market views were used for years 2 & 3, lifting profit to 110% of the plan starting position.
  • The company’s ‘blame culture’ & its unbalanced approach to work and information flows were changed to a more constructive attitude based on practical support between functions to overcome specific difficulties.
  • 3 business streams, with particular needs, were identified to convert sales into solid profit:
    • The spares business, representing c.20% of turn over was focused on a proactive approach to generating new business & improving customer service. An E-commerce web site was developed to achieve quick international 24hr. service.
    • Larger, more complex projects were approached far more rigorously, ensuring well-defined quotation production & tight project management control.
    • Routine, simple machine sales were satisfied using a cell manufacturing approach & fast tracking through the drawing stage for rapid customer supply.
  • Market diversification was undertaken to supply company equipment and expertise to the large growth catalytic converter market. Initial sales representing c.25% of turn over were obtained with record gross margins
  • A strategy was built & implemented for much greater penetration into the dairy & desserts markets, based on product development & increasing sector expertise.
  • A fresh approach to the N. American market was established as a result of the sale of other Group companies, leading to rapid increase in sales.
  • As part of the normal Group budget cycle, a comprehensive review was undertaken building on work underway that was deemed too speculative for inclusion in the earlier 3-year plan. This resulted in a budget showing a realistic 300%+ increase in Operating Profit over forecast.
  • 15 essential change management initiatives were identified, scoped & included within the detailed budget submission for implementation in the year.

Overall, business growth was achieved without additional capital expenditure and only marginal changes to working capital demands through modified phasing of customer payments.

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