Business Distress
When a business is in distress a clear plan with urgent, decisive action is needed. Independent external skills and expertise are essential in driving through the turnaround plan with energy and impartiality to save the business. This success story showcases how this was brought to great effect in a large family-owned chain of opticians.
Background
The client was a family owned firm of opticians with 80 outlets across the south of England that also owned a lens manufacturing and spectacles production facility. The company, which had a distinguished history going back over 100 years had a strong reputation for providing the highest standards of eye-care along with friendly customer service.
Issues
This client was referred to Secantor by their bank’s support unit because the company was making year upon year losses amounting to millions of pounds and had insufficient cash to cover next month’s payroll of 800 staff. The future looked very bleak. A turnaround was urgently needed.
Actions
Secantor initiated, guided and achieved the following actions:
• Daily cash flow forecasting was introduced to give four months visibility. Careful management of creditors was carried out with personal communication & explanation of financial position and time to pay arrangements with commitments that were honoured ensuring continuity of supplies.
• A comprehensive strategic business review was carried out over 18 days interviewing the senior & middle management at Head Office and the production facility together with visits to 15 retail outlets to meet frontline staff & customers. The conclusion was that in every function of the business there was considerable scope for modernising and improving the effectiveness of management with the capability to achieve a turnaround in profitability. Consequently options to sell the Group or merge with another retailer were put aside for the preferred option to revitalise the company.
• The results of the review were urgently agreed with the directors & shareholders and a detailed action plan was prepared & agreed with the bank who were very supportive throughout.
• Secantor acting as Finance & Turnaround Director restructured the board and introduced new directors with the retail and finance skills to take the business forward alongside three existing directors covering Chairman, professional services, production/purchasing, marketing and property responsibilities. Four longstanding directors were retired together with several other management roles.
• Support Associates from Secantor were brought in to analyse existing marketing and IT structures and advise on a new strategy for both areas.
• A detailed 3 year business and financial plan was prepared with management participation and commitment and defined budget holder accountability.
• Clear monthly management reporting of accounts & KPI’s for a Board meeting in 2nd week of month were prepared with appropriate commentary & interpretation.
• The production facility was restructured and investment made in new technology that provided greater capacity and improved productivity & cost savings. The automation project enabled the space to be condensed to accommodate the relocation of the reduced central support staff/management into modern offices.
• The large and prestigious head office comprising country estate & grounds was sold.
• Retail operations were invigorated by the new Retail Director who had a proven track record of commercial retail performance & customer service. Strong, assertive & sustained management was introduced for each store through careful planning, discipline, consistency and management accountability for performance. A new focus on the customer was introduced with best retail practice involving full participation by staff as part of each store team. Each store manager & team committed to accountability for successful performance of their “own local business”. A suitable performance related pay scheme was implemented to replace existing arrangements which had ceased to be motivational. A new programme of staff training was introduced for both professional services & customer care to ensure consistency in best practice.
• A business development plan was instigated for each store with the participation of Store Manager and appropriate staff to include analysis of local market & customer-base, competition, promotional campaigns & events, displays, selling methodology, product range, housekeeping, resources and profit targets.
• Store profitability was considerably diverse with loss-makers accounting for one third of all stores. The profitability of every Branch received close scrutiny but all loss-makers undertook intensive management care with actions put in place and targets set to be closely monitored on a regular basis. Two of the loss-makers were in towns where the business traded from two separate stores having been previous acquisitions.
• After 8 months a new bank was introduced providing much larger funding to invest in further essential updating of optical equipment, IT systems, marketing and retail design.
• After 18 months a £24m pension deficit was renegotiated and agreed with the Trustees and the Government Regulator, providing a long term solution for 700 professional and support staff.
• Building on the existing strong loyalty to the family business a major culture change was woven into the management of the business that transformed behaviours to a business oriented ethic to maximise commercial performance alongside market leading professional standards.
Outcome
The effect was rapid with a £2m pa. loss being turned into a £250k profit the following year and £1.5m in year two. Performance and profits continued to grow positively, rebuilding value in the business.
In year three Secantor initiated and guided the successful sale of the group to a national chain of opticians for £14 million.
Chairman’s quote:
Our Secantor FD has had an impact beyond all expectation. It is hard for me to find words to express my gratitude for such a clear-sighted plan, so well implemented.
