Importer and Manufacturer of Rail and Service Equipment

AUSTRALIA

Importer and Manufacturer of Rail and Service Equipment

The backstory

The company was part of a larger subsidiary group which was sold to the new Directors. With the formation of a new company, there was no credit history resulting in banks refusal to lend credit to the company. They were not in a financial position to be able to fund the business and discussions of a voluntary administration were had. We were appointed to assist with the acquisition; however, turnaround work was required first to stabilise the company. With as little as $10k in the bank and $3M in Creditors plus more in loans, $300k in Debtors with no sales pipeline – Directors were ready to call it a day.

01 The challenge

The obvious challenge was the severe cash flow problems and insolvency situation.
There was no organisational structure as a result of the takeover of an already existing business.
Highly reactive environment with poor decisions made on gut feel rather than evidence and figures.
Economic slowdown affecting machinery sales and a demand for more second-hand equipment.
Lack of strategic clarity and alignment.
Foreign exchange rates unfavourable against the dollar eroding gross profits.
Old antiquated systems.
Operational inefficiencies and lack of consistency with processes.
Focusing on low GP customers.
No internal controls, policies and procedures.
Lack of employee accountability and responsibility. Low employee productivity due to lack of monitoring and little leadership.

Financials required greater sophistication for analysis, reporting, risk mitigation and control.
Financial reporting was basic and did not provide enough information to make informed decisions promptly or with confidence.
Manufactured equipment projects were unclear during production causing internal issues with the lack of interpretation of job builds. Over delivering more than the customer wanted and undercharging making lower gross margins.
Warranty for inventory was rarely recouped or monitored with the supplier which costed the business money.
Manual based processes creating inefficiencies. Day to day operations were unproductive and objectives everchanging.
Service jobs were loss making and quotes were always underestimated.
Debtors were not chased and invoiced promptly causing more delay in cash inflow.

02 Our Solution

Formal assessment of entire company

A formal assessment on the entire business was conducted to identify areas of risk, opportunities and improvement.
We interviewed all personnel, held workshops and on the ground reviews to see the business for what it was.

Developed a Strategy

Our aim was to develop a strategy for turnaround and once stabilised expansion strategy. Manufacturing equipment overseas instead of Australia with tight quality control standards, checklists and procedures. The business was structured with better systems, processes, policies and procedures that improved employee performance, sales margins, cost control and improved cash flow for company stability. Entered into new markets – Governments, councils, 1st Tier construction, wind farming with higher profitability margins. Managers were monitored and given directive to improve performance and some performance managed. Hired quality employees to assist with the growth of the business.

Created detailed sales budgets

Created detailed sales budgets per customer, per state, per product / service. Full analysis was performed on history with forecasting predictions. This was monitored monthly and action was taken to improve numbers or reward the team. Data and insights were reported for supporting evidence for Management to highlight financial impact if changes were not made. Some examples included creating a minimum order value for customer orders, creating strategies for stock obsolescence to reduce slow moving stock.

Established Key Performance Indicators

Established Key Performance Indicators for key processes and measurement, reporting and monitoring. Created dashboard reporting highlight financial and non-financial data in summary and detailed format and holding monthly management meetings. Identify quality business opportunities that served the company’s vision and goals. Improved sales quotations, follow up procedures and closing deals – resulting in higher sales conversion ratios and the achievement of sales budgets.

Improved stock control

Improved stock control through stock policies and procedures, creating an automated warranty claim system and assessment process
Warranty procedure allowed for stricter warranty assessment – and more rejected claims. Monitoring of warranty claims assisted with obtaining credit notes or cash back from suppliers. The warranty claims process was also automated delegating the task to the customer rather than the Administrator.

Strong financial position

Strong financial position – profitable, cashflow positive turnaround focus moved to accelerated growth. Implementation of changes were executed as time was of essence. Tighter internal controls of costings and employee productivity pre authorised. Stock and old equipment was sold to increase cash inflow. Scaled down the operations of the business – paused servicing and ceased the importation of a branded equipment that was causing warranty issues. Preventing further compounding losses and cash outflow for a product and service that generated negative or break even returns. Once stabilised we accelerated sales growth with targeting Governments and Council tenders with success as well as winning work from large high quality clients.

03 Results

$6.5M

sales contribution

$2M

R&D Grant

5X

Net profits

Increased 5x Net Profits under 18 month period.
Sales contribution of $6.5M from networks, tenders, presentations, selling obsolete stock and equipment.
Greater accountability achieved on Sales team and expanding new markets, cross selling products – an additional $4M from the team in 6 months.
Increased gross profit margins to targeted budget and more.
Sold products into new markets and targeted customers more strategically with greater Gross Profit margin per product and customer.
Sold part of a business to an international buyer – which was no longer part of the clearly defined business strategy.
R&D Grant successfully received of $2M.
Improving job costing and reducing direct costs by 60%.
Reduced indirect costs by 75%.
Recouped warranty claims of $120k in 8 months.
Acquired and merged a company which aligned to the core company vision and product offering.
Expanded branches in other states and created 3PL opportunity to test the market.
Reduced employee head count with improved productivity and change in manufacturing processes resulting in a saving $1.8M per annum of salaries and wages.
Provided real live data allowed Management to take action instantly and deal with issues proactively.

Improved customer service and satisfaction through systemised and consistent processes that were streamlined across Divisions. Confirmed with customer feedback, reviews and increased sales.
Structured systematic approach to operations with a positive financial impact.
Greater productivity due to clearly defined roles, responsibilities and accountabilities monitored through KPI reporting and performance appraisals.
Clearer leadership approach for the Management team and improved culture.
Improved employee performance and engagement with nurturing leadership and a constructive culture.
Realigned employee benefits and streamlined all Award Wages to obtain unity and saving $150k per annum.
Growth accelerated with strong foundations and confidence to continue on their journey with the team well equipped to achiever great heights.
Established a Hire Rental business that is extremely successful.
Opened Branches in three states across Australia and one manufacturing plant offshore.
Improved Management reporting delivery from 14 days to 3 days and with greater detailed and summary insights that were meaningful.
Successfully passed ISO9001 compliance audits.

AUSTRALIA