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Construction | Business Turnaround & Financial Management

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This specialist construction business had suffered a severe reduction in profits and was facing increasing cash flow pressures...

Specialist construction business – turnaround and financial management


Situation

This specialist construction firm had suffered a severe decline in profits and been subject to poor financial control. The overdraft spiralled and this threatened the financial survival of the business.

The firm’s bank intervened and identified the need for a turnaround specialist. Playfair Partnerships was selected to help rehabilitate the firm by providing better financial control and support to the management in devising solutions to their short-term issues, whilst also establishing a longer-term plan and an accompanying financial strategy.

Action

Review the profitability of the core business

This showed a mixed bag of performances, but some attractive specialist work. The poor performers were identified, and this work terminated, with several managers leaving the business. This left a core of profitable high-margin work, with also a resultant lower overall working capital requirement.

Introduce robust financial control of contracts, monitoring profitability, and promoting the prompt collection of cash

Previously, this had not happened, but with the introduction of these controls, financial management was more visible, and both profit and cash collections improved.

Review the capital structure of the business

Although the balance sheet was healthy, it was skewed towards fixed assets and the working capital was constantly under pressure. Whilst the above actions would work their way through to improve this situation, there was a need for an immediate improvement and a change of emphasis. This was achieved by selling the company’s share of the property for £1m+ and moving to a more appropriate, reasonably priced accommodation, with the proceeds used to eliminate most of the debt.

Review non-core business and investment opportunities

The management pursued an opportunity to acquire a specialist piling business, in which it has continued to invest. This has contributed significantly to the growth in turnover. The group also contains some non-core and indifferently performing business units. These are being saved or closed down, freeing up working capital and generating further investment funds for the group.

Outcome

Following the turnaround, this specialist construction business is profitable and debt-free. It is now looking to develop further by growing organically and making further acquisitions.

Testimonial

“Playfair Partnerships intervened at a critical juncture and were instrumental in dissecting my business, analysing the various sectors within it and helping me redefine what we do and removing the non-profit-making work streams. They provided much more accurate systems of financial control and other management tools which helped us substantially cut our overhead and other costs, making us profitable once again. They remain with us some 10 years later, still providing valuable advice on all things ‘business’, helping make key decisions on shaping the future both for me and the company.
Being frank, Playfair Partnerships saved the company from what was a very uncertain future, their timely intervention was and continues to be invaluable.” – Managing Director and Shareholder

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