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Construction | Business Turnaround & Financial Management

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This supply and installation business needed better financial management to satisfy their bank. However, there were also some other underlying business problems...

Supply & installation business – business review with ongoing financial management and strategic advice


Situation

Recommended by the client’s bank to provide better financial management, Playfair Partnerships were engaged to help all parties gain a clearer understanding of the current and anticipated future profit and cashflow requirements. Issues with labour management and foreign exchange movement had resulted in weaker margins and hence gross profit. As time progressed, these issues, coupled with product failure, resulted in losses and significant cashflow pressure which required immediate action and fundraising strategies to remedy.

In addition, running alongside this was a generational change in the management and a shift from small contract supply to multi-million-pound major installation projects.

Action

Introduce new software and accounting controls

There was a need to provide a better understanding of individual contract performance – sales, costs and hence profitability. We achieved this by introducing industry-specific accounting software and related controls together with regular management accounts.

Implement daily cashflow planning and monitoring

Cash reserves were very scarce, and it was necessary to have daily control over this to ensure the company stayed within agreed borrowing limits.

Negotiate both short- and medium-term additional funding to meet shortfall

Notwithstanding the controls introduced, there was an overall shortfall in cash in the business. The most pressing issue was an HMRC demand, which, if not dealt with, would result in winding up procedures. To resolve this situation, we negotiated a deferred payment arrangement and also raised a loan at short notice. However, going forward there was still a need for increased funding, so we approached the market to obtain longer-term funding, allowing the business to trade more effectively.

Change the operational approach

The historic approach contained too much risk within contract delivery, from tendering to installation, with labour overruns and client delay costs not being fully recovered. To de-risk the business, we helped change this approach by introducing a fixed-price work model for the installation teams culminating in a smaller, more efficient core workforce. This also allowed better understanding at the tender stages and significantly higher margins and control.

Outcome

Following the turnaround and introduction of financial control, this construction business now has a clear understanding of its financial position and a new approach to the tendering and management of its contracts. Cash is being managed and the forward order book bodes well for sustainable higher profits. Playfair Partnerships continue to assist and advise the client and stakeholders, as well as providing comprehensive business-related MI.

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Mill Studio Business Centre
Crane Mead, Ware
Herts SG12 9PY

01920 444230mail@playfairpartnerships.com

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