| Angels
and Nurses
| Company
nursing: |
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Describes
services provided to ailing companies when, having put
in place the basic strategic cures required for their
illness, a period of intensive monitoring and nursing
back to good health is required. Sometimes the illness
is discovered too late or is too serious, and may be incurable.
In such cases, the best that can be done is "damage
limitation". In other cases, the process will be
more successful. What is certain is that the cure
alone is rarely enough. Without a period of intensive
nursing, most ailing companies will continue to struggle. |
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to techniques, the Company Nurse should be prepared to
act as a part-time (financial) director, assisting board
decision-making on critical areas. Monthly management
accounts on an historical basis must be accompanied by
longer-term (up to 12 month) projections, and it is essential
that these are regularly updated to reflect current knowledge
- fixed budgets are valuable in these circumstances only
for filing purposes! Regular visits to the company facilitate
the essential day-to-day decisions on cash control, and
need to be supported by 6 or 7 week cashflow projections.
Considerable effort needs also to be devoted to debtor
and creditor control. |
We
have specialised in company nursing and turnaround assignments
since 1990, and the following brief case studies give
some examples of our recent and current activities:
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| EAT.
At
the beginning of 2000, 3i, Europe's leading Private
Equity Firm, recommended our involvement with EAT, a
chain of 18 London based sandwich shops in which they
had invested and which had recently encountered delays
in its expansion plans. Management welcomed the
benefit of our outside assistance at a crucial point
in their development of the company.
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Following
a process of re-organisation, in October 2001, Stephen was
appointed to the Board as 3i’s nominated non-executive
Director and worked with the Board in the development of the
business to 45 units by August 2005, including 8 out of London
shops and a successful first franchise operation at Gatwick’s
North Terminal. In August 2005, the company succeeded in obtaining
funds for its next stage of development to 100 shops, in a
process which valued the company in excess of £20m and
allowed 3i to exit its investment successfully. Accordingly,
Stephen also resigned at that time, and is convinced that
the company, through its excellent brand, innovative food
offering, top quality people and service levels, will continue
to thrive in the future.
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| Company
A |
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When
we first came to this company in the early part of '92,
a redundancy programme was already under way, reducing
the number of chargeable employees from 30. Cash was
tight: factoring was introduced, and a process of negotiation
with Customs & Excise and the Inland Revenue was
initiated. But the cost-cutting was inadequate and merely
reactive. A "white knight" was found to provide
much needed funds. In an ongoing role as part-time
FD, this company was gradually nursed back to health
and then into successful ongoing profitability and growth.
From a hole in its balance sheet in 1992, this company
was sold to a trade buyer in 1999 for £16m.
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| Company
B |
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This
company had grown its turnover at the expense of its
bottom line. With a strategy in place to reduce overheads
and turnover, whilst seeking higher gross profitability
on projects, my initial work involved heavy emphasis
on short-term cash controls. As this was taking
shape, the emphasis moved to the development of phased
monthly profitability controls on a project-by-project
basis, which has since developed into a company-wide
forecasting system
for profit and loss, cashflow and balance sheets. The
company is now comfortably cash positive. |
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Company
C |
A
London car hire and taxi company had been incurring
ongoing significant losses for more than a year when
we first became involved. Introduction was by its
bank, who, whilst well secured, were concerned about
ongoing breaches of facilities.
We
carried out cost reviews and introduced control systems
to monitor and forecast performance much more closely,
but there had been a fundamental problem of trade
falling away in a competitive market against a relatively
fixed based infrastructure of costs.
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solution would be to find another operator in this field
who could absorb some of their overheads, but this process
was too lengthy to prevent the insolvency of the company
becoming untenable and ultimately, a Creditor’s
Voluntary Arrangement was agreed which, in itself, wiped
sufficient debt off the company’s balance sheet
to render it solvent and give an opportunity to continue
trading and to partially pay off its creditors over
a few years. Following that CVA, the company became
a much a more attractive proposition to potential suitors,
and a disposal of the trade (for the significant benefit
of its shareholders) was finalised. |
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Company
D |
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We were called in by a major private equity player in
an FD support role at a time when this group was losing
money, and running into unforeseen cashflow problems.
We worked closely with the management to review the costs
of the business and to assist the MD and the new FD with
focusing on the under-performing areas of the business.
At the end of this 10 month assignment, this group was
in considerably better shape, our assignment was essentially
completed, but we did advise further, as required, on
other development activities. |
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| Company
E |
A
requirement from the same private equity firm as company
D to assist with the development of a profitable but
underperforming company. This twelve month assignment
once again required the support of the FD, implementation
of cost reviews, identification and control of key influences
on cashflow, and the development of previously absent
forecasting systems. This company may continue to face
commercial pressures, and a new Chairman has been introduced
with a view to taking the company forward. |
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| In
our view, the purpose of what we have defined as ‘the
company nurse’ is little more than to ensure survival
until the company is able to sustain its profit and
cash lines, but our assignments have at times continued
in a part-time FD or non-exec role. Company nursing
activity is highly “hands-on” work, and
requires the maintenance of basic health functions within
the client’s business. Above all, nursing back
to a reasonable state cannot be achieved if the underlying
business is so weak that it cannot achieve a reliably
targeted sales line.
The need for working capital control continues to be
vital at all stages of the economic cycle. Not all directors
are keen to recognise that they may have a need for
such nursing services, but the issues of monitoring,
directing and control are always crucial.
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Rights Reserved | © S R Lynn & Co 2003 | 11 Warren Yard,
Wolverton
Mill, Milton Keynes, MK12 5NW | Photography by Stephen Lynn