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The Institute For Turnaround Financial Roadmap for SMEs

We have updated our roadmap for SMEs to reflect the announcements made by the Chancellor on 5 November, in which he detailed a new phase of simplified support measures in line with a new one-month national lockdown.

This roadmap is here to support SMEs in their return to business and activity. It shows the critical points ahead so SMEs can seek early intervention in the form of help from an accredited turnaround professional.

This roadmap was created in association with Playfair Partnerships Ltd, please contact John Playfair or Simon Playfair of Playfair Partnerships Ltd if you require further assistance.

John Playfair: 07970 619986
Simon Playfair: 07968 198550.

Details are still emerging, and information is correct as of 11 November but subject to change at short notice given further government announcements.

You can download the infographic in PDF format HERE.

UPDATED: COVID-19 LOCKDOWN RECOVERY PINCH POINTS: A TURNAROUND ROADMAP FOR SMES

This roadmap shows the critical points ahead for SMEs recovering from COVID-19 lockdown.

The roadmap has been updated to reflect the announcements made by the Chancellor on 24 September. Details are still emerging, and information is correct as of 8 October but subject to change at short notice given further government announcements. This roadmap was created in association with Playfair Partnerships Ltd, please contact John Playfair or Simon Playfair of Playfair Partnerships Ltd if you require any further assistance.

John Playfair: 07970 619986

Simon Playfair: 07968 198550.

You can download the infographic in PDF format HERE

 

Creating Value by Ken Scott

We recently published a new report, Unlocking Value, Saving Jobs: The Contribution of Turnaround to Business and People, demonstrating the vital role IFT members make in saving jobs and preserving value for UK plc. The report aims to increase understanding of turnaround as an essential business discipline that can help avoid unnecessary insolvencies, especially at a time when business recovery is even more important to the economy and to people.

The report also demonstrates how turnaround establishes the inherent value in businesses.  Here, IFT member, Ken Scott, draws on his experience as a business leader and turnaround expert, citing examples of how businesses have pivoted during the Covid-19 disruption to rethink their value proposition.

You can read Ken’s full article here.

Unlocking Value, Saving Jobs: The Contribution of Turnaround to Business and People

When businesses go bust, the economic fallout can be catastrophic. Individuals – and sometimes large parts of the community – lose their jobs. Vital services cease overnight. Enterprise value – a vital underpinning of a dynamic economy – is lost.

In this report, Unlocking Value, Saving Jobs: The Contribution of Turnaround to Business and People, we shine a light on the huge contribution IFT members make and the value they create for society and the economy.

IFT members preserve jobs and livelihoods, uphold local industries, protect economic value and strengthen public service organisations.  In this report, we estimate that in 2019 IFT members and corporate partners saved more than 200,000 jobs and protected £2 billion in enterprise value.

Our research, which predates the Covid-19 disruption, also shows that in 2019 over 130,000 companies in the UK were showing signs of distress. We expect the spread of Covid-19 to drive higher demand for turnaround services for the remainder of 2020 and beyond. That is why this report broadens understandings of turnaround as an essential business discipline that can help avoid unnecessary insolvencies, especially at a time when business recovery is even more important to the economy and to people.

To download the report please click here.

To download the IFT press release for this report please click here.

For press information and media enquiries please contact:

Francesca Rivett-Carnac (francesca@standagency.com / 07966 227 390)

Grace French (grace@standagency.com / 07906 630 501)

 

You can also view and download our infographics for the report:

DNA of a Turnaround Director 

Key Turnaround Measures 

The Stages of a Turnaround 

Turnaround Timeline 

Handwashing and Beyond: Key Turnaround Advice for Businesses Under Stress

The impact of coronavirus is already exacerbating existing challenges for businesses in the UK. In the context of increased strain, we are sharing the key turnaround insights as you implement measures in your business to deal with coronavirus.

Knowledge and Planning

Understand your position and keep doing so, to aid your planning and management and to help your stakeholders have confidence, “a well-constructed forward looking report focusing on the key KPIs: sales, orders, cash, debts and profit will help with decision making and any difficult conversations. Management should be thinking about actions they can take to mitigate shortfalls and pinch points in the short-term cash flow”, says Ian Parker, Independent Turnaround Professional.

Once you have this forward-looking view, it is important to also ensure it is agile to deal with rapidly changing circumstances:

“It’s important to identify the planning assumption with the greatest uncertainty around them and then develop multiple scenarios for each.  This won’t give you a ‘crystal ball’ but it will greatly increase the resilience of your plans.”, adds Kelly Jones, IFT corporate partner Kingsgate.

Stakeholder confidence

Trust levels can naturally become affected at times of stress. Identify and manage stakeholder expectations – lenders, funders, shareholders, customers, suppliers and your workforce. Engage early and consistently to ensure confidence and trust.

In addition to providing the basis for contingency planning, trusted information and trusted relationships go hand in hand:

Open and honest discussions should be had as early as possible. It’s generally in lenders’ interests to be supportive, but they will need to have confidence in the management information and the management team.” says Philip Watkins, Restructuring Advisory Partner, FRP.

It is essential that the leadership grasps the issues and motivation from the top to the bottom of the business. From engagement in hygiene measures to steps you may need to take to temporarily remodel or scale back operations, your colleagues need to know how they can get involved and how they will be affected.

Cash Flow

The life blood of any business is cash. Take a long hard look at your regular and discretionary expenditure”, says Ian Parker. Running out of cash is often the trigger point for a crisis.  Fixing the finances is not a cure in itself, but it does provide the time and space to manage wider issues.

Cash collection remains crucial whilst recognising that customers and suppliers will likely be facing similar challenges. “It is even more essential in these testing times that robust cashflow forecasting is in place”, says Nina Warwick, Independent Turnaround Professional.

Supply Chain Disruption

A key part of your contingency planning will be managing your supply chains, including clarity on where essential materials and components come from: “Large multi-nationals supplying key components may have multiple facilities, but key components can cause serious disruption”; local suppliers are important too and have different issues “this group is usually under-capitalised and reliant on short term finance and overdrafts” however, the government’s recent measures to refund 14 days sick pay for SMEs with fewer than 250 employees will ease cash flow for some suppliers.

Adapting your Operating Model

Every business will be considering how to do things differently, but many businesses cannot use home working as an option. The need for reduced working may coincide with staff illness and isolation, and businesses should be making maximum use of government measures, such as refunding sick pay for businesses with fewer than 250 employees. Consider how to ‘right size’ your businesses to match reduced demand.

Ensuring a continuity of workforce is key.  Some companies are changing work patterns and others have implemented home working.  Independent member Philip Smith says “Don’t forget the management! Change how they work to ensure the brain of the business is not suddenly disabled.  You should even consider keeping some people away to act as substitutes if key management become unwell or are unable to work.”  

Long-term strategy

Where there are ongoing and underlying issues, for a turnaround to take place, a re-growth strategy needs to be put in place. That means finding a way to do things better, cheaper or differently than your competitors, and having a vision that can be turned into a long-term recovery plan.

Work out what sets you apart from your competitors:

What is different about how you do business?

What is different about how you value your clients and why they would work with you?

What is your Unique Selling Point?”, advises Nina Warwick.

Coronavirus will continue to test resilience for the immediate future but, with structured planning and a short – and medium – term view, it needn’t prove the end of the road for the UK’s stressed businesses” – Philip Watkins of FRP.

In summary, the key issues to consider are:

  1. Take stock of the situation and regularly evaluate.
  2. Maintain or increase the communications flow to key stakeholder.
  3. Closely manage your cash flow as it’s the lifeblood of the business.
  4. Ensure your supply chain is resilient and have a contingency plan.
  5. Adapt your operating model including how senior management work.
  6. Think about the long-term position and start to put a strategy in place.

The IFT is the key organisation in the UK for professionals advising stressed and distressed businesses on business recovery. We champion turnaround excellence.

Disruption in the automotive supply chain

The automotive industry is in the early stages of disruption events that will change the shape of the sector forever. This is being driven by numerous factors, most notably including:
• Decline of diesel. The impact of “dieselgate” continues to be felt across the sector, with European diesel sales expected to fall to 5.6 million in 2024 from a peak of 6.9 million in 2016. As a proportion of total vehicles sales this represents a drop from 52% to 37%.

• Changes in demand. More consumers are choosing alternative engines/power units, with petrol returning to the fore and, increasingly, hybrid electric and full electric powertrains. Whilst demand seems to be switching from diesel to petrol in the short term, the medium/long term outlook is that petrol vehicle volumes are likely to also decline. With forecasts of consumer demand remaining uncertain, anticipating future sales mix will prove challenging for both manufacturers and suppliers. In parallel new emissions standards in 2021 are emphasising the move towards power units other than petrol and diesel. This has the potential to cause significant under and over-supply. Unsurprisingly, capacity issues are already appearing as petrol engine component suppliers are reluctant to lay down new production lines knowing that volumes are in decline.

• Lifestyle changes. Younger generations are placing less importance in owning cars and indeed even having a driving licence. The transition towards Mobility-as-a-Service (Maas) has already commenced in major global cities, where policies such as congestion charging and car-free developments deter car ownership. The 2019 KPMG Global Automotive Executive Survey highlighted that 43% of automotive executives believe that half of today’s car owners will not want to own a car by 2025. The impact on the volumes and types of vehicles sold will be both significant and unpredictable.

Against the backdrop of these global industry challenges, consideration also needs to be given to where vehicles will be made in the future. Recent press announcements have demonstrated the risk that a significant proportion of vehicle production in the UK could move to mainland Europe, save for some specialist manufacturers with a strong British heritage.

Suppliers are facing an uncertain future

So what does this mean for suppliers? In short, this will lead to significant challenges, specifically around areas such as:
• Demand forecasting – can suppliers accurately forecast likely demand for components in the short/medium term?
• The need for a diversification strategy to change the product portfolios to those more appropriate to future requirements, e.g. electric vehicles.
• Cost reduction – can fixed costs and overheads be reduced sufficiently to match the likely reduction in volumes that many component manufacturers could experience, recognising that the many suppliers are highly operationally geared?
• Transport and relocation costs – can suppliers factor in additional freight or relocation costs if OEM manufacturing facilities move elsewhere?
• Funding accessibility – anecdotal evidence indicates bank funding for suppliers may be hardening as funders attempt to determine who the relative winners and losers will be.

Manufacturers are facing difficult decisions
There may also be significant issues for manufacturers as they manage their supply chains:
• How and when do they communicate intentions regarding plant closures or volume reductions?
• Which suppliers are likely to struggle as a result of the systemic market changes and the OEM specific changes in their portfolio?
For turnaround professionals these challenges create opportunities to support clients – from cash forecasting and control to stakeholder management and strategic change implementation. In addition, for those suppliers who experience medium/long term decline in volumes (e.g. diesel engine component suppliers) there is likely to be a need for more substantive solutions from key customers and/or M&A transactions to ensure distressed suppliers are able to reach the end of their supplier contract without further material risks.
What is clear is that conventional remedies such as bailments and changing payment terms are unlikely to be sufficient for some of these challenged supplier situations and we will see more radical and innovative solutions being effected. These could include OEM’s bringing suppliers in-house, the creation of run off platforms and turnaround professionals stepping in to support component manufacturers for prolonged periods.
Only time will tell what the extent of the impact will be of these disruption events but all the indications are that when it comes it will be significant.

Jo Wright leads Key NPQEL module for Education CEOs

The Department for Education has created a programme for Executive Leaders. One of its purposes is to develop the skills, knowledge and behaviours that a high-performing executive leader needs.

De Novo’s founder, Jo Wright, was approached to lead a session which formed part of the Managing Resources and Risks module of the programme. The workshop took place towards the end of last year and was well attended by aspiring and serving executive head teachers and multi-academy trust (MAT) chief executive officers (CEOs).

The main take away points for the attendees were:

Heightened awareness of why organisations fail and the warning signs
Importance of a more ‘business-like’ culture and thought process to identify and deal with issues promptly
The need for greater commerciality to achieve a better business model, operationally and financially
The significant impact a strong Finance Director with appropriate skill set can make
The tangible benefits of identifying and investing in talent, upskilling management and recruiting quality leaders
Importance of a diverse skills mix in Governors to support, challenge and hold leadership to account
The challenge of identifying and dealing with the vast amount of uncertainty – debated key risks, ways of mitigating them and the need to contingency plan
A focus shift is required from reporting on issues to actually resolving them – clearer roles / responsibilities and accountability are critical to speed up the process
The need to constantly embrace change to secure sustainability long term
How key the right cultural attitude is to evolving an organisation, and the amount of time and effort required before it embeds
War stories and case studies of both Colleges and Corporates, demonstrated where the timing of issues being addressed was the difference between success and failure

The lively session concluded with a discussion about ways of trying to future proof and secure long-term sustainability. Positive feedback from leading education services provider, Cognition Education, who organised the course included:

“Just want to say an enormous thank you for your time and input, I understand it was a really informative session, and very well received.”

“Just a word of thanks for your input today. It was really great, and the attendees really enjoyed the session. We kept drawing on it all day as we worked through the materials so thank you again.”

BTG Advisory strengthens national advisory offering with appointment of new partner

 

 

“Given the uncertainties faced by businesses from both the current economic conditions and the wider political debate, having the ability to effectively manage change will be key to the success, survival and growth of organisations as they move forward. I believe BTG Advisory is well-positioned to provide the skills required by businesses and look forward to working with the team to develop the firm’s advisory services regionally and nationally.”