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Robert Ross

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Financial Transformation – From An Unleveraged To A Leveraged Environment

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Robert Ross

  1. 1. Financial transformation – from an unleveraged to a leveraged environment
  2. 2. Financial transformation – from an unleveraged to a leveraged environment
  3. 3. Agenda - Quick introduction to me and Europa - Why we needed investment - How we are achieving growth - How we have funded it - What I have learnt - Questions?
  4. 4. Quick introduction to me… - Joined PwC from university on the graduate scheme - Moved out of audit as quickly as possible - Spent the rest of my 10 years there in Transaction Services - Performed financial due diligence on around 75 transactions across a variety off sectors for a variety of clients - Let to join Europa in Nov-15
  5. 5. …and Europa - Europa is a privately owned logistics company that was founded over 50 years ago - Its main products are European Road Freight (predominantly Groupage), Air & Sea Freight and Warehousing - The company grew steadily until it was acquired by Andrew Baxter in Aug-13. - At the time of the acquisition, the business was managed on a regional basis by three operational directors - Andrew recognised that the business needed a wholesale restructure and significant investment to facilitate growth - Andrew brought in a new management team and they set about restructuring Europa
  6. 6. Europa’s financial position - At the point of acquisition (Aug-13) Europa turned over c.£72m and made PBT of £500k. - During FY14, the new management team joined and the restructuring started and this, together with FY15 were tough years. - The restructuring resulted in significant operational changes, a new head office and single hub in Dartford as well as significant investment in a new sales force - It was expensive but the right thing to do as by Sep-15 Europa was set up in an optimal operating structure £’000s 2013 2014 2015 Revenue 77,668 84,726 96,551 PBT 665 16 (1,448)
  7. 7. Financial impact of the restructuring - To fund the restructuring (mainly the new head office fit out), Europa used its existing £6m CID facility - Coupled with significant additional cost in the business – new staff, additional rent, investment in IT – this put significant financial pressure on the Group - When I joined in Nov-15 the summary was: - We are in business support - The daily cash flow forecast shows we will be short by around £1m for the Dec-15 rent bill - The restructuring is over but there remain a lot of large of payments that need to be made e.g. dilapidations on the old head office - Good luck!
  8. 8. So what initially did we do - Met with the bank as soon as possible – I knew that relationship was going to be crucial to get us out of the current situation but also to drive planned growth - Persuade 2 large customers who we invoiced monthly to change to weekly or fortnightly invoicing - Ensure the sales people we aware that we would accept credit terms longer than 30 days - Go through the overheads in detail and reduce or stop any unnecessary spend - Look over the balance sheet and try to find something to leverage that wasn’t already
  9. 9. Facilitating growth - Once the financial position was more secure we were then able to discuss how we were going to achieve our financial targets: - £200m turnover by 2019 - £400m by 2022 - £1bn by 2027 - This was this going to be challenging because: - Low levels of net profit margin (2-5% industry norm) - Requirement for capex (estate investment and proprietary IT system) - Some working capital absorption (DSO 2-3 days higher then DPO) - Targeting acquisitions to augment organic growth
  10. 10. 2016 and 2017 - The financial results for 2016 and 2017 improved as did our relationship with our bank - We increased our CID facility to £9m and then to £12m to facilitate the growth and started looking at some acquisition opportunities - With each of the increases in the facility I wrote papers for the bank, explaining why we needed the extension of the facility £’000s 2015 2016 2017 Revenue 96,551 116,424 144,352 PBT (1,448) 1,118 3,224
  11. 11. 2018 – acquisition of CCC NV - During 2018, we increased our facility again (up to £15m) as well as extending the sales and license back deal for our in-house IT system - This additional financial headroom together with a CID facility in Belgium and a mortgage on the head office building in Belgium, allowed us to make our first acquisition - We took our bank along the journey of the acquisition despite the funding being predominantly provided by another bank (Belgian based) £’000s 2016 2017 2018 Revenue 116,424 144,352 179,842 PBT 1,118 3,224 5,184
  12. 12. 2019 challenges - We aimed to complete a large acquisition during Q418/Q119 which required: - A further increase in our CID facility to £20m - A £4m term loan - Full external financial due diligence - This was a really tough period for the finance team - We needed a high quality, full integrated financial model through which numerous financial scenarios could be run - We also had to deal with a number of my former colleagues completing the FDD - The acquisition remains on hold pending Brexit but it has been an invaluable experience for me and my team
  13. 13. 2019 challenges continued - With the acquisition on hold we have moved onto the next opportunity to drive the Europa Warehouse business forward - We plan to open a new warehouse in Northamptonshire area that requires significant financing: c.£10m of finance leases for the fit out of the site (racking, lighting, sprinklers etc) and automation system which will cost c.£7m - To do this I am running a mini banking process which may turn into a Group refinancing process: - Speaking to a number of banks and asset based lenders - Bringing them up to speed on the business and our current capital structure - Talking them through the site and its financial requirements - Aiming for financing to be in place by the end of Q319
  14. 14. What have I learnt? - Having a good, open and honest relationship with our incumbent bank has been key - Developing relationships with other banks/asset based lenders has opened up other funding opportunities - Have the confidence to ask for what you need from your bank - Being creative with credit terms and invoicing patterns has helped our funding - The presentation of the business and pulling together papers, analysis and models to back up what you want is important - It is much easier to get financing when you have a good story to tell…
  15. 15. Revenue and net profit since acquisition
  16. 16. Any Questions?

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