Office: 01296 423256

The client is a £7m hand tool manufacturer. The company had experienced a cash loss of £650k pa during 2003 and 2004, mostly due to poor profitability. To survive, the client sold premises for £1.1m, but the losses persisted.

I joined the client in late October 2004 to review the business and the problems it had, in particular in its accounts department. An alleged minor fraud had taken place and the controls in the accounts department had failed to pick up a run on cash. The company's bankers had become alarmed at the sustained drain on cash.

Cash losses had been put down to fraud and overspend on development. Whilst development spend had exceeded depreciation during the years in question, the main problem was profitability with losses close to £500k pa. Money lost through fraud ultimately turned out to be quite small and occurred over eight years.

By late December 2004, with the accounts department now producing viable management accounts and forecasting, the owners accepted the need to radically improve the performance of the firm, and I was engaged to turnaround the firm to profit.

During the next year, a series of changes were implemented including:

• The outsourcing of non-core processes such as hardening and tempering and moulding
• Improvement in gross margin by over 7% by reduced material waste (5%) and productivity improvements in the use of direct labour (2%)
• Re-invention of the engineering function to concentrate on development as opposed to maintenance. This brought about a concentration on making products easier to make. The client now develops products faster than previously.
• Overhead reduction to make both sales and administration more productive.
• Setting up a management team and monthly management meetings to support the owners and to devolve responsibility for running the company.
• Development spend to be controlled and equal or less than depreciation

The work behind the turnaround took place in 2005/06 but subsequently the owners kept me on at a reduced level moving to a CFO role and helping with strategic issues. During 2007 the company made almost exactly £600k before tax and PRP. It has no loans, uses no invoice discounting, and although it has overdraft facilities, does not use its overdraft. It had £700k free cash at year end.

In March 2008 the company was sold to a quoted Swedish company.