Aviation Turnaround

Background

The company started operations in 2004 and made significant losses in the first three years. The three-year Budget prepared before Secantor was called in anticipated a further year of losses before break-even.

The company had three CEOs in under a year. The latest CEO had been in the role for only three months. Following the departure of the Finance Director and a key accounting clerk, pending the appointment of a new full time FD, a Secantor FD joined the management team, with responsibility for the day-to-day work of the Finance / Accounting Function

Issues

Accounting - strengthening the accounting and reporting function, including training a new accountant and an accounting assistant.

Budgets - in conjunction with the CEO, preparing a robust budget for 2007 - 2009.

• Business Model / Financing Options – working with the CEO to model business scenarios and review aircraft procurement / replacement options to ensure that the company could achieve sustainable profitability as early as possible.

Actions

• In conjunction with the CEO, the 2007 – 2009 Budget P&L was revised once it became clear that the short-term revenue targets would not be achieved.
• Although the company had a robust P&L budget / forecasting model, it had never prepared budget / forecast balance sheets and cash flows, so monthly balance sheets and cash flow forecasts were prepared for 2007 – 2009.
• The accounts for the company and its parent for 2005 and 2006 had not been finalised. In particular, there was no clear separation of costs between the two entities. The accounts were re-worked in accordance with the comments made by the companies’ auditors and re-presented to them for sign-off.
• Development of various business scenarios, reviewing aircraft procurement / replacement options, so that the company could achieve sustained profitability as early as possible. An optimal strategy was agreed with the CEO and a detailed operating plan was prepared for presentation to the parent company’s board.

Unforeseen problems

Just three weeks into the assignment, the group’s bankers blocked the bank account without warning.

The Secantor FD produced a highly detailed cash flow forecast, covering a thirteen-week period, which formed the basis for negotiations between the group board and the bank. An additional, temporary banking facility was then agreed. The bank also appointed a major accounting firm to carry out a detailed business review of the group.

External business review

The Secantor FD spent four weeks supporting the bank’s advisers in carrying out their business review and made a significant contribution to their final report.

Search for potential investors

During the review by the bank’s advisers it became clear that the company required new inward investment. The CEO and the Secantor FD jointly wrote a three-year business plan which was presented to potential investors.

Company put up for sale

Following discussions between the Group’s board and the bank, based on the report submitted by the external advisers, the company was put up for sale. The Secantor FD quickly created a headline offer document for general circulation and a detailed Information Memorandum for interested parties.

Subsequently, the necessary detailed information and analysis, including various business scenarios models, was produced for interested parties

Cash Flow Control and Reporting

Pending sale, whilst the bank continued to fund the group, detailed weekly cashflow reporting was prepared and provided to the bank.

Outcome

The company was successfully sold.

The CEOs of both the sold company and the purchasing company and the bank’s advisers fully acknowledged that the Secantor FD made a significant contribution to the sale process.