Recent successful engagements
Industry sector: Mining Services
Engagement timeframe: 18 months
Country: South Africa
Size: Turnover= R2.5bn per annum
Owner: Private company; part of major Holding Company.
- Problem statement:
- Financial performance seriously deteriorated over a period of 2 years. Operating margins declined significantly with 2 of its 4 Business Units (BUs) loss making
- Causes of the problem:
- Weakening market conditions in the mining industry
- Poor management – a new CEO was appointed to improve performance
- Strategic assessment:
- Well-established business with a long tradition. It is the market leader in the South African mining services. Its core service offerings/ Business Units are:
- Tailings: Mining depositions, hydraulic mining
- Materials handlingMineral processing, and
- Construction
- In recent years, experienced more competition in its traditional market – a market that is in a downward cycle. Although its Tailings business is expanding into many other geographies – supported by good growth in Minerals Processing – the turnover of the overall business remains flat and the net profit under pressure. This negatively impacts shareholder value
- Business is in a ‘strategic drift’ with a weak competitive posture as a result of:
- High-cost structures; project margins decreasing
- Some of its businesses are ‘trapped’ in their own competitive spaces where they have become commodities
- After a series of poor results, the task was to turn the company around (NPAT = 4%), financial performance is under pressure:
- SA mining industry is not growing
- Increased competition and cost pressure on contractsTwo BUs underperformingDivisional operating margins too lowPlant utilisation lowOverhead costs too high
- Significant cash flow pressure on the business.
- Interventions undertaken:
- The following strategic interventions were undertaken:
- Strategic review – with Findings and Recommendations
- Develop Case for Change
- Curtailed geographic expansion strategy into Africa and South America – reduced Country presence from 34 to 19
- Develop Turnaround strategy – with a Turnaround Specialist to oversee execution:
- Set clear performance targets
- Overhead cost reduction: retrench work force by 15%; restructure the businessRenegotiate debtors and creditors payment terms; assessed all suppliers and negotiate new contracts and reduced pricing and terms; renegotiate credit facilities with BanksImprove Plant utilisation – sell off excess yellow machines
- Improve the performance of the 4 Business Units:
- Sell off one BU
- Exit loss making contracts
- Secure a future order book.
- Turnaround outcome/ results:
- A series of major financial benefits with a combined value of R160m per annum.
- Turnaround project details:
- Turnaround Engagement Leader: Paul Aucamp
Industry sector: Petroleum
Engagement duration: 21 months
Country: South Africa
Industry sector: Petroleum manufacturing and related services
Size: Turnover = R2.5bn per annum
Owner: Holding company listed on JSE
- Problem statement:
- Loss making – necessitating the need for a turnaround in performance – made a loss of R52m per annum
- Causes of the problem:
- Recent acquisition as part of an unbundling deal
- Heavy financial gearing (debt to equity ratio more than 100 percent) – technically insolvent as a standalone entity
- Competitive market – low operating margins
- Poor previous management – a new CEO was appointed to improve performance.
- Strategic assessment:
- Assembler and distributor of petrol pumps (Market cap. R400m) – with Headquarters in Johannesburg and Branches in Cape Town, Durban and Port Elizabeth
- Product offerings include the sale, maintenance and repair of Petroleum Dispensing Equipment, Forecourt Control Systems, Bulk Meters and Commercial Products throughout Southern Africa
- Offers product support and maintenance on a national basis through 44 fully trained field service engineers operating out of fully equipped service vehicles. These engineers are based at strategic points throughout the country offering a 24/7 service capability
- Modern call center control used at all locations with a central database at our Head Office in Johannesburg
- Major problems:
- Debt burden
- Poor operating margins – gross profit percentage < 12 percent
- This negatively impacts shareholder value
- Interventions undertaken:
- The following strategic interventions were undertaken:
- Restructured shareholder equity and balance sheet
- Sold the business back to its major European supplier in France and exited agency agreement.
- Turnaround outcome/ results:
- Restoration of profitability to NPAT of 5 percent over a 9 month period.
Turnaround project details:
- Turnaround Engagement Leader: Paul Aucamp
Industry sector: Automotive
Country: South Africa, Namibia & Germany
Industry sector: Number plate manufacturer (largest in SA market)
Size: Turnover = R210m per annum
Owner: European parent company
Engagement period: 10 months
- Problem statement:
Business in financial distress – with urgent intervention required to protect shareholder value. Based on audited 2021/22 Financial Statements, its financial position was weak:
- High debt ratio
- Poor liquidity
- Lack of working capital
- Loss before taxation:
- 2023: (R50.262) [unaudited]
- 2022: (R68.808m)
- 2021: (R36.341m).
Top-line performance has been the major contributor to its financial position:
- In the last 5 years, revenue has decreased from R210m (2017) to R136m in 2021 to R124m in 2022 to R69m in 2023
- Main casual factor to declining revenue has been the ongoing ‘price war’ in the SA market:
- Heavy price war in the last 4 years:
- GP margins reduced to single digits
- Heavy price war in the last 4 years:
- As a result:
- Major loss of market share
- Major deterioration in profitability (2022: R69m loss before tax)
- Note: As a result of the price war and a non-related decrease in market volumes (new and used), the inference had to be drawn that that all competitors are taking financial strain to a greater or lesser degree – with margins being taken downstream in the value chain (since the end consumer prices were not affected in SA).
At the outset of this work, the Board and Management indicated that approximately 6 weeks working capital is available – and that if a turnaround is not successful, the following three viable options existed:
- Secure a new investor
- Merge with a competitor
- Liquidation and shareholder exit.
- Interventions undertaken:
Appointed as Interim CEO – with the aim to:
- Restructure the business and its 8 subsidiaries (2022 loss = R98.8m)
- Turnaround the business.
Headline restructure and turnaround initiatives included:
- Assessed the market for a potential (BEE) investor
- Signing a HOA with NNPR to merge the 2 companies
- UG price increase of ~90%; KZN a further 40%, Namibia 10%
- UG compressible cost reduction of ~20%
- Closure of main subsidiary company
- Scale down/ exit of embossing business in two other BUs TVP and Buffalo Signs
- Tightening of financial controls
- Establishment of new management team (after dismissals and retrenchments)
- Implementing new management practices
- Improvement of staff remuneration and benefit structures
- Scrutinising and reducing legal exposures and risks
- Retaining all suppliers (with difficulty, and many promises)
- Limiting loss of customers and market share
- Responding to regulatory changes and requirements
- Regaining UK export market.
- Turnaround outcome/ results:
Early results in 2024 started to show the positive effect of the turnaround interventions. For the record, the PBT of ~R2.4m achieved in January and February was the first such monthly profitability since 2018. What makes this performance remarkable is that this improvement was achieved without the much-needed working capital injection – whilst simultaneously (in the first instance) keeping the company afloat.
The sustainability of this recovery is however hampered by business ability to adequately procure raw materials – an issue that now been addressed with the entrance of Imbani as shareholder (and the injection of R25m as fresh capital into the business). This development has saved the business.
Together with its balance sheet restructuring and debt write offs from the parent company, tied to the clean-up of all legacy bad management practices, the business is now well positioned to start turning a new page with significant further growth opportunities.
The transaction to sell off 60 percent of the shares to a new strategic investor also benefit its BEE profile in a major way. The combination of the new Investor’s profile and market access on the one hand, tied to the intellectual property and global supplier access from the parent company, bode well for the business’ future.
Critical success factors however remain:
- The prevention of another pricing war in the SA market, whilst utilising opportunities to further increase pricing
- Developing a good supplier strategy; and building strong relationships with suppliers
- Securing adequate lines of credit to fund growth
- Building a solid management team.
With the new capital injection from the strategic Investor, it is anticipated that operations will become more ‘normal’ and predictable during the 2nd part of 2024 – translating into good margins.
- Turnaround project details:
- Turnaround Engagement Leader: Paul Aucamp
Industry sector: Tourism
Country: Namibia
Industry sector: Tourism
Size: Turnover: R340m annum
Owner: Public company
Engagement period: 19 months
- Problem statement:
Manage tourism and hospitality assets in one of Namibia’s crown jewels, namely national parks. At present, operate twenty-eight resorts – spread out through Namibia. Four of these resorts operate as part of Public Private Partnership (PPP) structures; the others are directly managed. The activities within these resorts differ, but generally include one or more of the following services:
- Hospitality (accommodation, food and beverage)
- Conferencing and events
- Guided tours to clients.
All resorts are the property of the company, who is therefore also responsible for the upkeep, maintenance, renovations, improvements and extensions of facilities and infrastructure.
The financial position has been unsatisfactory for most of the company’s period of existence.
- With the exception of 2018/19, business has always been loss-making. Up to 2015, the business was sustained by government subsidies and international funding support. The main reasons for this situation included the lack of commercial expertise, poor management, emphasis on flagship projects that were not always feasible, no project accountability for capital expenditure, lack of financial controls and the abuse by suppliers and customers. Essentially, the business has historically not been managed as a business. With the appointments of its current Board and key management executives in the middle and latter part of the previous decade, several management practices were changed, costs were reduced (including a significant number of staff) and tighter cost financial controls implemented. These factors led to its first operating profit in 2018/19 of N$22.5m (with an ROE of 2.7%).
- Immediately following, Covid-19 very negatively impacted the business (and the global tourism industry in general) in the following two years. Revenue decreased by more than fifty percent, a situation that led to a requirement from Government for additional financial assistance to sustain the business. Since Covid, the total amount received (in one form or another) from shareholders amounted to N$357.893m.
The business is also experiencing a number of operational challenges. These include:
- Asset base has been shrinking due to the lack of investments into upgrades to maintain value (and relevance) in a demanding tourism industry. Considerable backlog in maintenance and repairs exist, and most properties require significant investments to meet current tourism standards. Flagship lodges have not seen any substantial re-investment since 2005/06
- Below industry-par customer service – primarily resulting from a lack of a service-oriented business culture, low staff morale, substandard facility maintenance and an inadequate investment in a digital marketing and reservations front-end
- The four active PPPs are not crafted in the best interest of the business and have led to (ongoing) litigation.
Although the company has been trusted with some of the best potential resorts in the protected national parks, its product offering to the market is generally seen as inferior. Private sector tourism facilities and resorts have increased significantly and have in many cases become preferred tourism resorts for guests.
On a positive note, performance in the period up to Covid was encouraging and showed signs of a turnaround.
- The company recorded its first profit of N$22m in the 2019 Financial Year, when the turnover increased by 9.1% (YoY). The average increase in turnover for the 5 years prior to 2019 was 8.8%, above the industry average. As per the graph below, the years 2016, 2017 and 2019 were the best years in terms of revenue growth.
For the five years up to 2019, significant improvements occurred in the financial performance of the company. The storyline that emerges is that the company’s past poor financial non-performance was self-inflicted and that it is possible to turnaround the fortunes of the company. The success ingredient immediately prior to Covid-19 can be repeated in future to turn around the fortunes of the company. The two key success ingredients leading to 2019 were:
- Increased revenue levels, and
- Disciplined cost-control practices.
The new Strategic Plan should realistically be based on the following (minimum) assumptions to turn the business around:
- Potential to be profitable and financially sustainable (i.e., operating profits, no direct GRN assistance; also, with the ability to adequately fund renovations and the general uplift of the existing resorts in its portfolio)
- The market has already started to improve – so has the business. Year-end 2021/22 revenue has increased to N$218.8m (2021: N$144.6m) and the operating loss to N$32.05m (2021: N$96.9m loss). Travel & Tourism’s contribution to GDP has grown healthily by USD1 trillion (+21.7% rise) in 2021 to reach USD5.8 trillion, while the sector’s share of the whole economy increased from 5.3% in 2020 to 6.1% in 2021. Additionally, the sector saw the recovery of 18.2 million jobs, representing an increase of 6.7%.[1] Global tourism is forecast to grow by thirty percent in 2023 and should also benefit Namibia’s main tourist attractions: Etosha game reserve (comprising about half of NWR’s revenue), Sossusvlei, Swakopmund, Fish River and Kavango/ Caprivi
- Although Covid-19 is over, it’s effects will take the business some time to get to the same level as in 2019 N$395m). The key reason is that the quality of NWR’s product has regressed in the last three years (facility standards, customer service)
- Key executive and other critical positions to be filled from early 2023 – supported by sound and impactful staff training and development
- After years of austerity and cost cutting, the annual cost base of approximately N$282m is probably close to an optimal level for its current business and Resort portfolio. The main drivers for future revenue growth (and therefore profitability) are:
- Increased occupancy
- Increased international tourists
- Increased conferencing and events revenue
- Premier pricing (building on existing price differentiation in its product offerings).
- Interventions undertaken:
Since appointment of a new Strategic Advisor, numerous actions have been implemented to:
- Develop a proper Strategic Plan for the shareholder; with its repositioning and required capital expenditure requirements
- Develop a Public Private Partnership (PPP) plan
- Develop a turnaround plan for NWR (3-year timeframe)
- Assisting the new Board and CEO, programme manage the implementation of the aforementioned plans.
- Turnaround outcome/ results:
- Outcomes included:
- A return to profitability after 6 months – and sustaining the positive trend
- A redesign of the portfolio of Resorts – and the repositioning of each of these in Premium, Experience and Conferencing segments/ venues
- Major cost reduction
- New marketing strategy.
- Turnaround project details:
- Turnaround Engagement Leader: Paul Aucamp
Industry sector: Diversified holdings
Country: Kingdom of Saudi Arabia, Egypt, France, United Arab Emirates
Industry sector: Diversified holding company (Construction, Retail, Manufacturing, Trading)
Size: Turnover = SR 2.1bn per annum (approximately R10bn)
Engagement period: 58 months.
- Problem statement:
Identified a requirement to review its strategic direction. In so doing, a number of key questions have been identified:
- What is the business definition (‘raison d’être’) and mission of the company? What is its vision?
- Is it a classical Holding company? Or not?
- Should the company focus on active or passive investments? If so, what are the best sectors to invest in?
- What is the ideal Investment portfolio of investments? What is the best structure for these investments?
- What should the investment criteria and risk profile of the portfolio of investments look like?
- What is the ideal capital structure of the company? How should assets be allocated?
- What should the optimal shareholding structure be to unlock maximum value for shareholders?
- What is the best corporate governance structure for the holdings company?
- What are the best corporate performance measures and targets for the company?
- How should the company be best managed?
- To what degree should decision making be decentralized?
- What is the ideal composition of the Management Boards?
- How should management performance be measured?
- How can the performance and growth prospects of its operating entities be accelerated (i.e. Contracting, Trading, Manufacturing and Engineering)?
- How can the growth potential of these businesses be enhanced? What new markets and products / services should be considered?
- What are the performance targets (operational & financial) for each of these businesses?
- What are the best management structures for these businesses?
- What are the best business and operational strategies and plans for each of these businesses?
- How should corporate reporting take place?
- To the Board
- To executive management.
- Specific challenges:
The company requires major restructuring. This will not be without pain – but will likely result in significant benefit in both the short and longer term.
- Interventions undertaken:
In my appointment of a new Strategic Advisor, numerous actions have been implemented to:
- Develop a proper Strategic Plan, including its investment portfolio strategy
- Strategic and performance turnaround plans for each subsidiary.
- Turnaround outcome/ results:
Future strategy:
- #1: To build a uniquely diversified investment company:
- Investment strategy is based on diversification, sectoral diversity, long-term investments, and participation with investors in establishing new companies in GCC
- Our portfolio balances:
- A variety of asset classes
- Long- and short-term investments
- Investments in different countries in the GCC
- Actively managed and passive investments
- Our portfolio comprises of variety assets classes:
- Private Equity
- Property
- Strategic Advisory
- Managed Companies
- Investments in New Projects
- #2: Focus on investment in new businesses and large-scale projects and actively grows our current actively managed investments with improved performance.
- Value proposition to investors is as follows:
- Very good / above market related returns
- 75th percentile of market performance
- Achieve a gross IRR on fully realised funds in excess of 30%
- Good / unique business model
- Focus on GCC market
- Major growth opportunities in private equity and property
- Focus on growth sectors in the economy
- Good balance between:
- Long- and shorter-term investments
- Liquid and other assets
- Investments in GCC countries
- Proven Family track record and good management
- Value proposition to investors is as follows:
- Turnaround project details:
- Turnaround Engagement Leader: Paul Aucamp
- Other examples
| # | Sector | Problem statement | Work undertaken | Results/ Outcome | Duration | Engagement Leader |
| 1 | Petroleum SA | Loss making Division of a major petroleum company | Turnaround of a line of business in commercial division. Included: Re-pricing of servicesCost reductionChanges to business processesPerformance tracking systems and controlsRevised creditor terms negotiatedDebtor payment terms reduced | Net profit after tax improved by R30m per annum | 2019 | Paul Aucamp |
| 2 | Telecommunications (Zimbabwe) | Loss making fixed line Telco | Major turnaround plan for a regional, fixed line telecommunications operator with a declining market share and shrinking revenue. The outcome of this work led to a new direction in technology and marketing, and an offensive strategy to create a more sustainable competitive posture. | Result: Pre emptive intervention avoided future major losses and the sustainability of the business | 2020/21 | Paul Aucamp |
| 3 | Process manufacturing | Major steel producer with 4 Plants | Analysis of competitive position and value chain resulted in a major turnaround which included major organisational restructuring, major labour and other reduction, new capital investment plan | Result: A series of major financial benefits with a combined value of more than R500m per annum | 2012/14 | Paul Aucamp |