IMPROVING MARGINS THROUGH BETTER MI23RD JUNE 2016
Neil Morling CFO, Olswang LLP
Margin Improvement: to some a simplistic cost cutting exercise but to the more fortunate an opportunity to challenge the way an entity operates.
Pivotal to any improvement will be the M.I.
Introduction
EC Harris was a traditional LLP exiting recession, while having remained profitable found the world a very different place
We were an international built asset consultancy driven to deliver positive client outcomes across an asset's lifecycle.
Background
Sector consolidation was rampant driven by a blend of "survival instinct" and mega opportunities which demanded breadth and depth on a global level combined with the need for stronger balance sheets.
ARCADIS NV appeared a near perfect fit for EC Harris BUT our numbers just weren't good enough to secure full value.
Context
Spring of 2011 Gross revenue of £300m: 60% UK, 20% Middle East (Dubai),
20% Asia (Hong Kong) Our EBITA was c. 3%, entry ticket was 5% with a clear three
year route to 10% Predicted revenues were not wholly reliable 80% of cost base was people, 10% accommodation
The Challenges
1. Creating an awareness – WHY2. Creating a vision – WHAT3. Some examples – HOW4. Embedding - WHEN
The 4 key stages
Creating an awareness – WHYAssessment
1. Challenges of growth especially global Yes2. Economic downturn and tougher trading conditions Yes3. Changes in strategy Yes4. Technological changes Yes
5. Competitive pressures incl. M&A Yes6. Customer pressures, shifting markets Yes7. Learning new organisation behaviours and skills Looming8. Government legislation Probably
1. Creating an awareness – WHY2. Creating a vision – WHAT3. Some examples – HOW4. Embedding - WHEN
The 4 key stages
Desired Outcomes Ability to continually invest in clients, markets,
technology and capability Clearly understood Operating Model Clear accountability for P&L performance Clarity of MI at all levels within the organisation. Improved certainty on view of future revenues A cost base managed using foresight and not
hindsight,
1. Creating an awareness – WHY2. Creating a vision – WHAT3. Some examples – HOW4. Embedding - WHEN
The 4 key stages
Reshaped P&L
An MI Pyramid
The “Fan” Chart
Revenue Outlook
The Business Cycle
1. Creating an awareness – WHY2. Creating a vision – WHAT3. Some examples – HOW4. Embedding - WHEN
The 4 key stages
Embedding ChangeWe Identified 8 steps
1. Develop a high degree of urgency2. Secure absolute support of Board3. Develop a vision4. Communicate 5. Empower6. Capture quick wins7. Do not give in, refine if necessary8. Embed, play to it at all levels at all times
Twelve months to December 2011: Gross revenue £305m, Net Revenue £270m EBITA 4.2% Averaged DRO 95 days
Twelve months to April 2014 Gross Revenue £325m, Net Revenue £300m EBITA 10.1% Average DRO 80 days
The Rewards
Questions … ?