GS Hydro US Business Plan 2016 First Draft
-
Upload
kevin-kisamore -
Category
Documents
-
view
25 -
download
7
Transcript of GS Hydro US Business Plan 2016 First Draft
GS –Hydro US, Inc.Roadmap for creating a World Class Organization
Personal ViewGS Hydro US is not a “healthy” company. Our product offering is 40 years old, our employees are not adequately engaged, and we haven’t had a clear vision for who we are or want to be as a company in quite some time.
My goal is to transform GS Hydro US into a World Class Organization and we will need to make significant changes in order to do it. Those changes include:
-Creating a clear Vision for our employees, customers, investors, and vendors
-Establishing consistent and crystal clear roles and responsibilities for every person and department
-Holding people accountable for those responsibilities
-Choosing products and target markets suitable for our long term goals
-Become more systems and processes driven vs. people driven
Personal Vision• Create and implement a business model in which employees are
motivated and engaged, owners receive excellent return and equity on their investment, customers have a strong preference to work with us, vendors prefer to sell to us, and our competitors are afraid of losing their business to us. In other words – become a World Class Organization.
Personal Mission Statement• We will operate an organization that creates tremendous
value for its ownership while also creating extraordinary opportunities for its employees.
• We will consistently deliver leak free piping systems for demanding applications using quality materials, with multiple delivery methods, and that will in every way exceed our customers expectations.
• We will operate this organization on purpose and with intent. We will do it with honesty, integrity, and with an unwavering commitment to safety and the environment.
• We will have a clear vision of what we do, how we do it, and why we do it.
US Market Summary• GS-US has historically focused on core GS products and services in
core GS markets such as O&G, Testing, and Steel from our Houston, TX facility. It is a constant and costly challenge to consistently develop enough sales prospects for the small niche market our products serve from our one location. Our competition has the same issues which has caused the market to be segregated with Tube Mac big on the East Coast and Canada, BAR in the Midwest, and GS on the Gulf Coast. Parker seems to have given up on the US market for now.
• Leak free - ultra clean piping systems are great but only the most demanding applications actually “require” them or can justify their premium costs. We compete much more with welding than we do with other weldless companies.
Issues and Opportunities• Issue: Limited Geographical Presence in US
– Opportunity: Have numerous GS-US offices close to our strongest potential target markets and customers
• Issue: Limited/Niche Product Range
– Opportunity: Expand and differentiate our offering while taking advantage of our existing need for project inventory and purchasing abilities
• Issue: People Dependent Business Model and Severe Limitations on Growth due to the Niche Nature of our Product and Services
– Opportunity: Automate and centralize estimating, pricing, and engineering functions. Automate and centralize key fabrication technologies – become more process oriented vs. people oriented. Expand our product offering to include “common” connection technology.
Business Growth ConceptWe will dramatically grow GS-Hydro US through a synergistic combination of organic growth, core business improvement, acquisitions, and branding.
1) Open 25+ “GS Local” hose and tubing shops within five years in strategic locations around the US,
Mexico, and Canada.
2)Complete review and optimization of all processes, systems, roles, and responsibilities.
3)Key acquisitions of existing companies with strategically important offerings be it geographical, product oriented, or market driven.
4)Building of the GS-Hydro “Brand”
Organic Growth• GS Hydro US will revolutionize the way non-welded piping systems
and hydraulic hose is marketed and sold in North America. We will do this by establishing “GS Local” hydraulic hose and tube shops in every region and market area where there is or should be a demand for our core product. The attributes of a GS Local office is that they will be:
– Self Sufficient/Self Managed
– Differentiated from our competition
– Operated by GS systems and processes
– Designed to support growth of GS “Core” product
– Structured for rapid-profitable-scalable growth
– Inexpensively started with minimal risk/exposure
– “Franchise Ready” – Faster Growth and Lower Capital
Core Business Improvement• Restructure of our “Lead Fulfillment and Conversion” Department
– Aligning technical sales/quoting with project management and engineering
• Review and Optimization of all Processes, Systems, Roles, and Responsibilities
– Pricing Tool, Training, Order Entry/Processing, Reporting Structure, Performance Pay, Lead Generation Strategy, Field Work, Shop Processes
• Refocus Sales Efforts to Reduce Dependence on Oil and Gas
– Steel, Testing, Plants, Mining, Pulp and Paper, Hoses, Cranes, Mobile Transports
– BUT, Continue Developing our Land Based, Offshore, and Subsea Product Offerings
• Pursue New Markets and Seize New Opportunities when they Arise
– Processing Plants, Subsea Equipment, Skids, Test Equipment
• Improved Commodity and “Distribution” sales
– Bulk Commodity Sales, Strong Web Presence, Strategic Relationships
Acquisition Targets• Bar Hydraulics – Competitor with strong presence in Northern US and
Canada – mostly steel and plants – rarely compete directly with them – very good owner/manager – inferior but generally accepted in-house product line ;). The owner is “definitely” interested in selling and recently had a sale fall through. He obviously has a number in mind so the deal could be done quickly.
• Streamline Pump Systems – Small hydraulics company in Houma, LA – similar business model as GS but with different products – Pressure Test Units, offshore and subsea skids, high pressure fittings (Fine Lok), twin ferrule (Fine Lok), excellent account base, possible IPR, and strong engineering
• Fine Lok – Designs, engineers, and manufactures instrumentation and high pressure (HIP, Autoclave) fittings – manufactured in Canada – competes directly with Swagelok (equal certification in place) – possible strategic relationship with or acquisition of them
• Plastic Extrusion Company – TBD – GS Hydro branded clamp bodies
“GS-Hydro” Brand• We must develop a way (Brand) of doing what we want to do that dramatically
differentiates us from anyone else.
– Clamps – Manufacture own Clamp Bodies – Metal components from LMC
– Hydraulic Hose - Branded or Co-Branded – Manuli/AlfaGomma/Balflex
– Valves – Continue Branding Program with MHA
– Tubes – Continue or Expand Branding Program
– Other – Twin Ferrule Line, HP Fitting Line, Hose Sleeves, Flange Protection, Test Pumps, Chart Recorders, Testing Rooms
– Systems, Processes, Delivery, Warranty, Commissioning, Flushing, etc
– Techs/Staff – “Uniforms” – Consistent Image - Create Sense of Team
• GS Brand Statement – “Process driven delivery of leak free hydraulic hose and tubing”
Future Competition• I am not overly worried about our existing primary competitors – Tube
Mac, Bar, Parker, or even Welding. I am worried about the competition that is coming.
– Tess – Opened first office in Houston with plans for rapid expansion in the US – primarily hose business with intentions to pursue offshore hose management
– Stauff – Bringing DIN 2353 to the US – decent US distribution network and plans to introduce hose and possibly tube services to the US
– Pro-Serve – UK based company with growth plans – have similar piping (welded) but also offers most any other kind of piping, fabrication, electrical, offshore or on
– Alatas – Offshore crane service company that is the established US leader in hose management – primarily because of the other services they offer like rope access, NDE, crane inspections, etc.
Goals and Objectives• Start Implementation and Execution of the “Business Growth Concept” -
Immediately
• Pricing Tool/Processes/Structure Fully Implemented by Q3 - 2016
• Have 25+ “GS Locals” @ $2.5M/YR & 20% ROS ($62.5M/$12.5M) – 5 Years
• 1.5 X our “Core Business” revenue ($12M/YR) – 3 years – 2x ($16M/YR) - 5 Years
• 20%+ ROS for our “Core Business” ($2.5M/YR) – 3 years
• First Major Acquisition Completed by Q3 - 2016
• Have Limit of Authority and LOC Access Suitable for Execution of the Plan
Financial Plan
1st Year 2nd Year 3rd YearNumber of Locations 1 2 3
Annual Sales 747 2,844 6,036
Gross Margin % 36% 37% 35%
EBIT 20 431 866 EBIT % 3% 15% 14%
Headcount 4 16 28CAPEX (Leased) 168 168 168
Working Capital:Inventory 93 262 399 Accounts Receivable 44 122 186 Accounts Payable (58) (137) (259) Core Working Capital 79 248 327
(KUSD)
Bridge financing for 1st year working capital will be required, subsequent years 2 & 3 will be funded by internal cash flow.
All CAPEX will be leased, combined lease costs are included in P&L. Leases will be accounted for as capital leases.
Cummulative cash flow for the first three locations expected to be 0.6 MUSD by end of year 3
Breakeven EBIT in the first year followed by 14% EBIT in year three.
Sales growth per branch location assumes an annualized growth of 300% over the first 3 years.
Hose shop at Air Center Blvd. location open 1st Qtr of first year, Branch office in south Houston open 1st Qtr in second year, Branch office in west Houston open 3rd Qtr of second year. Opening dates could be accelerated since we currently have existing qualified employees.
Resource Requirements• List requirements for the following resources:
– Personnel – Intent is to add as supportable – not grow a large organization before revenue starts. GS Local Employees will be added as we open stores and grow. We may need someone to oversee the building of the pricing/engineering model and someone experienced with creating “franchise” type processes and systems.
– Technology – Two major items are needed. 1) Pricing tool/engineering software <60K and 2) CNC bending/grooving equipment ($1M +). Both items can be leased to minimize cash expenditure.
– Finances – Our intention is to lease most all of the equipment and vehicles needed for the plan. Our cash flow projections are positive and we would ask for a contingency LOC (line of credit) of $1M.
Resource Requirements (cont)
– Promotion – We would like to develop a strong web presence to actively promote online sales of all our commodity products. The web is not going away and a nicely executed web site and commerce portal would be very beneficial. Site itself nothing fancy – basically a very straightforward means to price and order products with minimal basic technical data.
– Products – We are forecasting an increase in inventory but it should be relatively modest if we (GS US) can choose our vendors. Again – increases in inventory value would be directly tied to increases in revenue.
– Services – There would be modest legal costs to properly protect the company from liability and possibly an increase of accounting cost depending on the final business structure created.
– Equipment – Equipment for the GS Hydro Locals will be detailed in my presentation but again – most of it will be leased to minimize risk and cash flow.
Risks• Risks are minimal – with the exception of the CNC equipment, all other
expenditures are relatively low and could be mitigated in the event of failure. The pricing/engineering tool is needed regardless of our success or failure launching the GS Locals. The only other financial risk is the cost of rent. If we open a GS Local and it fails – the rent costs don’t go away although they could possibly be mitigated by a sub-lease or buyout. We expect to sign no more than a 36 month lease and will aim for less.
• We are at an awkward time as far as the market goes which provides both opportunity and risks. The opportunities are that we can possibly acquire companies and great people more economically and customers are considering new suppliers. The risks are that the market hasn’t bottomed out and customers are only looking at new suppliers in order to dramatically lower cost.
Rewards• The rewards for the anticipated success of this Business Concept are
extraordinary. Success will include:
– Extremely Happy Investors – both financially and because the business becomes “saleable” due to its growth, branding, differentiation, distribution footprint, and its lessoned reliance on people vs. processes and systems.
– Employees will be engaged and motivated by the opportunities created and clear roles and responsibilities they have. They will work for a “healthy” organization.
– This same model could be expanded into both our existing country locations and new global target markets like India or Australia.
Is This a Good Plan?• Gives us better geographic and sales access to new and existing
customers
• Makes more efficient use of our labor supply
• Provides career path from 18 years old to 67
• Gives us a good distribution network for new products
• Provides a layer of stability against market changes
• Easier and faster growth with systems instead of people
• Creates more opportunities for GS Hydro Core Business
• It’s scalable – can ramp up growth quickly – especially with franchising
• Limited capital requirements – especially with franchising
• Good model for pay for performance comp plans
Immediate Action ItemsGroup Level Actions
•Approval to Proceed with First 3 Houston GS Locals
•Establishment of Milestone Success for Opening More
•Approval for Ordering Equipment, Signing Leases, Hiring for GS Locals
•Approval for Ordering Pricing/Engineering Tool
GS US Level Actions
•Finalize starting inventory and equipment, new order entry process, order MSU’s, arrange leasing, update non-compete forms, determine legal structure/issues, find shop space, find PM for pricing tool implementation, finish roles and responsibilities, etc, etc, etc
Management Team• Kevin Kisamore – Managing Director
- Turnaround Management Experience – 20+ Yrs.
• Scot Wilkerson – VP - Operations/Estimating
- Contractor Experience – Sales/Ops/Eng – 20+ Yrs.
• Bernard Brown – VP - Business Development
- Contractor Experience – Sales/Ops/Eng – 12+ Yrs.
• John Willhite – Controller
-Corporate Accounting/Finance – 30+ Yrs.
• Sharla Grossie – HR/Accounting
-HR/ Accounting/Finance – 10+ Yrs.
Essential Business Disciplines
Functional Org Chart/Model
GSH-US – Structure
GS Local - Structure
Branch Office Proforma P&L – 5 YrGS Hydro US, Inc.Branch Office Proforma P&L
(KUSD) Year N Year N +1 Year N +2 Year N +3 Year N +4Sales: Branch Office 630 2,202 4,785 7,494 8,784 Remote Distributors 117 642 1,251 1,791 2,127 Total Revenue 747 2,844 6,036 9,285 10,911 Driect Material Costs (35%) 261 995 2,113 3,250 3,819 Production Related: Production Labor Costs 110 430 1,065 1,338 1,350 Production Fringe Benefits 37 154 327 386 390 Shop Supplies 15 57 121 186 218 Maintenance 7 28 60 93 109 Safety 1 3 5 5 5 Warranty 6 22 48 75 88 Lease on Cargo Van & Equipment 42 105 189 210 210 Total Production Related Costs 218 799 1,815 2,292 2,370 Net Margin 267 1,050 2,109 3,744 4,722 Net Margin % 36% 37% 35% 40% 43%
Administrative Costs: Admin Salaries 85 213 450 700 700 Admin Fringe Benefits 23 58 123 191 191 Auto Allowance 9 23 41 45 45 Credit Card Discount Fee 5 18 38 58 68 Advertising 11 25 25 25 25 Rent 90 225 405 450 450 Utilities 5 13 23 25 25 Telephone / Internet 1 3 5 5 5 Auto, Fuel, Tolls, etc. 2 5 9 10 10 Office Supplies 1 3 5 5 5 Parent Admin Service Fees 15 57 121 186 218 Total Admin Costs 247 640 1,242 1,699 1,742 Depreciation - - - - - EBIT 20 410 866 2,044 2,980 EBIT % 3% 14% 14% 22% 27% Headcount 4 16 28 30 30Avg. Branch Sales $ / Employee 158 138 171 250 293 Capex Leased Leased Leased Leased Leased
Expense items included in Parent Admin Service Fee:Liability InsuranceProperty InsuranceProfessional Fees - ISO CertificationProfessional Fees - Accounting & AdminI.T. Support
Cash FlowGS Hydro US, Inc.Branch Office Proforma Cash Flow
(KUSD) Year N Year N +1 Year N +2 Year N +3 Year N +4
Income (EBIT) From Operations 20
410
866
2,044
2,980
Changes in Working Capital:
Accounts Receivable (*) (93)
(262)
(399)
(406)
(203)
Inventories (*) (44)
(122)
(186)
(190)
(95)
Cash Flow From Operations (117)
25
281
1,449
2,682
Financial Investments:
Initial Capitalization (Loan) 117
-
-
Repayment
Net Change in Cash Position 0
25
281
1,449
2,682
Beginning Cash Balance -
0
26
307
1,756
Ending Cash Balance 0
26
307
1,756
4,437
(*)Assume AR turns 8 times a year(*)Assume Inv turns 6 times a year
CAPEX for GS Local