Key Note Best practices in operational ... - TMA · practices in operational restructuring process...
Transcript of Key Note Best practices in operational ... - TMA · practices in operational restructuring process...
Key Note – Best practices in operational restructuring process
Petr SmutnýBusiness Recovery LeaderPwC CEE
www.pwc.com
PricewaterhouseCoopers Česká republika,
s.r.o.
Agenda
Operational restructuring – key areas and prerequisites for successful restructuring
Case study – operational restructuring of Tatra
PricewaterhouseCoopers Česká republika,
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When is the right time to start with operational restructuring?
Strategic crisis
Profitability crisis
Liquidity
crisis
IncomeStatements
The problemappears on the:
Balance Sheet Cash Flow
MIN
MAX
Insolvency risk
Right time for operational restructuring
Corporate crisis curve
June 2017
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PricewaterhouseCoopers Česká republika,
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Operational restructuring is often a synonym for cost cutting, but it is only one aspect that can sometimes be even damaging in long run
• Owners in the role of management
• Bad investments
• Missing strategy
• Bad product mix
• Complex corporate structures
• Poor data, controlling and planning
• Inefficient processes and systems
• Low productivity
June 2017
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Typical profile and reasons for crisis
Usual reaction: COST CUTTING
Optimal reaction: COMPLEX CHANGE
PricewaterhouseCoopers Česká republika,
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Operational restructuring is a complex change where all business & financial aspects need to be taken into account…
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Strategy
Finance and liquidity
Company structure
Sales
Supply Chain Management
Production
• CF and working capital management
• Financing and debt structure
Finance and liquidity
• In house production vs. outsourcing
• In house R&D• Planning and Efficiency
Production
• Purchasing• Logistics
Supply Chain Management
Operational restructuring
• Business model• Markets, product lines, M&A
Strategy
• Ownership structure• Intragroup relationships
• Organisationalstructure
Company structure
• Product portfolio
• Marketing and pricing
• Sales activities
Sales
Operational restucturing – key areas
June 2017
PricewaterhouseCoopers Česká republika,
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…and usually takes from three to twelve months
6 – 8 weeks
time
Stabilisation of the company / liquidity management
Operational (and strategic) restructuring
Financial restructuring
Regular independent monitoring
IBR
Restructuring process
3 – 6 months
3 – 12 months
6 – 12 months
Complete turnaround process
Quick wins
6 weeks
June 2017
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PricewaterhouseCoopers Česká republika,
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Mix of key success factors is a prerequisite for a successful business turn-around – the management is crucial
KEY DRIVERS
KEY
SUCCESS
FACTORS
Sense of urgency –buy in from all
employees
Regular monitoring of implementation
Timely re-aligment of plan
Clear strategy of whole restructuring
Detailed operational restructuring plan with goals and responsibilities
Strong management –CRO – with clear mandate
June 2017
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PricewaterhouseCoopers Česká republika,
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Operational restructuring of Tatra
June 2017
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PricewaterhouseCoopers Česká republika,
s.r.o.
TATRA is the oldest vehicle factory in Central Europe and the second oldest in the world
TATRA - historical facts & higlights
• 1850 - Ignác Šustala begins the production of carriages and coaches
• 1923 - Hans Ledwinka introduced “TATRA vehicle concept” (central load-carrying tube and directly installed air-cooled engine and transmission with independently mounted swinging half-axles)
• Visionary concepts
• Aerodynamic chassis – Tatra 600 (TATRAPLAN) - 1948
• Boxer engine – Tatra 600 (TATRAPLAN) - 1948
• Aluminium chassis – Tatra 601 Monte Carlo 1948
• Legendary trucks:
• Tatra 111 (1946 – 1962)
• Tatra 148 (100 000 pcs in CEE)
• Production capacity 15 000 trucks p.a.
• Exported to 53 countries of 5 continents
Tatra T148
Tatra T111
Tatra T600
June 2017
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PricewaterhouseCoopers Česká republika,
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TATRA was hit hard by 2008 Economic crisis especially due to late deliveries in below par quality
Situation in 2008
URGENT NEED
OF
STABILIZATION
• Full order book until June 2008
• Due to order cancellations 390 trucks on stock
• Reasons for crisis – high fixed costs, low adaptibility to market changes, obsolete structure, quality issues of engines
• Ongoing TATRA production led to:
• Disproportionate level of inventory – ca EUR 56m in material and WIP and EUR 22m in trucks
• High ARs of EUR 40m
• Excessive number of employees – 3 800 by end of 2008
• Negative operating cash flow of EUR -20m
• No available cash, excessive level of bank debt of EUR 55m
2007 2 453 300 25 54
2008 1 962 370 8 88
2009 992 140 -15 45
YearTrucks [pcs]
Revenue [EUR m]
EBITDA [EUR m]
Inventory [EUR m]
June 2017
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Comprehensive approach addressing all critical areas was defined and implemented in order to resolve TATRA´s crisis
Strategy
Finance and liquidity
Company structure
Sales
Supply Chain Management
Production
• Short-term stabilization• Decreased fixed costs
and break-even point• Reduction of debt,
divestments• WC optimization –
inventory reduction
• Simplification and economies of scale
• Focused R&D on core products
• Mainstream vs. Custom-made production
• Streamlined supplier structure and material flow
• Increased ability of planning
Operational restructuring
• Change in business model (core business - chassis, components outsourced)• Strategic partnership
• Divestment of non-core assets (incl. subsidiary)
• Minimisation of distorting I/C transactions
• Reduction of employees• Shareholder and organisation
structure adjustments
• New opportunities (DAF) –access to new markets and
customers• Streamlined product
portfolio• Competitive pricing
Operational restructuring - TATRA
June 2017
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PricewaterhouseCoopers Česká republika,
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Results of restructuring
• Short- and long-term stabilization, maintained continuity of business & employment
• Contract with DAF – strategic partnership
• Clear strategy and business model
• Simplification of multiple areas and ability to clearly focus on core business / strengths
• Transparent and flexible structure
• Creditors recovered 100% in several months
June 2017
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Thank you for your attention
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Petr Smutný
Partner
Tel: +420 251 151 215
Mobile: +420 602 648 602
Email: [email protected]
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