choppy waters demand a strong skipper: a case study · choppy waters demand a strong skipper: a...
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Choppy Waters Demand a Strong
Skipper: a Case Study
27/28th January 2016 Steve Francis – Turnaround CEO
CHC Chief Executives’ Conference, Miskin
Steve Francis - Bio
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• Successful Danwood turnaround. Nominated for 2015 CEO of the Year • CEO/ CFO for complex operational turnarounds with turnover £100m-£2bn. • Experienced in large operational transformation/ restructuring involving financial distress or
change of ownership. Former roles include: – Group CFO/ MD, Vion Foods UK (£2bn turnover), UK’s largest meat producer – Group CFO and former Member of the Management Buy-in Team at Vita Group (£1bn
turnover), an international plastics manufacturing conglomerate • Former McKinsey consultant and partner of PwC • Banking career including MD and Head of Corporate Finance Advisory at Barclays Capital • Member of Advisory Board of CRESC and contributor to several publications. Recently gave an
open lecture to Manchester Business School on “Where Next for British Business? A Return to Traditional Values after the Casino Days”
• Former Visiting Professor and Advisory Board member at Oxford University Business School
CHC Chief Executives Conference – 27/28 January 2016 Steve Francis
ABOUT DANWOOD: UK’s #1 Independent Managed Print Services Group
36,000+ Average number of support
centre calls per month
100,000+ Machines in Field
£195m Revenue
The UK’s largest, most influential, multi-brand channel partner in the world
25,000+ Average number of tech
visits per month
3,000+ Number of different device
models currently being supported
2,000+ Combined years of
engineering experience
The largest professional
services team in the UK
within our industry
3 CHC Chief Executives Conference – 27/28 January 2016 Steve Francis
ABOUT DANWOOD
We service SIX BILLION pages per annum
Stacked as reams this would exceed the
height of Everest every week
Laid out it would cover the City of
London every 4 months
Equivalent to 268 acres
of forest every year
Would use up 50,000 sq ft of
office space or 113TB of
Storage
4 CHC Chief Executives Conference – 27/28 January 2016 Steve Francis
Danwood: Before and After
October 2012: • Growth through acquisition • Unprofitable: high costs/ manual
systems • Running out of Cash • Small Family Business grown Large
(1,800 employees) • Fragmented structure: Regional
Baronies, poorly controlled & inward-looking
• Old-fashioned Ways/ Untrustworthy
• Reactive Service • Knowledge in Individual heads;
little focus on IT backbone • Many legacy issues
September 2015: • Strongly profitable, well-invested • Clear Direction & Strong Governance
& Values • Legacy issues with customers
decisively resolved • Clear UK focus • A few Deep Partnerships • An Integrated Business delivering
Consistent Service • Industry Leading Management • Functional Excellence – Outward-
looking • Continuous Innovation • Big Data/ Knowledge-driven; Cloud-
based
5 CHC Chief Executives Conference – 27/28 January 2016 Steve Francis
Danwood Status: October 15th 2012 – Appointment of new CEO
• Group Finance Director left in June 2012, replaced by interim CFO • 3rd delay in publication of overdue 2011 Audited Accounts; PwC’s first audit into its 9th month • Group’s banking facilities in default and the banks (Barclays and RBS). Now handled by their
“work-out” teams • A “whistle-blower” investigation by Deloitte’s forensic accounting team underway, initiated by
the Board, triggered by allegations about accounting and contracting irregularities • Relations between Board and Chairman/ CEO/ founder (Colin Daniels) were strained due to
missed profit targets • On October 15th 2012, the PE backers made some decisive changes:
– New Non-Executive Chairman appointed and took on relationships with Banks and auditors – New CEO, Steve Francis, appointed with responsibility for introducing “a more professional
management regime”, if possible working with the founder – Both set the task of stabilising the business urgently – CEO asked to “professionalise” the group.
What Type of Leadership Was Needed?
• Bias to Action. Rapid fact-based assessment & decisive actions. Confidence to act quickly • Creativity. Step-changes in Complex, Ambiguous Situations requiring new angles, insights and
innovative new business models. Happy to challenge orthodoxy. “Steve has been like a Lawrence of Arabia in this role”, former #2
• Calculated and Methodical Risk-Taking. Emphasis on rigour and quality in execution. Analytic, quantitative, financially-literate: clear structure/ process, accuracy, detail
• Preference for “Trust & Delegation” to “Control” but err towards Centralised Controls initially • Strong Values/ Ethics. Unshakable business & personal values. Belief in highest standards of
governance. Instil strong values and clear accountability as a foundation stone • Working in Teams. Build teams and coalitions at pace • Results-focused, “getting stuff done” • Be Relentless but Consultative; Care about your team; Spot strugglers and Develop them.
Empathy rather than sympathy.
Press Reports during the Early Months
FOUNDER AND CHAIRMAN OF DANWOOD SACKED The founder and chairman of the Lincoln firm Danwood has been sacked. His employment with the company was terminated this week after he was suspended along with three other senior directors. A spokesman for the Whisby Road business said 3 Other Senior Directors would remain suspended until the conclusion of "due process". The office printing equipment supplier has not revealed the circumstances behind the suspensions or why Mr Daniels was removed from his post. Lincolnshire Echo, January 23rd, 2013 DANWOOD BOOKS £20M LOSS AND RESTATES 6 YEARS’ ACCOUNTS Danwood Group has been forced to restate its accounts for the last six years after uncovering "accounting irregularities" relating to Managed Print Services (MPS) contracts. Ernst and Young, who had been the group's auditors since 2008 and who signed off its original 2010 accounts, were replaced by PricewaterhouseCoopers (PwC) on 25 October 2011, following a review during which PwC identified the accounting irregularities. Print Week, January 14th, 2013
Press Reports during the Early Months [Continued]
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FOUNDER AND CHAIRMAN OF DANWOOD SACKED Troubled print biz lost £8.5m in fiscal '12 Danwood's exec team has completed a review of operations including "contract documentation" this month. It began the review in September 2012 when a whistle-blower blew the lid on dodgy book-keeping practices spanning fiscal 2005 to fiscal 2010. This discovery forced the group to restate its numbers for the six years ending fiscal 2011, which it refiled in January this year, showing a near £17m drop in sales and £8.5m less in operating profits. The "accounting weaknesses" (PDF) admission and subsequent review, initiated by private equity backer Bregal Capital, saw the departure of founder and chief executive Colin Daniels, who resigned in January to be replaced by Stephen Francis. Bloodletting at Danwood was not confined to the chief, with the wider sales force also made to pay for the mistakes of the few at the top. Channel Register, May 28th, 2013
• Teamwork, Openness, Transparency
• Partnership & Mutual Trust
• Love our Customers before Profit, Know them Better
• Discipline, speed & efficiency
• Develop, Train, Inform and Empower Our People
Danwood Values – Foundation of the Turnaround & Recovery
Overview of a Turnaround: Danwood Group 2012-15
Winter 2012: First 50 Days
“Take Control”
Jan-May 2013: “Stabilise & Plan”
June 13-June14 Profit Turnaround
June 14-Summer 15 Re-birth
Overview of a Turnaround: Danwood Group 2012-15 - i
Jan-May 2013: “Stabilise & Plan”
June 13-June14 Profit Turnaround
June 14-Summer 15 Re-birth
• Install new governance and reinforce strong values, improved reporting; “New Danwood”
• Strong cash management, delay payments – manage liquidity daily/ continuously
• Institute temporary, conditional amnesty – “Lance the Boils” • Suspend majority of Executive Board including Founder/ install external
replacements • Produce Heavily Qualified 2011 Audited Accounts “Worst in the Firm this
year” – PwC. Questions on going concern…..
Winter 2012: First 50 Days
“Take Control”
Overview of a Turnaround: Danwood Group 2012-15 - ii
Jan-May 2013: “Stabilise & Plan”
• Emergency cost reduction (<£10m pa.), reduce salesforce by 50% - get to
trading cash break-even (500 person salesforce cut in half) • Centralise management & controls, dismantle old regional “Baronies”,
remove layers of senior management • Review all major customer contracts, continue investigation of legacy issues,
further suspensions and dismissals • Build “Fragile Coalitions” of stakeholders and management – “Brutal
Openness”; “Keep Your Nerves” • Publish clean, unqualified 2012 Audited Accounts
Overview of a Turnaround: Danwood Group 2012-15 - iii
Winter 2012: First 50 Days
“Take Control”
Jan-May 2013: “Stabilise & Plan”
June 14-Summer 15 Re-birth
• Cash injection to fund exceptional and legacy costs - £8m.; Refinance bank debts
• Secure Customers and Contracts, Build Trust with all Stakeholders • Centralise and Modernise Service Delivery, Fix Unprofitable Customers &
Contracts (“Shrink to Health”) • Reduce Back Office Costs, Property Costs • EBITDA back to £1m per month (historic high % EBITDA margins), 30%
improvement in productivity in 18 months June 13-June14
Profit Turnaround
Overview of a Turnaround: Danwood Group 2012-15 – iv Rebirth
Winter 2012: First 50 Days
“Take Control”
Jan-May 2013: “Stabilise & Plan”
June 13-June14 Profit Turnaround
June 14-Summer 15 Re-birth
• New Sales and Marketing Leadership, Streamlined Management team • £8m investment in Cloud-based “Big Data” systems & analytics across
12,000 customers: “i-Danwood” • Grow Organic Sales via Campaign-driven OEM Partnerships • More Joined-up Danwood/ OEM Major Deal Business Development
Processes • Industrialise & Automate the Customer Renewal/ Retention Life-cycle
STRONG, STRATEGIC SUPPLIER RELATIONSHIPS
Meeting with Dr Inamouri, Founder of
Kyocera, Oxford, June 2014
Presenting at Samsung’s New Product Launch in Monaco,
February 2015
With Canon Global Leadership, Tokyo, June 2015
With Samsung Global Leadership, Korea, November 2014 Receiving a Partner Award from
Xerox Global Leadership, Miami, May 2015 With Ricoh Global Leadership,
Tokyo, June 2015
Building strong and strategic Supplier partnerships was at the heart of Danwood’s strategy Detailed Joint Business Planning driving Competitive Advantage
DANWOOD WINS SPECIALIST RESELLER OF THE YEAR AT CRN AWARDS
• Reseller awards recognise excellence in the delivery of solutions, service and support to end user customers, taking into consideration the reseller's ability to deliver real benefits to the user organisation, and to meet customer objectives in terms of improved efficiency, ROI and investment protection, and cost reduction.
• Our entry focused on the ‘new Danwood’ and used Yorkshire Building Society and Thomas Cook as customer testimonials.
• CRN is a multi-channel newspaper (print, web & mobile) providing news and commentary on the technology industry.
Danwood wins! Specialist Reseller of the Year Recognition across the technology industry and our peer group. Danwood rated #11 out of 55 in CRNs top Value-Added Resellers – ahead of Dixons, Annodata and Dimension Data, and only 8 places behind BT!!
Recent Press – Summer 2015
CEO FRANCIS EXITS STAGE LEFT Hauled half-dead print services biz back to black The CEO brought in by Danwood’s backers to extinguish the financial flames that resulted from half a decade of systemic mismanagement and dodgy bookkeeping practises, has exited. Steve Francis, the self-proclaimed serial turnaround expert has left the building in far better shape than he found it in October 2012 when the print services provider reported a loss of £21m. The exec said he joined at a “point of crisis”, following the discovery of accounting errors that forced Danwood to restate six years’ worth of financials. Francis overhauled the structure and senior team. Chairman Bob Ellis pointed out that after work undertaken, Danwood returned to the black in fiscal ’14, and has resolved the “remaining inherited legal and contractual issues” with customers. “The remit for which Steve was engaged is now complete,” he said in a canned statement. Control of the organisation has been passed to chief operations officer Wes Mulligan, who was one of the early recruits made by Francis. Channel Register, September 1st, 2015
Messages at Conclusion of Turnaround, September 2015
Dear Steve Gosh , you must be longing for a damn good rest after 2 years 10 months ! You built a team , generated energy , determination , self-belief and enthusiasm , whilst simultaneously leading the complete rebuilding of Danwood to the stage where the endeavour certainly will be remembered as a model, highly successful ‘ turn around ‘ . You set examples of decency , honesty and integrity and reminded Danwood’s employees ,customers and suppliers what is a proper business and how it should earn and deserve loyalty and support . Well done for achieving such a huge transformation in a very short time . With my best wishes Adam Hackett, former Group Sales Director, Danwood