30th Sep 2006, by Andrew Barr

Real Business magazine - top ten business turn-a-rounds

Real Business is another magazine we take here at Yeti Towers and this months (September 2006) had two particular articles I was interested in.

The first was to do with the Top 10 turn arounds in business over the last few years and the second was an interview with David Cameron by the editor Adam Leyland.

Before I go onto the David Cameron interview, the top 10 turn-a-rounds, according to Real Business

1. Marks and Spencer under Stuart Rose.
The gist is that he went in, fought off Phillip Green (interesting to note BHS is now struggling), and then set about turning things round by cutting down on all the micro brands, selling off the Credit Card arm and changing the purchase process so they had less surplus stock hanging around and could react quicker to seasonal trends changing during the season.

2. Fads/Homestyle under Jon Moulton's Alchemy Partners
With this one the company was absolutely fubar'd when it was sold to Moulton for just £2. After two years of cost cutting and "stock rationalisation" the partners were able to remove £27m from the business. Not a bad return! In a classic example of money motivating staff, store managers were empowered to order their own merchandise and allowed to keep 10% of any increase in profits from the store through wider margins. profit then came in months!

3. Hornby
Went through two management buy-outs and down the route of product diversification before realising that the best way was to sever its work-force routes in Ramsgate and outsource production to China. I imagine the owners got a real kicking about that from the local and national press! Still, it worked as the business turned around and profits increased to the extent that the company is now in a position to win lucrative contracts for film spin off merchandise such as Harry Potter.

4. Sommerfield
The general story is that the company bought Kwik-Save and bungled the plan to harmonise both brands and sell off the poorly performing stores. When the rubbish stores could not be sold the share price dropped and the boss was given his P-45. The new boss, Mr von Spreckelsen, kept the two brands running seperately and all went well, resulting in a profitable buy-out in 2003.

5. Merrydown
The brand introduced the alcopop Two-Dogs, could not keep up with demand and this led to its rival producing similar drinks that ate into Merrydown's market share. When the company was on the verge of collapse thanks to poor sales a consortium of drinks business heavy hitters took over. They proceeded to re-position the popular brand of Schloer (also owned by Merrydown) and a few years later they were bought out by a company called SHS who also own the brand WKD.

6. British Energy
We all know the story, company was privatised, nearly went t*ts up but the government saved it with a £600m loan. The government also dropped in Arup Associates to turn it around and it looks like they have done the job. That being said, personally, I think it is a bit early doors to be saying it has fully turned around.

7. BHS under Philip Green
A shame that this article came out a few weeks befoer it was announced that BHS is not performing very well this year. Still, since taking over Green has sorted out M&S's poor relation to the point that it nearly took its crown.

8. Tarsus
Never heard of them myself until this article but seem a pretty awesome company. Basically they do exhibitions and rightly saw the internet as the future but they made a few dodgy community-website-designer-company buys and this sent the share price right down. The guy who took them into it has also led them out though, having secured a recapitalisation deal worth £5m

9. XAAR
An IP company that I don't fully understand. Was going to set the world alight with its innovative printing technology but it did not go quite to plan. Instead the company started manufacturing other items and that didn't seem to go smoothly either. It seems all is ok now though with the company making a £10m profit last year.

10. Clarks
Reading the info about this company was a real revelation. I didn't know that, a, Clarks was based in Somerset, b, it was a global company and, c, that it is the third largest shoe retailer behind Nike and Reebok! Tirns out the company was in the doldrums, similar to Hornby, because it made its products in the UK and needed to offshore to remain competitive. The new boss, Tim Parker, took the necessary action and raised profits from £20 to £60m in only 7 years.

All in all a good read.

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