Connect with us

Lessons Learnt

How Peter Mountford Became The Turnaround King

Here’s how a failing behemoth found its feet, got back on track, and turned a profit.

Nadine Todd

Published

on

peter-mountford_super-group-holdings_business-lessons-learnt

VITAL STATS

Player: Peter Mountford

Company: CEO, Super Group Holdings

Awards: EY Southern Africa World Entrepreneur Award 2016

Group Turnover: R30 billion for the 2017 financial year

Market Cap: R12 billion.

Visit: www.supergroup.co.za

When Peter Mountford was asked to return to Super Group as CEO in 2009, it was to help the holding company regroup and find its way back to profitability. The business had lost its way. Super Group itself had annualised pre-tax losses of approximately R1,5 billion. Its borrowings had escalated to R4,3 billion and there was virtually no shareholder equity left in the business as a result of aggregated losses.

Something had to be done if the group was to survive. Sharks were circling the waters, looking for opportunities for a hostile takeover. Attrition and even death were imminent. The whole situation was a lesson that even large, profitable businesses can lose their way. It was time to make some changes.

Q: How did Super Group find itself in such a precarious position in 2009?

In a sense, the group had lost direction from 2006 to 2009. Our core businesses are supply chain, fleet lease and dealership businesses. We had lost sight of that and expanded into a series of industrial products businesses, which were importing and assembling a range of Chinese trucks, material handling equipment and so on. These businesses had underperformed and were losing R1 billion per annum.

Related: Siya Mapoko Measures Success By 4 Simple (But Essential) Yardsticks

We’d also gone into a number of retail and panel beating-type investments, which were also underperforming. Revenues were down, borrowings were up, and many of the group’s businesses were experiencing a cash squeeze. The group found itself under enormous pressure as a result. 

Q: Why were these businesses performing so poorly?

Each of the businesses needs to be looked at in its own right. The material handling and trucking-type businesses were entering a highly competitive South Africa landscape.

Super Group entered the market through businesses that largely imported and assembled products, but were competing against strong manufactured products and brands in South Africa. They just weren’t getting critical mass. This resulted in overstocking issues, which meant the businesses in that space were in a cash squeeze.

In the retail environment, Mica hardware had seen a failure of systems, and in response to that the business had moved to a royalty-based model. The value proposition for a franchisee is central procurement, administration, stock control, creditors and payments and collections.

A royalty model didn’t add value for us or them. Mica had a loss level of R500 million. We focused on turning that around, and managed to do so, but we knew a change in direction was necessary as well.

Related: Tough Lessons Flume Learnt To Survive Super-Charged Growth

We realised reasonable value on the sale of Mica, and the business could have worked within the group, but we also recognised that our core interests weren’t in franchised brands that had building material retail interests.

In coming back to the group we did an environmental scan that pinpointed Super Group’s core competencies, and these were supply chain, fleet leasing and dealerships.

Q: What were the key elements of the turnaround strategy?

In a nutshell, you need to reduce costs, bring down — or even eradicate — debt, increase cash flow and improve your focus.

We placed significant emphasis on cash generation and the need to get our balance sheet back to where it should be. At that stage, Super Group’s asset value was largely held across 16 lending banks. We needed to re-establish ownership of the underlying net assets of the business, which meant we needed to start making a profit.

We spent three years focused on regenerating our three core business pillars, highlighting the importance of cash generation. We managed to turn the group around to modest profitability — R150 million pre-tax profit by 2010. By 2012 the core group businesses were starting to perform well, and we had paid back all of our borrowings, were in a net cash position, and had managed to re-establish ownership of the underlying net assets of the business.

Q: What did rebuilding your core competencies entail?

First, and most importantly, it meant exiting areas that were not part of our core competencies. We immediately exited the industrial products division. This was a massive burning platform for us, losing over R1 billion per annum.

We were then able to realise some fairly reasonable cash injections via the disposal of AutoZone, which yielded over R400 million, and Mica Hardware, which over time realised over R230 million.

After we jettisoned some of our underperforming areas, we could now focus on rebuilding our core competencies.

We recognised that while the dealership model isn’t the most profitable area of our business, it does have an important role to play. In a mobility sense it’s complementary to both supply chain and fleet lease operations.

Focusing on driving operating margins

We had a strong management team in place and so we focused on driving our operating margins as a percentage of sales from lagging areas of 1,5% up to where we are today at 3,2%. We chose one area to focus our attention on, and that was it. We paid attention to the numbers, and how we could achieve the numbers we were looking for.

Within this context the dealership model becomes good. It’s relatively modest in a capital intensity sense, and we could leverage our other businesses off the dealerships. As a result, we’ve grown our dealership interests quite nicely.

By 2009 our supply chain businesses had lost a significant portion of their customer base. They had a failing fleet scenario, with large elements of their fleets parked off.

We needed to re-establish some of the management levels and layers that no longer existed — starting with marketing and new business development departments. At the time we hardly had the ability to respond to tenders. Because of cost-cutting a lot of those elements had fallen by the wayside.

peter-mountford_super-group-holdings_business-lessons

Q: Once you had regained a measure of control over the business and were back in a cash positive position, what was the next step?

By 2012 we were in a position to enter a more expansionary phase, which gave us the ability, with a very strong balance sheet, to start looking at what new business areas we wanted to enter in South Africa and abroad.

We did not repeat Super Group’s mistake of the past, which was to enter into completely new territories. Instead, we focused on opportunities that played into our core strengths.

In South Africa we identified four key growth areas.

  1. Fast foods distribution. This is a high-growth area. Our first acquisition was Digistics, a company that provides end-to-end supply chain solutions to many of the major fast food distributors in South Africa, from procurement to freight forwarding and clearing, warehousing, distribution and even collecting debtors’ book on behalf of the franchisor. This was absolutely within our core.
  1. Fuels, hazardous chemicals and bulk powders. Up until that point we had largely left this environment unchallenged and in the hands of our competitors, who had a very strong position in this sector. We invested in Haulcon, which at the time was a failing group, rebranded the business as SG Bulk, and have built that up into a successful bulk cement powder, hazardous chemicals and fuels distribution-type business. 
  1. The bottom end of the retail market. Most of the supply chain players in our environment are focused on top-end and mid-trade distribution. Top-end encompasses the big five retail groups, and mid-tier retailers like 7-Eleven and Spar. We felt there was an opportunity to focus on effective distribution into the garage forecourts, cafés and spaza-type environments. The initiative has worked well, and really got legs from 2009 onwards. Today it’s a business that does R2,3 billion annual turnover.
  1. Pharmaceutical and medical distribution. This seemed like a major opportunity for us, given Super Group’s market-leading technology capabilities. One of our businesses has promoted and implemented a range of warehouse management, transport planning and optimisation, and visibility systems that enable our clients to have complete supply chain visibility of their products, right down to any performance against a standard activity-time specification.

This capability is important in the pharmaceutical environment. We apply it in the automotive parts sector, but it offers huge value in pharmaceutical and medical environments, where lot, batch control and visibility of a product is essential.

This is an area where we see huge potential, but of our four growth areas, has been the least successful to date. We haven’t achieved the traction we expected, as we’ve only been able to grow organically, and have not made acquisitions in the sector.

Related: Why Café del Sol Are Intentionally Expanding Slowly

A few acquisitions have come to market, but they’ve been priced at very high and, we believe, unsustainable multiples by some of our competitors. We continue to grow those businesses organically and that remains a strategic agenda item for us but we’re also vigilant in recognising when PE multiples aren’t working for us. Experience has taught us that you can end up over-investing in a business that doesn’t perform.

Q: How do you determine whether a business is a good investment or not?

One of the realities of the new accounting standards is that purchasing businesses at investment value above net asset value sets off an intangible, and those intangibles have to be amortised to the income statement over the useful life of the technologies in those businesses, or over the average life of contracts in those businesses.

There are no free lunches in the acquisition space now, and we will not look at deals that are diluted in terms of our earnings per share, or that look unsustainable relative to the underlying core contracts and outstanding periods on those contracts.

The same is true of dealerships. We will not buy dealerships through a multiple of economic cycles; there are sensible price-earning multiples for these types of businesses and we will stick to those parameters. 

Q: What has been Super Group’s international growth path?

We’ve grown Super Group’s fleet in Australia, New Zealand and the UK, and invested into supply chain and dealership environments in Germany and the UK, respectively.

We’ve focused on areas we understand, and that require core time-critical distribution solutions, such as the automotive and medical industries in Germany.

Having an international footprint also mitigates our risk, from a currency perspective as well as market cycles.

Q: You’ve said that you believe in a small business culture with decisive business capabilities.

To be successful, I believe you need to retain a small business mindset. You need to be quick, decisive and entrepreneurial in your decision-making processes. We’ve resisted bogging the organisation down with administrative processes and documents, such as daily sales forecasts, daily order covers and daily cash flow forecasts.

We run a small executive team at group level, and keep our decision-making process highly efficient. We do read our financial dashboards carefully, but don’t get bogged down by bureaucracy for the sake of it. We’ve had a long and strong relationship with our non-executive directors, and have developed a mutual trust and understanding of our strategy and modus operandi, which has worked well because it allows us to make decisions quickly.

We’ve also carefully ensured that absolute management control is retained over all of the businesses within the group. Each business has a CEO who is directly accountable for all aspects of the businesses, removing the danger of a centralised decision-making process that undermines the entrepreneurial capabilities of businesses in various territories.

Bureaucratic matrix structures tend to be removed from the coal face; when that happens, the wrong decisions are made, which ultimately hurts the business.

Nadine Todd is the Managing Editor of Entrepreneur Magazine, the How-To guide for growing businesses. Find her on Google+.

Advertisement
Click to comment

You must be logged in to post a comment Login

Leave a Reply

Lessons Learnt

Scaleup Learnings From Our Top Clients – What The Most Successful Entrepreneurs Do Right

So, how do our successful clients move through these constraints to scaling up? We see four key drivers of success, and they are: people, strategy, flawless execution and finance.

Louw Barnardt

Published

on

business-growth-scaling-advice

You’re out of your start-up boots, staff is increasing, your client base is growing, revenue is up and you’ve proven your case to the market. Now it’s time to scale up. The challenges of this vital growth phase are different and it’s a time that demands different mindsets and different actions. In a world littered with small business failures, it helps to be well-prepared for scaling up using a proven methodology. At Outsourced CFO, we get an inside look at the success factors of our clients who are mastering the transition.

On the one hand, scaling up is a really exciting phase; this is what moves you into real job creation and making an impactful contribution to economic growth. On the other hand, it is really hard to scale up successfully. We see three major constraints that limit companies’ transition from start-up to scale-up:

Leadership

The business has to have the leadership that can take it to the next level. When you start scaling up, especially rapidly, the founders can no longer do everything themselves. The team must grow and include new leadership talent that can take charge and execute so that the founders are working on the business instead of in the business.

Infrastructure

The processes, procedures, networks, systems and workflows of the business all need to be scalable. This is imperative when it comes to your infrastructure for the financial management of your business. You’re only ready for growth when your infrastructure can seamlessly keep pace.

Market access

Scaling up demands more innovative marketing and storytelling so that you can more easily connect and engage with the new employees, clients, network partners, investors and mentors that need to come along with you on your scale-up journey.

Businesses that build a market conversation and a compelling brand narrative during their start-up phase are better positioned to have this kind of market access when they need to scale up.

People

It is critical to have the right people on your team. Our successful entrepreneurs have what it takes to attract, inspire and retain top talent. A strong team of smart, ambitious and purpose-driven people who love the company and want to see it succeed contribute greatly to a world class company culture. They are adept at communicating a compelling vision and establishing core values that people can take on. These entrepreneurs are tuned into the aspirations of their people and focus on developing leaders in their teams who can in turn develop more leaders.

Strategy

It is planning that ensures that the right things are happening at the right times. At successful scale-ups strategies and action plans are devised to ensure that the most important thing always remains the most important thing.

Strategy includes input from all team members and setting of good priorities for the short, medium and long term. Goals are clear and everyone always knows what they are working towards. The needle is continuously moved because 90-day action plans are implemented each quarter to achieve targets and goals that are over and above people doing their daily jobs.

Flawless execution

Top entrepreneurs are not just focused on what operations need to achieve, but how the business operates. They have the right procedures, processes and tools in place so that everyone can deliver along the line on the company’s brand promise. Frequent, quick successive meetings ensure the rapid flow of effective communication. Problems are solved without drama. There is no chaos in the office environment. Everyone is empowered to execute flawlessly to an array of consistently happy clients.

Finance

Everyone knows that growth burns cash. A rapidly scaling business faces the challenge of needing a scalable financial infrastructure to keep the company healthy. Our successful entrepreneurs pay close attention to finance as the heartbeat of the business, ensuring that everything else functions. They look at the tech they are using for financial management and for the ways that their financial systems can be automated so that they can be brought rapidly to scale. The capital to grow is another vital finance issue.

The best way to finance a business is through paying clients on the shortest possible cash flow cycle. However, when you are scaling up and making heavier investments in the resources you need for growth, it is likely that you will need a workable plan for raising capital. Our scale-up clients know the value of accessing innovative financial management that provides high level services to drive their business growth.

Navigating the scale-up journey of a growing private company is one of the hardest but most rewarding of careers to pursue. Having people in your corner who have been through this journey before helps take a lot of pain out of the process. No growth journey looks the same, but there are tried and tested methods that will – if applied diligently – lead to definite success. Happy scaling!

Continue Reading

Lessons Learnt

That Time Jeff Bezos Was The Stupidest Person In The Room

Everyone can benefit from simple advice, no matter who they are.

Gene Marks

Published

on

jeff-bezos

When you think of Jeff Bezos, a lot of things probably come to your mind.

You likely think of Amazon.com, a company he founded more than twenty years ago, that’s completely disrupted retail and online commerce as we know it. You probably also think of his entrepreneurial genius. Or the immense wealth that he’s built for himself and others. You may also think of drones, Alexa and same-day delivery. Bezos is a visionary, an entrepreneur, a cutthroat competitor and a game changer. He’s unquestionably a very, very smart man. But sometimes, he can be…well…stupid, too.

Like that time back in 1995.

That was when Amazon was just a startup operating from a 2,000 square foot basement in Seattle. During that period, Bezos and most of the handful of employees working for him had other day jobs. They gathered in the office after hours to print and pack up the orders that their fast-growing bookselling site was receiving each day from around the world. It was tough, grueling work.

The company at the time, according to a speech Bezos gave, had no real organisation or distribution. Worse yet, the process of filling orders was physically demanding.

“We were packing on our hands and knees on a hard concrete floor,” Bezos recalled. “I said to the person next to me ‘this packing is killing me! My back hurts, it’s killing my knees’ and the person said ‘yeah, I know what you mean.'”

Related: Jeff Bezos: 9 Remarkable Choices That Shaped The Richest Man In The World

Bezos, our hero, the entrepreneurial genius, the CEO of a now 600,000-employee company that’s worth around a trillion dollars and one of the richest men in the world today then came up with what he thought was a brilliant idea. “You know what we need,” he said to the employee as they packed boxes together. “What we need is…kneepads!”

The employee (Nicholas Lovejoy, who worked at Amazon for three years before founding his own philanthropic organisation financed by the millions he made from the company’s stock) looked at Bezos like he was — in Bezos’ words — the “stupidest guy in the room.”

“What we need, Jeff,” Lovejoy said, “are a few packing tables.” Duh.

So the next day Bezos – after acknowledging Lovejoy’s brilliance – bought a few inexpensive packing tables. The result? An almost immediate doubling in productivity. In his speech, Bezos said that the story is just one of many examples how Amazon built its customer-centered service culture from the company’s very early days. Perhaps that’s true. Then again, it could mean something else.

It could mean that sometimes, just sometimes, those successful, smart, wealthy and powerful people may not be as brilliant as you may think. Nor do they always have the right answers. Sometimes, just sometimes, they may actually be the stupidest guy in the room. So keep that in mind the next time you’re doing business with an intimidating customer, supplier or partner who appears to know it all. You might be the one with the brilliant idea.

This article was originally posted here on Entrepreneur.com.

Continue Reading

Lessons Learnt

How Sureswipe Built Its Identity By Building A Strong Company Culture

Culture is unique to a business, it’s the reason why companies win or lose.

Nadine Todd

Published

on

company-culture

A company’s culture is its identity and personality. Since this is closely linked to its brand and how it wants to be viewed by its employees, customers, competitors and the outside world, culture is critical. The challenge is understanding that culture contains unwritten rules and that certain behaviours that align to the culture the company is nurturing should be valued and cherished more than others.

At Sureswipe, the core of our culture is that we value people and what they are capable of. We particularly value people who are engaged, get on with the job, take initiative, are happy to get stuck in beyond their formal job descriptions, and who sometimes have to suck up a bit of pain to get through a challenge.

We include culture in everything we do, so it’s a fundamental element in our recruitment process. In addition to a skills and experience interview, each candidate undergoes a culture fit in the form of a values interview. We look for top performers who echo our core values (collaboration, courage, taking initiative, fairness and personal responsibility) and have real conviction about making a difference in the lives of independent retailers. If we don’t believe a candidate will be a culture fit, we won’t hire them.

If we make a mistake in the recruitment process, we won’t retain culture killers, even if they are top performers. This is such a tough lesson to learn, but it liberates a company and often improves overall company performance.

Culture should be cultivated, constantly communicated and used when making decisions. At Sureswipe, we often talk about what it takes to win and have simplified winning into three key elements: A simple, yet inspirational vision; the right culture; and a clear and focused strategy. The first and third elements can be copied from organisation to organisation. Culture on the other hand is unique to every business and can be a great influencer in its success.

Catch phrases on the wall are not the definition of culture

A strong culture is purposeful and evolving. It’s what makes a company great, but also exposes its weakness. No company is perfect and it’s important to acknowledge the good and the bad. Without it, we cannot ensure that we are protecting and building on the good and reducing or eradicating the bad.

Mistakes happen. That’s okay. But we are very purposeful about how mistakes are handled. Culturally we’re allergic to things being covered up or deflected and have had great learning moments as individuals and as an organisation when bad news travels fast. It’s liberating to ‘tell it like it is’ and almost always, with a few more minds on the problem at hand, things can be rectified with minimal impact.

Related: Starbucks Coffee Is All About Culture… For A Reason

Culture should be built on values that resonate with you and that you want to excel at. In our case, some are lived daily and others are aspirational in that we’re still striving for them. In each case we genuinely believe in them and encourage each other to keep living them. This increases the level of trust within the team, as there is consistency in how people are treated and how we get things done.

We are always inspired when, after sitting in our reception area, nine out of ten visitors will comment on the friendliness of staff. We hear their remarks about how friendly the Sureswipe team is or a potential candidate will talk about the high level of energy and positivity they experience throughout the interview process.

These are indicators that our culture is alive and well. It’s these components of our culture — friendliness, helpfulness and positivity — that cascade into how we do business and how we treat our customers and people in general. Being able to describe your culture and support it with real life examples is a great way to communicate and promote the type of behaviour that is important and recognised within the organisation.

Culture doesn’t just happen

We are fortunate that culture has always been important to us, even if it wasn’t clearly defined in our early days. As we grew it became important to be more purposeful in the evolution of our culture. About four years ago, the senior leadership team and nominated cultural or values icons were mandated to relook all things cultural.

A facilitator said to us, “You really love it when people take the initiative, and get very frustrated when they don’t.” That accurate insight became core to our values. We love to see people proactively solve problems, take responsibility for their own growth, initiate spontaneous events, change their tactics or implement new ideas. It energises us and aligns to the way we do business.

We celebrate growth and love to see our staff getting promoted due to their hard work and perseverance. We recently had one of our earliest technicians get promoted to the Regional Manager of Limpopo. It was one of the best moments of 2018.

Be purposeful with culture, describe it, communicate it and use it in all aspects of business. Culture should change. Don’t allow phrases like ‘this is not how we do things,’ or, ‘the culture here is changing,’ to stifle the growth and development of your culture. When done correctly change is a good thing. Culture is driven from the top but at the end of the day it’s a company-wide initiative. Design it together with team members from different parts of the organisation to get the most from it. And then make sure everyone lives and breathes it.

Cost Cutting

The best ROI is achieved when you stop wasting money.

Peter Drucker once said that businesses have two main functions — marketing and innovation — that produce results. “All the rest are costs.”

If you agree, that means that the average business has a lot of fat to trim. Obviously you can go overboard trying to cut costs too. My philosophy has been to look at some of the general areas where you can add some efficiency but not at the expense of impairing your most valuable resource — your focus.

The following cost-cutting measures will do that. Think of these as adding value to your company, whether it’s time, creativity or a closer connection to your consumers.

Related: Wise Words From wiGroup On Building A “Wow” Company Culture

Uncover inefficiencies in your process

This is where I begin. In fact, it was analysing the inefficiencies of legal communication and knowledge sharing that led me to create Foxwordy, the digital collaboration platform for lawyers. I noticed that attorneys in our clients’ legal departments were drafting new documents from scratch when they could pool their knowledge and save time by using language that a trusted colleague had employed in a similar document. Business is all about process. When you create a new process, or enhance an existing process, you will drive cost efficiency.

Refine your process, then automate

If existing processes are lacking, it is time to create process. If you have processes, but they are not driving efficiency, it’s time to redefine your process. Either way, a key second step is refining processes that are needed in your business. Only then can you go to automation, since automating without a process will result in chaos — and won’t save time or money. Similarly, automating a poor process is not going to give you the cost-saving results you are looking for.

Thanks to the Cloud, there are very accessible means of automating manual processes. For instance, you can automate bookkeeping functions with FreshBooks and use chatbots to interface with clients — for very basic information. If you’re a retailer, a chatbot on your site can explain your return policy or address other frequently asked questions. Automating such processes allows you to spend more time focusing on clients and customers. Technology alone isn’t a panacea for all business functions, but if you find something you’re doing manually that can be automated, take a look and consider how much time and process definition automation would save you.

Rethink your outreach

Marketing and outreach are usually big and important challenges for an organisation. In my experience, there are two main components to successful marketing — knowing your customers and using the most effective media to spread your message. For the first part, I recommend polling. There are various online survey services that offer an instant read on what your customers are thinking. You may think business is humming along, but a survey could reveal that while consumers like your product, a few tweaks would make it even better.

For the second part — marketing messaging — once you have a firm idea of your marketing messaging, Facebook is a great vehicle for outreach. The ability to granularly target customers and create Lookalike audiences (from around 1 000 consumers) can help grow your business.

Related: Take Responsibility For Your Company’s Culture To Boost Productivity

Scrutinise your spend history

There are tools that can help you assess spend history and find cost-cutting opportunities. For example, you might be able to take advantage of rewards or loyalty programmes to reduce common business expenses, like travel, or consolidate vendors for a similar function. If you have a long-standing relationship with a vendor, negotiate better pricing.

The most important elements to keep in mind are resources that make your company special. Your company may be built on one person’s reputation and expertise. Guard against tarnishing that reputation with inappropriate messaging in advertising or social media. If your company’s special sauce is intellectual property, protect that too. But everything else — ranging from physical property to salary and benefits — are costs and should be considered negotiable. — Monica Zent

Continue Reading
Advertisement

SPOTLIGHT

Advertisement

Recent Posts

Follow Us

Entrepreneur-Newsletters
*
We respect your privacy. 
* indicates required.
Advertisement

Trending