Simon Mair knows all too well how quickly things can change in business. After setting up a national equipment hire company, Australian Industrial Rental, in 2007, which grew 60 per cent a year for two years courtesy of the burgeoning mining sector, taking on $10 million in debt, things started to unravel. “For the first half of 2009, we were still growing at about 60 per cent,” AIR chief executive Mair says. “Then the claws of the financial crisis dug in and by the third quarter it was pretty obvious we were going backwards.” Eight months after AIR opened a branch in Mount Isa, Queensland, 23 mines closed. “Maintenance budgets were cut from $900 million to $100 million almost overnight,” Mair says. “Everyone clamped up and we just limped along.”
This pattern was replicated in every market and by the end of 2009, the company was behind revenue targets by 50 per cent and faced the possibility of not being able to pay debts or tax bills. “Monthly losses led us to the realisation that we needed help,” he says. “We could handle a few losses but once they became prolonged, it reached the point where we couldn’t make payments to the Australian Taxation Office or the banks.”
By January 2010, AIR was in debt to seven banks, six in arrears and its total gearing level was more than 1300 per cent. The principal bank was owed more than 40 per cent of the total debt and because of non-payment and breaches of its trading account, AIR was in the bank’s workout section and a week away from having administrators appointed. It marked the start of an very stressful 18 months for Mair.
“We were under considerable pressure from our financiers and it was frustrating because we didn’t have the capacity in-house to stem the losses and frankly we didn’t know what to do,” he says. “That’s when we got turnaround specialists Vantage Performance involved.”
Vantage director Steve Hogan and executive Harsh Shah spent the first week working 20-hour days with Mair and his senior management team, analyzing the business.
The process identified two key operational issues that needed to be addressed.