Planestation: turnaround from hell
Article Date: Sep 01 2004Losses of £73 million, an ousted management team and huge overheads are just three of the factors that have plagued airports and property group Planestation – yet one entrepreneur is now aiming to make the business profitable.
'I don’t think I’ve got an easy job, that’s for sure,’ is how Martin May, one of the UK’s foremost turnaround practitioners, describes the task before him at troubled airports and property group Planestation.
To anyone who has a passing knowledge of this group, his comments will smack of extreme understatement, because, up till now, Planestation has been one of the most woeful ventures ever to grace the London Stock Exchange.
Over the past ten years the group, previously known as Wiggins, has raised more money – north of around £115 million – than its actual market valuation. With this cash it built up an international chain of seven (hitherto largely dormant) airports and an assortment of property interests and assets in the UK. Apart from property disposals, it has generated little in the way of revenues, milked its investor base for all they were worth and produced gargantuan annual losses – in the past 48 months alone it has lost more than £73 million.
The group was only saved from complete collapse at the turn of the year when no less than £46 million was raised from City institutions to repay an almost equal amount of mezzanine finance that was accruing interest at 28 per cent (yes, we’re not lying, twenty-eight per cent!). After this fundraising, chief executive Oliver Iny walked the plank. He was shortly followed by the chairman, Richard Bernays and non-executive director Lady Rona Delves Broughton.
Knowledge is strength
Even for May, who has engineered a few spectacular turnarounds over the past ten years, transforming Planestation into a proper business represents something of a special task. But he exudes charm and calm in equal measure and says he is ‘excited’, not perturbed, by the challenge ahead.
‘I know my strengths and weaknesses, as all chief executives should. I am not good at business development, I am not a specialist in any particular sector. What I am good at is fixing things.’
Fixing things is indeed his forte. Since leaving a global packaging specialist in the late 90s May has worked wonders at a very diverse selection of companies. Among his most successful commercial reinventions has been Gresham Computing, where he transformed the loss-making, indebted venture into a profitable re-financed concern within six months.
His most recent project has been Cape, where he is still chairman. He joined in June 2002 after it had leaked so much cash its shares had bombed and debts were topping £50 million. Now, it is trading profitably, its debts are negligible and, in response, the shares have soared tenfold.
A meticulous 12-month plan
Says May, ‘in distressed business you meet many similar problems. There are always immediate cash concerns, the incumbent management are very often “blockers” of change, margins are weak and staff morale is non-existent.
’When I come on board I engender a 12-month time- and task-orientated plan to get the ship afloat. It’s about real business goals, revenue generation and management inspiration.’
For May, the first quarter in his standard recovery plan is all about ‘stopping unnecessary spending immediately’. He also identifies non-core assets that can be off-loaded for much needed cash.
The next three months is then about establishing ‘short-term corporate and financial goals’ to ensure that by the third quarter ‘management changes are in place and a temporary platform built to start developing a viable future strategy’. The last three months of his first year is then devoted to ‘really making a step change to take the business forward’.
Hard medicine
The first six months at Planestation have, by and large, followed this philosophy to the letter. ‘When I first arrived here I realised that the commercial “vision” of the previous management was merely vapour. Like many failing concerns, it was truly a lifestyle business. It was full of hobbies.’
To reinforce the point he highlights the fact that annual head office costs were no less than £7.8 million. This figure included the £600,000 it cost to lease Planestation’s wonderfully indulgent Georgian offices on London’s grandiose Berkeley Square. Head office costs have been slashed and the group has relocated to a small space at the back of the building. The rest is being sub-let.
Another ‘pet project’ he put to the sword was the previous management’s harebrained attempt to build a 1.4-mile-long grandstand (designed by leading signature architect Lord Foster) at its property site in East London. This was part of its overall plan to build a ‘London City Racecourse’. Says May, ‘A total of £2.8 million was spent on this design, which, unsurprisingly, failed to get planning permission.’
Beyond cost-cutting
On the finance front, a £5 million cash injection was completed recently, with most of the new investors being tempted in by May’s new realism and much progress has been made on the actual business.
Of the group’s seven airports, three have been designated core and revenues are at last beginning to tumble in.
At Kent International, Planestation’s flagship asset, passenger services are finally up and running following the launch of Europe’s newest airline, EUJet. Planestation invested £2 million for a 30 per cent stake in this airline. Two planes are operating, and the plan is to have seven on the go by next year. The other major development at this site was the final completion of a Border Inspection Post (one of only eight in the UK). This, it is hoped, will become a serious destination for those shipping fresh produce and other cargo into the UK.
At the group’s Lahr airport in Germany’s Black Forest, charter flights are landing and taking off and plans are afoot to increase cargo capacity. Over in the US, Planestation’s plans to take holiday-makers from the UK and Europe to Florida are developing rapidly.
Property solutions
As for its property division, May is in negotiations to sell the group’s residential property interests in Liverpool. Many now reckon that due to his patience, he is likely to reel in more than the £9 million previously mooted by analysts. In Oxfordshire, a future residential development is at the planning stage and in East London, a revised (and more sensible) proposal for a racetrack has been resubmitted. £30 million, say commentators, is what could be raised over the short- to medium-term from three-to-four sites.
Says May, ‘When I came here, we were spending money to no particular end. Last year, we spent £11 million maintaining dormant airports. The previous year, £13.5 milion. It wasn’t too hard to work out that revenue generation built on a scaleable business model was what was needed.’
Ever the pragmatist, May acknowledges much remains to be done. ‘I am a sensible businessman. I’m taking one step at a time. The board here has collective goals and every individual employee here has personal goals. We are still not profitable but the days when this company was an acquirer of assets and a stealer of ideas is over. Our target is to be cash neutral by March next year. I intend to make it.’
