Four months into Commander's 'turnaround' plan, CEO Amanda Lacaze is confident that the ailing IT services company is heading for better days.
It was what financial analysts referred to a "five minutes to midnight" appointment.
IT services company Commander was struggling. Revenues were growing, thanks to former CEO Adrian Coote's appetite for thinking big. But costs, and debt with it, were getting way out of hand.
In the six months to December 2007, Commander lost AU$245 million. Some AU$400 million was also wiped off the company's value on the stockmarket in under a year — with shares worth over AU$2 plummeting to around the 10 cent mark. Its debt facilities with major lenders, sitting at around $360 million, were exhausted. Key stockmarket investors had either fled (Babcock and Brown) or sold down their stakes significantly (Perpetual Investments, AMP).
Enter investment house Hunter Hall, and right behind it a new CEO to lead the company back from the precipice — former AOL/7 CEO Amanda Lacaze.
The Lacaze/Hunter Hall partnership had worked once before. Together they had taken struggling telco minnow Orion Telecommunications from a company trading at 12.5 cents per share to a company worth twice as much when it was sold to M2 Telecommunications.
Lacaze's appointment at Commander, says BBY financial analyst Mark McDonald, came at a "dire" time for the company.
"The extent of the negative cash flow in the six months prior was in the order of AU$100 million," he said.
The dilemma was best explained by the closing remark in the half yearly report by auditor PriceWaterhouseCoopers.
The company's spiralling debt and lack of cash, the auditor said, "indicate the existence of significant uncertainty whether the consolidated entity will continue as a going concern".
The 'turnaround'
Pulling Commander back from the precipice was always going to require something drastic. In a move that saw ex-employees dub her "cyclone Amanda", Lacaze announced a massive restructure.
The company's headcount was reduced from 2000 to well below 1400, with most of the cuts being made in a single day. Management positions were gutted. Business units that were deemed external to the company's core value propositions were put up for sale or dissolved.
Lacaze says it wasn't the least bit nerve-wracking.
"My view from the outside of the company, which has been confirmed by my experience on the inside, was that Commander is a business with really significant value areas for its customers," she says.
What she also saw was a business that had lost its direction.
"A large share of its revenue line was contributed by the resale of IT hardware," she says. "There are businesses out there that make money out of distribution — but you have to be experts at logistics, relentlessly focused on costs, operating with very, very slim overheads. It's not an area where Commander could add significant value."
Commander's highly transactional hardware resale business, she said, required high overheads but delivered low margins.
The provision of IT services, however, had "very healthy" margins and resulted in recurring revenue streams.
Lacaze opted to axe the resale business — and only sell products when part of broader services relationships with a customer. Any employee involved with pure hardware resale — be it the product salesforce or roles that indirectly supported them, were made redundant.
With no financial institution willing to lend the company any more cash, Lacaze also went about selling off some assets to provide Commander some working capital.
Wholesale telecommunications arm Unitel was sold to Orion's buyer M2 Telecommunications, networking integrator Nexon was sold back to its founders, while Commander's West Australian ICT business was sold off to Empired for a mere AU$30,000.
"What I aim to do is ...
