Client Overview

The client is a vertically integrated battery energy storage solution (BESS) manufacturer with an annual revenue of $15-25m historically servicing wholesale, corporate and distributer customers throughout Australia. The client has developed and manages proprietary software which focuses on electricity management and optimisation. ​​

​The client leverages a global supply chain for various components, however designs and manufactures its products locally. Manufacturing occurs centrally, with products shipped to wholesalers upon sale or managed through supply agreements with electrical distribution partners nationally. ​​​

​The client was experiencing declining revenue, achieving a gross profit margin of c.26% and incurred a c.$1.3m loss for Q3-24. Additionally, they were in the process of navigating strategic changes regarding their sales strategy following an operational structure 6 months prior to our engagement. The client’s cashflow forecast indicated a marginal positive balance at the low-point over the forecast period based on their assumptions.

​Engagement Scope​

Engaged to conduct a full scale operational and financial business review to identify performance improvement options and design a turnaround plan in consultation with key stakeholders over a 6-week period.

Our Approach

Following a high-level overview of the business, we focused on the following key aspects:​​

• Cashflow analysis and improvement initiatives, short term capital requirements​​
• Product Alignment and Simplification​​
• Critical Product Development ​​
• Manufacturing Strategy, including Production Capacity Analysis ​​
• Procurement Optimisation, including expansion of Offshoring ​​
• Resource management and operational improvement

Key Findings and Outcomes​

Cashflow Analysis

We conducted a thorough review of Management’s weekly cashflow forecast model and identified a series of errors in assumptions and formulas which overstated the cash position by c.$160k at the cash low-point and c.$270k at the end of the forecast period. Based on our sensitivity analysis, we identified that the client was likely to run out of cash within 6 weeks based on Management’s assumptions. ​​

Product Alignment & Simplification ​​

The client’s product range included 12 products which were available to the market. Our analysis, in conjunction with stakeholders, identified that there was material cannibalisation between products. ​​​

Our analysis supported a reduction of core products from 11 to 4, which was based on a small, medium and large capacity range. Whilst this eliminated cannibalisation and simplified the sales strategy, it also identified products which could be considered redundant and available for runout to improve its cash position.

Cashflow Initiatives​

We identified four strategies to raise cash from business assets on an urgent basis to mitigate our forecast cashflow deficiency:

1. Realisation of obsolete stock (surplus components for obsolete systems) – c.$200k​​
2. Realisation of obsolete systems – c.$300k​​
3. Realisation of redundant systems – c.$1m+ (requiring assembly)​​
4. Accelerated recovery of overdue receivables – c.$100k

Given the quantum of the initiatives, assuming urgent action was taken, we considered it likely that the cashflow deficiency could be bridged and prevent a potential insolvency event. ​

Procurement Optimisation

Due to the impact of liquidity constraints the client was completing stock procurement on an “as needed” basis from offshore (LCL) and local suppliers. ​​

​​Our analysis indicated that an overall COGS saving of 9%-26% (across the product line) could be realised from offshore procurement on a Full Container Load (FCL) basis for high value components. Additionally, further procurement savings were identified for other components and consumables which would result in incremental gross profit improvement.​

Scenario Analysis

We conducted a scenario analysis to understand the combined impact of our performance improvement recommendations. Our analysis was based on the following core assumptions:​​​

• The product line was limited to 4 core products (being 7 total including options) ​​
• Procurement of high value components was exclusively from offshore suppliers on a FCL basis ​​
• Manufacturing division to operate at full capacity with existing FTE resources only​​

​​Our analysis indicated that the client would improve their gross profit margin from 26% (Q3-24) to 41% and generate a monthly EBITDA improvement of $389k, resulting in an EBITDA of $43k per month compared to an average loss of ($346k) (Q3-24) prior to the implementation of any other cost reduction recommendations.

Does Your Business Need a Recharge?

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