Greyhound Australia Success Story
Managing Partner Tom Esplin was the chief architect of a dramatic turnaround at McCaffertys –Greyhound in the years 2003 to 2006.
McCaffertys had been purchased by ANZ Private Equity in early 2003 (majority stake). It quickly became apparent that the assumptions and projections underlying the acquisition were fundamentally flawed and the business was to make a loss of over $10M in the FY04 financial year.
Tom Esplin was employed initially as Group CFO in late 2003 in order to turn fortunes around. Tom assumed the Group CEO role in early 2005.
The problems facing the business were significant and exacerbating:
- Virgin Air had commenced operations and cheap airfares were decimating the inter-capital coach travel market
- Fuel prices were escalating with Middle East supply restrictions and fears of ‘peak oil’ abounding
- Long term unfavourable leases for infrastructure had been entered into
- The coach fleet was old (average age around 14 years) and poorly maintained. Breakdowns were frequent and running costs were high. All vehicles were under finance as part of the purchase transaction
Within 18 months the losses had been stemmed back to cash break-even. Within 3 years the company was restored to strong profitability with a $7M profit. Key actions taken to achieve this $17M turnaround were as follows:
- Re-engineering of processes in all business areas
- Significant staff and overhead reductions with major redundancy payments avoided
- Vastly improved fleet performance due to improved maintenance regime at significantly lower cost
- Revolutionary changes in the business model including successfully redefining target markets, new agent arrangements, growing the freight business, re-engineering the network to improve fleet utilisation and passenger yields
The financial turnaround restored confidence in the company by its bankers and enabled a major fleet renewal programme. The rebranded Greyhound was restored to a profitable and sustainable business which continues to this day.