Stakeholder Management as an Interim Chief Executive.

Case Study: Interim Chief Executive – Eco City Vehicles Plc (AIM)

Background: Eco City Vehicles Plc, a niche Mercedes-Benz commercial business based in London, was facing a challenging period. The company suffered from low morale, poor customer relationships, and operational disruptions that were impacting its overall performance. Adding to the complexity, the founders, who were executive directors, had not taken any cash off the table during the initial investment. It became highly desirable for the investors to reduce their shareholding, and I was tasked with facilitating this through a further share placing. Appointed by the majority shareholders, chairman, and investors, I led the company’s turnaround as Interim Chief Executive.

Challenges:

• Low morale: The workforce was disengaged, affecting internal culture and external service quality.
• Market decline: The business was operating in a sector experiencing a double-digit contraction.
• Operational issues with TFL compliance: A significant fault in the conversion of Mercedes Vito vehicles to meet TFL requirements was creating operational setbacks.
• Customer satisfaction issues: The reliability problems stemming from the conversion issues were negatively impacting customer relationships and satisfaction levels.
• Founders’ shareholding: The founders, who had not taken any financial gains from the initial investment, had a high shareholding that needed to be reduced through new investment.
• Financial instability: With stagnant revenues and thin margins, the company’s financial position was precarious.

Actions Taken:

1. Rebuilding the Management Team: I focused on restructuring and revitalising the leadership team, ensuring the right people were in place to address the immediate challenges and position the company for long-term success.
2. Addressing Initial Engineering Issues: While the fault with the TFL-compliant conversion was not fully resolved, we overcame the initial hurdles, allowing for better operational stability and improved delivery timelines.
3. Raising Investment: To address the founders’ desire to reduce their shareholding and bring fresh capital into the business, I led a successful share placing involving an institutional investor. This not only facilitated the reduction of the founders’ shares but also brought in essential funding for future growth.
4. Optimising Sales Mix: By focusing on higher-margin products, we improved the gross margin by 2%, contributing to a stronger overall financial position.

Stakeholder Management:

• TFL: As the regulatory body overseeing London taxis, I maintained ongoing communication with TFL to update them on our engineering progress and ensure continued compliance.
• Taxi Unions: Representing a key customer base, the taxi unions required consistent communication to minimise disruption for their members. By being transparent about our progress, we helped manage expectations during the technical challenges.
• Mercedes Benz: Collaborating closely with the Managing Director of Mercedes Benz Vans UK and Europe, I worked to resolve product issues and ensure their ongoing support for future operations.
• Manufacturing Partner: By instituting regular reviews with our manufacturing partner, we streamlined the conversion process and reduced operational disruptions.
• Large Customer Influencers: Key customers who held significant influence over broader market perceptions were engaged directly. Restoring their confidence was vital for rebuilding trust in the brand, particularly after the reliability issues caused by the conversion fault.
• Nomad and Broker: Managing the Nomad (Nominated Adviser) and Broker was crucial to ensuring that the company remained compliant with AIM regulations and had access to capital markets. I maintained open lines of communication with both parties, providing regular updates on operational progress and financial performance. This transparency ensured their continued confidence in the company’s strategy, enabling smooth execution of the share placing and ongoing support in maintaining investor relations. By working closely with them, I secured the necessary guidance to align our actions with market expectations and regulatory requirements.

Stakeholder Management: Original Investors

The original investors, including the majority shareholders and the chairman, were instrumental in my appointment as Interim Chief Executive. Given their significant investment and long-term interest in the company’s success, managing their expectations was a top priority throughout the turnaround process.

• Clear Communication: From the outset, I maintained transparent and regular communication with the original investors. This included detailed updates on the company’s financial health, progress in addressing operational challenges, and the impact of key strategic decisions such as the share placing. By keeping them informed, I helped ensure their confidence in the turnaround strategy.
• Aligning Interests: The original investors were keen to see a reduction in the founders’ shareholding, as the founders had not taken any cash off the table in the initial investment series. I worked closely with the investors to ensure that the share placing achieved this objective, aligning with their long-term financial interests while securing institutional investment for the company’s future growth.
• Focus on Value Creation: The investors sought a sustainable turnaround that would protect and enhance their investment. By improving the company’s operational performance, increasing margins, and enhancing cash flow, I was able to demonstrate value creation and set the foundation for future profitability, which reassured the investors of the company’s positive trajectory.
• Leadership Transition Planning: Given their vested interest in the company’s stability, I ensured that the handover of the CEO role to an original director was smooth and well-coordinated. This gave the investors confidence in the continuity of leadership and the company’s ability to maintain its recovery and growth under the new CEO.

In managing the original investors, I struck a balance between addressing their immediate concerns—particularly around shareholding and cash flow—and building a long-term vision for the company’s success, securing their ongoing support throughout the transition.

Outcomes:

• Revenue Growth in a Declining Market: Despite market difficulties, Eco City Vehicles achieved a 4% increase in revenue, supported by improvements in stakeholder management and strategic sales decisions.
• Profitability and Cash Flow: The combined effect of better margins and increased operational efficiency led to a doubling of EBITDA and a notable increase in operating cash flow.
• Founders’ Shareholding Reduced: The successful share placing not only brought in new capital but also allowed the founders to reduce their shareholding, achieving one of the key objectives of the turnaround.
• Customer Satisfaction Restored: While the engineering issues were not fully resolved, addressing the most critical faults helped restore customer confidence and stabilise relationships.
• Leadership Transition: Once the company was back on stable footing, I transitioned the CEO role to one of the original directors, ensuring leadership continuity and future success.

Conclusion: Through decisive leadership, effective stakeholder management, and the successful facilitation of institutional investment, Eco City Vehicles Plc overcame significant operational and financial challenges. The company emerged stronger, with improved customer relationships, restored profitability, and a more balanced ownership structure, ready for future growth.