Case Study - Simworx

Summary:

• Nature of Business: Entertainment Simulators
• Year of Entry: 2008
• Amount Invested: £552,682
• Year of Exit: 2015
• Returns to Fund: n/a
• Equity %: 37%
• Cash Multiple: n/a
• Midven Added Value: Strengthening management team, spinning out a new business, introducing banked hours system

Simworx is a manufacturer of cinema attractions for theme parks. It was part of a larger group that failed in 2007, following which the management team bought the business from the administrator.

How Midven Helped:

The Advantage Growth Fund invested in Simworx approximately one year after the administration had occurred, and introduced the former managing director of Minivator (a very successful HSBC fund investment) into the company as chairman.

As a provider of capital equipment, the business suffers large swings in income and profitability from month to month. In addition the theme park industry demands a rapid rate of product innovation.

After a reasonably steady start the company’s order book dried up and The Exceed Partnership, also managed by Midven, made an initial investment into the company in 2010 at the height of the recession. Over the next few months a number of changes were introduced including:

• The management team was fundamentally reviewed, and a financial controller introduced.
• To cope with the peaks and troughs of the order book, direct labour was moved to a more flexible system incorporating banked hours.
• A system for managing foreign currency risk was introduced.
• Joint ventures with customers were spun out into a separate company.

However the changes were not having the desired impact on the company’s performance so in 2011 one of the Midven staff became the acting finance director, and at one point was based at the company’s premises for three days a week.  Deeper knowledge of the company’s main issues was gathered, and a second batch of reforms was required:

• The first financial controller was replaced with a new person, who was trained by Midven, and reported directly to Midven.
• Weekly management team meetings were strictly enforced, with each potential project signed off by the production team prior to acceptance of the customer order.
• A project manager was recruited, who quickly rose to the position of general manager.
• A risk register was compiled, with a list of medium term actions to mitigate those risks.

The performance of the company has now improved markedly, with a profit of £400,000 expected in the year to December 2012, on sales of £4m (compared to a loss of £650,000 on sales of £2m in the year to December 2010).