Rooms for improvement - IK Investment Partners

ROUND-THE-CLOCK SUPPORT:
The expansion of MCG’s service
division has been very successful
and it now accounts for 25 per cent
of group turnover.
“So, it was not until we had contracted out our
manufacturing, put the cost reduction
programme in place and built a stable platform
that we could focus on growth,” he says.
Central to this has been the expansion of
MCG’s service division. This has been very
successful and now accounts for 25 per cent of
group turnover. “Service contracts are not only
relatively high-margin but also help smooth our
earnings and cash flows,” says Pettersson. MCG
operates as a global partner to its customers,
providing round-the-clock service and support
from more than 40 offices in over 25 countries.
During 2002 sales at MCG fell by 20 per
cent to SEK3.4 billion while EBITA declined to
SEK76 million from SEK114 million in 2001 on
a margin of 2.2 per cent. As the PIP progressed,
2003 sales fell to SEK3.2 billion but EBITA
increased to SEK170 million on a margin of
5.3 per cent. In 2004, MCG’s margin increased
to 6.8 per cent with EBITA of SEK216 million
and sales of SEK3.2 billion.
Further margin improvements are expected
as MCG continues to see the effects of the PIP
translate into earnings. “We implemented the
PIP swiftly and were helped by an upturn in
the market, but lead times in this industry
are still 18 months long so it takes time for
improvements to show through on the bottom
line,” Pettersson explains.
“Hans Pettersson and his team have done an
excellent job in transforming MCG. In the last
few years they have achieved what should have
been done much earlier. Ultimately it has
come good but there were three years of
uncertainty,” notes De Geer.
“Without the management delay, the
restructuring would have been completed by
2000 giving us more headroom in the lean
years of 2001–2003. By then MCG could have
reduced its debt, become slightly bigger, more
flexible and more international. The company
would have been better placed to take
advantage of the downturn in the sector
through add-on acquisitions, for example,”
maintains Rosenlew.
Even so, in 2000 MCG acquired a link span
specialist, Norent, to extend the scope of its
RoRo capabilities. That year MCG also
acquired the Miami-based cruise ship galley
“It was not until we had contracted out
our manufacturing, put the cost reduction
programme in place and built a stable
platform that we could focus on growth.”
technology specialist Atlas Marine Services to
extend its passenger ship portfolio. MCG
acquired Dubai-based hydraulic power
engineering specialist Otecnor in 2001 and, in
2002, raised its stake in MCG Kayaba.
Throughout the turnaround process
Gambro – which retained a 40 per cent stake
in MCG – was a supportive, although rather
passive, stakeholder. As to working with IK,
Pettersson says: “IK is a profit-oriented company
and it is good to work with an organisation
where the targets are clear. But we were not
only driven by IK – we pushed ourselves.”
Discussing the exit, Pettersson points out
that this is ‘always the owner’s prerogative’.
“Everyone knew the agenda and the timing is
perfect. We have completed the turnaround
and now both the market and our
order book are growing,”
he says.
Going forward, MCG will form
the marine cargo handling
division within Kone Cargotec
complementing the land-based
operations of its Kalmar and Hiab
Divisions. Ironically, MCG was part of Kone
Corporation in 1983, ahead of being acquired
by Incentive in 1994.
“Kone Cargotec will provide an environment
within which MCG can continue to develop
and grow. It is a perfect, logical fit with many
synergies and will create a strong, industrial
group. We have found a very good home,”
Pettersson concludes.
FOCUS AND CONSENSUS: “Hans Pettersson
and his team have done an excellent job in
transforming MCG. In the last few years they
have achieved what should have been done
much earlier,” says IK Partner Gerard de Geer,
far left.
Middle picture, IK Partner Michael Rosenlew.
Hans Pettersson, CEO MacGREGOR, right.
6 ik news