Restructuring Programmes – Lessons Learnt From The Last Global Recession

by | Jun 4, 2020

Founder of VFDS Paul Collis FCCA, talks about the lessons he learnt being part of restructuring programmes with two FTSE 250 businesses, Savills plc and DTZ plc, during the last global recession, the credit crisis which began in 2007, and the period that followed. This article is part 1 of a 3 part series on Restructuring.

There is no doubt amongst business commentators, that the economic turmoil that the world economy is facing right now, is like to cut far deeper than the global credit crisis from  2007.

An unfortunate consequence of any economic crisis or recession is the need for business owners and senior management teams to reassess their business plan and immediate cashflow requirements. Whether you are a FSTE listed company or an SME the principles are the same.

This process may involve reducing headcount, attempting to end onerous lease contracts and an overall cut in operational overhead. Having worked in businesses that went through the 2007 global credit crisis, I gained a valuable insight and first-hand experience on how a business can survive and reposition itself to come out the other side.

Most business sectors are currently being hit as a result of the Covid-19 outbreak – business owners and senior management teams need to be prepared and have a clear plan for survival.

During the 2007 credit crisis I had just started my first role in industry with FTSE 250 property advisors Savills plc, having spent the first 6 years of my professional life with big 4 accounting and consulting firm PwC.

Joining a company like Savills at that time was definitely an eye opener and a hugely valuable learning experience for someone fresh out of a big accounting practice.

There are various types of restructuring programme that I’ll discuss is article 2 in this series, however, for now I will focus on my practical experience of restructuring programmes, from my own career. The two types of restructuring programmes that I have experienced are ‘cost reduction’ and ‘turnaround.’

Cost reduction 

Part of my Group Accountant role at Savills was collating restructuring reports from the business heads across the world and consolidating this information for inclusion in the monthly plc board report. In addition to this we had to report to the stock exchange our restructuring plans including one off ‘exceptional costs (redundancies, ending lease contracts), savings for the current year and also annualised savings. A restructuring programme can be quite a sensitive subject especially when people’s livelihoods are at stake. It’s important management who are responsible for implementing the changes act with the utmost respect and professionalism throughout the whole process.

From a financial reporting point of view, there can be a lot of moving parts which can result in immense pressure on the finance team reporting accurate information to the plc board and the stock market.

The business itself had grown organically over the years and had very minimal external debt to service. The annualised cost savings of £28m allowed Savills to stabilise and continue to grow year on year since.


DTZ, however, was a different kind of challenge. Having borrowed to fund acquisitions over the years leading up to the credit crisis, deeper cuts had to be made from the operating cost base to try and get the business back on an even keel.

My role in the restructuring exercise at DTZ was similar to my role at Savills in that I consolidated and reported on the actions taken by the business unit heads to reduce costs.

A much more aggressive approach was needed with the cost cutting actions at DTZ in order to conserve and protect cash. These actions resulted in annualised cost savings of 75m.

You will have I noticed that I have used the term ‘annualised cost savings’ in this article. During a restructuring programme the shareholders and stock market are interested in operating cost run rates and the full years impact on the cost saving actions. This gives them an idea of the operating cost base for future years and therefore if sales remain constant, an estimation of future earnings.

As business owners and senior management teams prepare to weather the current economic storm, not only should the focus be on the cost savings in the current financial year, but what are the savings on an annual basis. This forms an integral part of any 3-5 year business plans and forecasts.

Part 2 of this series of articles discusses other types of restructuring programmes.


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