Page 13 - Stakis Consolidated Teaching Note

• Had to lose nursing homes because planning permission ran out in a year
and so to avoid a profit fall could either borrow to develop as it was a good
opportunity (but banks said no) or sell off and take a hit on the balance
sheet (which they did).
• Market for hotels sale depressed due to market flooding with Thistle Hotel
sales
• Sir Lewis put in his own board, Andros “resigned”. Lewis kept Chisman as
he was the knowledge base of Stakis.

Notes on Turnarounds
• Turnaround (t/a) usually predicated by short term recovery.
• Look at industry attractiveness and concentrate on loss making
subsidiaries – portfolio restructuring.
• T/a based on improving cash flow – this sends out correct signals to the
right people such as the city / banks etc.
• For Stakis, hotels and casinos are immediate cash generators, which
therefore provide liquid funds i.e. cash.
• T/a man must show the banks he has reduced debt, and cash reduces debt.

Causal factors leading to turnaround strategies being required:

• Large loss making subsidiaries (property division?)
• Too many businesses in unattractive industries.