When he joined along with new chief executive David Lockwood in January 2017, Cobham was in big trouble.
Following a string of profit warnings and with debts of more than £1bn, it had been forced to ask investors for £500mln to shore up its finances.
Wareing’s job was to help oversee Cobham’s turnaround, and it was always the plan that he would step down in early 2019 after picking out a new chairman who would take the group forward.
Although he wasn’t the chief executive and already had a seat on the board, Wareing effectively performed the role otherwise known as the company doctor.
These are people that are drafted in to the top roles at struggling companies who lack the self-awareness to diagnose their own issues.
The doctors’ sole aim is to identify the problems and put in place the fixes needed to get the business back on the straight and narrow.
Like Wareing, who used to work for KPMG, they tend to be financially minded, so most are often accountants by trade.
They have free reign to reset the business without the fear of looking stupid as all they’re doing is tidying up after the old management team. Their actions are often very predictable: cut jobs, slash costs and re-set guidance.
This often comes all at once, something known as ‘kitchen-sinking’, when all of the bad news is put out to the market at the same time rather than drip-feeding it over several months.
Wareing and the rest of the board stuck to that well-versed plan, sounding the profit alarm once again within days of their arrival and instantly kicking off a review of operations. A second jumbo rights issue followed a month later as well.
It sounds cynical, but such early profit warnings and fundraises are freebies for new bosses as the blame will be pinned on the old management team.
Tesco PLC (LON:TSCO) chief executive ‘drastic’ Dave Lewis did a similar thing when he was brought in in the wake of an accounting scandal. Even the ex-Chancellor, George Osborne, has been described as a “master kitchen-sinker”.
It’s not just individuals, either, some businesses are based entirely on providing turnaround services. AlixPartners, for example, has been hired by Thomas Cook Group PLC (LON:TCG) which is going through a rough time and is exploring a possible sale.
Doctors have their critics
Some in the City are sceptical of company doctors, who they reckon set expectations so low at the beginning that they can’t fail to outperform.
The real cynics will also point to their share options, which are often based on building the company from its new, lower base.
There’s no doubt company doctors can work, though.
Coming back to Cobham and Wareing, the company now has a net cash position £10.3mln versus net debt of more than £1bn when he, Lockwood.
Its share price, which tanked in those first few weeks following the profit warning and rights issue, has perked up nicely, too – up more than a third since those dreary days in February 2017.
But critics will be quick to point out that the share price is actually just back to where it was before the kitchen sink was chucked.