Ulf, can you first explain to our readers how the collaboration between Blue Cap Holding and its portfolio companies works?

In principle, each portfolio company is assigned a member of the portfolio team as the responsible person and first point of contact. The central control format is the monthly shareholder review meeting (SRM), in which the Blue Cap board also takes part. Here we discuss current developments, opportunities, and possible risks. In addition, sparring takes place between Blue Cap and the management. This means that we jointly start initiatives and projects that contribute to the value levers of our transformation radar. We then ensure implementation rigor and speed via the PMO (Project Management Office).

One such project was the “fitness program” at Neschen in 2023. What's it all about?

Neschen worked intensively on the production processes in the second half of 2022 and achieved very good results - a new delivery record was even accomplished in the last week before Christmas! On this basis, growth should be further driven forward in 2023, especially in the focus area of industrial applications. Unfortunately, we discovered right at the beginning of the year that there was a threat of a sales gap in the second half of the first quarter due to customer de-stocking measures and the beginning of an economic slowdown, especially in the Graphics division. Thanks to the monitoring system, we recognized this early on, long before it became noticeable in the financial indicators or production utilization. This gave us valuable weeks to initiate countermeasures.

What has happened since then?

We firstly initiated immediate measures with the management on site. The coordination cycles with sales were shortened in order to have an even more precise picture of developments. We developed plans for short-time work that could be implemented immediately and flexibly if capacity utilization fell. In addition, together with the head of supply chain and production, we intensified the management of working capital in order to strengthen the cash position. As a result, Neschen remained fully operational at all times despite the significant decline in sales in the period that followed.

Can you explain the following fitness program to us in more detail? What key goals does it contribute to?

After it became apparent that the sales level would only recover in the medium term, the management worked with us to develop more extensive measures. It was important to everyone not only to deal with the immediate situation, but also to use the opportunity to put Neschen on a better basis for sustainable positive development.
The fitness program targets four core dimensions of our transformation radar in order to achieve the desired target image of the company: Neschen is a problem solver in the area of self-adhesive coating solutions. The fitness program addresses the “growth” area by improving sales. For example, additional capacities were moved to Industrial Applications sales in order to achieve even greater impact here. In addition, the management has founded a cross-departmental “Team for Innovation” to enhance innovative strength and thus improve sales opportunities in all business areas. The cost saving measures, especially in the field of personnel and material costs, affect the “margin” area - here the quality of results is improved and resilience is increased. The management of working capital, a classic topic from the “balance sheet” area, ensures financial ability to act. Last but not least, the “People & Culture” dimension plays a very central role in the success of the transformation. The lower management levels were specifically strengthened in order to speed up decisions and streamline processes. We are also further developing the organization in key areas.

What specific successes were achieved through the fitness program?

Measured for the year as a whole, we were able to reduce personnel and material costs by over 15% compared to the previous year. Thanks to working capital management, operating cash flow is on track until the third quarter despite the significant decline in sales. The rather short-term measures of the fitness program are essentially completed.
With regard to the measures aimed at growth and organizational development, we are of course still in the process of implementing them. Together with Industrial Applications Sales, concrete initiatives and goals for the next year are currently being developed. Product management is in the middle of streamlining the product portfolio so that Neschen can focus on the value drivers in the future. In terms of innovations, there are a few product ideas in progress that will be presented next year.
A coaching program was started so that the lower management levels can better meet their increased responsibility. Together with my colleague Carolin Scheffer (Director People & Culture) we are also working on filling some key positions in the organization.

Long-term growth is the central goal in portfolio management. How does Blue Cap ensure that the improvements achieved as part of the restructuring program are sustainable and that Neschen thrives in the long term?

As you know, at Blue Cap, we closely measure progress using key KPIs and support management in implementation. This also brings us full circle to the first question: all essential measures are tracked via the PMO. We discuss the current status every month in the SRMs. In this way, we can ensure continuous processing of topics, but also retain the necessary flexibility to react to current developments.
Overall, we are absolutely satisfied with what we have achieved so far and believe we are well on the way to further developing Neschen into a problem solver in the area of self-adhesive coating solutions and returning to a profitable growth path.