Mounting losses and a failed turnaround strategy: How Bedford crashed
A five-year turnaround plan for collapsed disability employment provider Bedford failed to bear fruit, with the organisation racking up more than $20 million in operating losses since the plan was announced.
The Bedford board announced on Thursday last week that the organisation, which employs more than 1400 people, would be placed in voluntary administration. The debts owed by the organisation have not been revealed at this stage.
Yesterday, the state government announced a $15 million support package for the company to give the company “it’s best chance of a future”, effectively rescuing it from collapse.
But the failure followed plans, and pledges, for a return to profitability in recent years, which failed to eventuate.
In May, 2021, the Bedford board approved a five year transformation strategy, and committed $1 million to the implementation of the program, which would “enable us to achieve our Strategic Pillars and provide employment choices and whole-of-life programs to our clients’’, the organisation’s 2020/21 annual report says.
Bedford said at the time that, “a number of prudent financial decisions have enabled Bedford to grow its Investment Fund by over $5 million’’.
“Our Net Asset position of over $60 million gives us significant confidence in our financial sustainability,’’ it went on.
A report from the then-chief executive Maggie Dowling in the FY21 annual report says the organisation had “critically reviewed our entire business model’’.
“This review resulted in creating an innovative and equitable ‘vision’ for the Bedford of the future and a Transformation Strategy for how that vision could be brought to fruition.’’
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Bedford, having reviewed its operations and commercial contracts, came to the conclusion that some just “didn’t make sense”, but also broadened its vision of what it could achieve.
“The true measure of our value should be in client outcomes through meaningful career and developmental opportunities – which in turn would attract growth and new people through the front door,’’ the FY21 annual report says.
“A future Bedford would become a capacity builder of choice, not just a provider of jobs, and therefore attract people to want to work with us and we would train them to enjoy their job and perform it well.’’
The organisation posted a $1.67 million operating loss in FY21, down from a profit of $1.95 million, however the result did include a $2.7 million donation to NDIS providers which took over some of Bedford’s former operations.
In FY22 that loss blew out to $6.67 million, with sales revenue plunging from $60.7 million to $46.9 million.
“Our commercial operations like APG, Manufacturing and Packaging and our Regional Enterprises still delivered fantastic outcomes, but were often affected by soaring freight costs, delays and supply chain issues,’’ Bedford said at the time.
“The total income for the financial year was just under $82 million, which is a net loss of $6.6 million for FY22,’’ the annual report says.
“A significant part of this loss was due to external expenses … as well as Bedford’s investment in the transformation of our operations – including our new commercial kitchen at Brooklyn Park, and other investments upgrading plant and equipment, and expanding Day Options at Panorama.
“Despite the loss, Bedford was cash positive for the year due to careful cash flow management.
“However this is not a sustainable position. This led to the Bedford Board and Executive team agreeing to a new five year strategic plan.
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“Over the next five years we will invest $50 million in new purpose-built facilities, upgrading existing properties and creating new job opportunities for people with intellectual disability. To do this we will open new social enterprises that offer open employment, and we will improve our supported employment offering.
“We are already underway building several new sites in Adelaide and Mt Barker and there’s more to come.’’
Maggie Dowling left the CEO role during this year, to be replaced by Myron Mann, who has now stepped down from the role.
In FY23 – the first full year of the new strategic plan – Bedford posted a $3.2 million loss, but was cashflow positive to the tune of $3.4 million, and the board was predicting better times ahead.
“Significant investment was made in restructuring the organisation to ensure we are positioned to deliver the 5 year forward strategy,’’ Bedford said.
“The improvement in FY23 has been encouraging and the successful execution of our strategic plan will see Bedford return to a break-even position in FY24 and sustainable profits from FY25.’’
The prediction of a return to breakeven did not eventuate, with the net loss blowing out to $9.45 million the next year, and cash flow turning negative. Operating expenses ballooned by more than $10 million that year to $105.5 million.
But the organisation was still looking on the bright side, saying the heavy lifting had been done on the investment front, and revenue was set to surge.
“FY25 anticipates a jump from $89 million to over $130 million in revenue with most of the cost of this growth occurring upfront in FY24,’’ Bedford said.
“FY24 incurred heavy costs with the transitions, startups, M&A integration, increasing gaps in NDIS funding compared to the cost of service delivery, increased compliance and soft retail trade.
“All combined, the year finished with an anticipated loss. As we approach the midpoint of our five year strategy to become financially sustainable, we are at the low point and the benefits of heavy investment will be incrementally realised in the forward years as our new manufacturing facility comes online and the new social enterprises mature.
“The necessary restructure has required both capital and operating investment and two major acquisitions resulted in higher than normal operating expenses to integrate them into Bedford and establish the appropriate governance.’’
Former chair Richard Hockney said in his report for FY24 that: “Our financial result for the year is not strong on paper’’.
“However, it is important to recognise that we are half-way through our Five Year Strategic Plan. A plan that will position Bedford as a financially sustainable organisation for the future.’’
Bedford’s net asset position deteriorated from $50.1 million to $40.9 million over the course of that year.
In 2021 the net asset position was $60.5 million.
The annual report, and the financial result, for the 2024-25 financial year have not been released to date.
