2009… indecision? The roundabout has now stopped in an unfamiliar place. Unfamiliarity makes decision making difficult as it’s hard to make decisions without a reference. Lending to corporates against p&l is rare & expensive. Asset Based Lending is replacing leveraged deals in the lower risk corporate space. ABL is becoming polarised around low and high risk clients.
The good news… 82% of FTSE 100 comes from outside the UK. Dec 08 – 09 saw a 22% increase in the FTSE 100 correlating with the shortfall in value of sterling. While Zombie company balance sheets may be technically insolvent; whilst the client is servicing the debt, banks are not acting or taking provisions & CVAs are becoming the norm.
BUT… Quantative easing has stopped & the c£25Bn HMRC loan to UK plc is being clawed back. The UK Government bought 30% of UK shoes & laptops last year; so cuts in public spending will have a direct impact on the private sector. Company valuations are still not holding up, so exits are an unattractive option. For those businesses requesting funds we continue to find Alan Sugar’s recent pithy synopsis accurate – 85% of businesses requesting bank’s cash in fact require an administrator – i.e. only 15% have a justifiable business case. Under the facade many businesses have the wrong capital structure, business models are flawed, & sources of revenues threatened.
Philip Long of PKF last week said “whilst the meek shall inherit the earth the young shall inherit the national debt”.
2010… Brian Green President of TMA UK & formerly of Gordon Brothers said “There will be great opportunities for those with imaginative solutions”. Jamie Constable says “distressed businesses are the hardest job to solve”, & Bob Crow the futurist RMT leader foresees “2010 as a year of action”! We hope he is right. Change from within & early action is our prescription. Early action is a much cheaper route for a business owner to retain control before the business irreversibly slides down the “curve of death”. MDs require real insight & courage to admit to these problems & integrity to ask for help & act. There too are those heroic MDs that squander returns by bearing too much load & always know better! Even with early action we still find that the solution requires very careful, swift action on all fronts to manage stakeholder’s expectations through a formal / informal turnaround process & out the other side.
Growth… is there. We have just put a proposal to a subcontract automotive technology client to incrementally grow into a military market from the same cost base. We have the knowledge from within our network to detail the MOD strategy & boxes to tick to get this right first time by taking a fresh look & leveraging our team’s combined experience (over 400 Plcs) through the single icebreaker – client contact. We have created a “let’s get started” package which includes a half day diagnostic with our Collaborative Partner, SMT to rapidly identify sources of incremental revenue.
Can you make money with 60% of current revenue? Moves to outsource have destroyed value; characterised by increasing costs, poor service & quality issues. Putting Bob Crow’s wisdom aside; the way we work together in Europe is very effective at converting knowledge into real value. Emerging economy labour rates may be a fraction of European rates BUT it often takes many more of their people to do the same tasks. Traditional corporates are being dismantled by disruptive technology. There is a free pot of additional value & cash where businesses interface with vendors. Core capabilities take decades to replicate, they provide long term advantage & are being squandered.
Is your cash working for you? We have recently delivered 2 projects delivering greater than £2m reductions in working capital, with huge knock on improvements in profit by getting the supply chain and vendor agreements right.
Whilst we receive a steady stream of opportunities from our trusted partners, we are not complacent. Where there is an opportunity to achieve a 10x cash ROI, our challenge is simply to find a seamless, self funding way to get started.
CEO Icebreaker Executive Interim Management Limited E: email@example.com T: 0207 193 5518.