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Rod Holdsworth, Group Finance Director at OCS Group - Cash – A scarce resource - Alternative funding options
1. CASH – A SCARCE RESOURCE &
ALTERNATIVE SOURCES?
Rod Holdsworth
CFO, OCS Group Limited
2. CASH – A SCARCE RESOURCE &
ALTERNATIVE SOURCES?
• A Scarce Resource
• Alternative Sources
• How have OCS responded
3. Bank lending
1400
Western European Loans Issuance: 1997 - 2013
1400
1200
1000
1000
800
800
600
600
400
400
200
200
0
0
Total Loans Volume (LH scale)
No. of Issues (RH scale)
Source: EY New Issue Review; Bloomberg
No. of issues
Amount ($bn)
1200
4. Cost of Bank borrowing
Pricing (Libor+bps)
250
European Investment Grade Loan Pricing (multi-year)
200
150
100
50
0
A
BBB
Source: EY New Issue Review; Bloomberg
5. 1,200
Euro Capital Markets Pricing Indices
Issuance Spread to Benchmark (bps)
1,000
800
600
400
200
0
Mar 05
Sep 05
Mar 06
Sep 06
Mar 07
Sep 07
Mar 08
iTraxx EUR 5yr Investment Grade
Sep 08
Mar 09
Sep 09
Mar 10
Sep 10
iTraxx EUR 5yr High-Yield
Source: EY New Issue Review; Datastream
Mar 11
Sep 11
Mar 12
iTraxx EUR 5yr Mid-Cap
Sep 12
Mar 13
Sep 13
6. Bank lending – what's changed
•
•
•
•
•
•
•
•
Bank lending volumes have nearly halved since 2007
Banks much more choosy
Ability to repay capital and not just ‘service the debt’
Charges/Fees have increased
The extra ‘wallet’…
Asset based lending vs. cashflow lending
‘Relationship management’ tested and failed
Future for bank lending?
8. Company response
•
•
•
•
•
•
Reduced investment (capex, acquisitions)
Asset finance (fixed assets and stock/debtors)
Operating leases
Increase cash ‘reserves’
Disposal of non-core operations
Cost control, low/no pay rises, reduced overtime and increased parttimers
• Stretching creditors
• Ensure contract pricing reflects the cost of any extended credit terms
• Focus on credit control and cash collection – debtor days
9. The Future
•
•
•
•
•
UK base rates set to stay low – 2015-2016
But long term rates expected to increase
QE unwind
Be prepared for next global financial ‘shock’
Keep funding options open - Diversify funding
- And….. reduce debt dependency
10. Workshop Discussion -20mins
• How has your company responded to the
changes in the global banking market?
• What alternative sources of funding have you
considered?
• What has your company done to preserve or
maximise cash