Rod Holdsworth, Group Finance Director at OCS Group - Cash – A scarce resource - Alternative funding options

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Rod Holdsworth, Group Finance Director at OCS Group - Cash – A scarce resource - Alternative funding options spoke at the CFO Event UK 2013

Economy & Finance Business

CASH – A SCARCE RESOURCE &
ALTERNATIVE SOURCES?

Rod Holdsworth
CFO, OCS Group Limited

CASH – A SCARCE RESOURCE &
ALTERNATIVE SOURCES?

• A Scarce Resource

• Alternative Sources
• How have OCS responded

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

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

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

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?

Funding alternatives
• Private Placements

• Bonds – Public, Retail, Convertible bonds
• Suppliers
• Customers

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

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

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

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