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Half yearly receivables
review 2008
The CEOs report on the progress of their companies through the first
six months of a challenging year
Arbuthnot Commercial Finance
Roger Taylor
New and unexpected challenges for Arbuthnot Commercial Finance.
The acquisition of the company by the Bibby Financial Services
Group, whilst in the medium to long term will be an excellent
platform to continue the momentum established in 2007, was
undoubtedly a distraction in the second quarter. This combined with
a difficult long-term collect-out made for a significant shift in
utilising resources and succeeded in slowing down the good progress
made by ACF in the first quarter of 2008.
Whilst mentioning collect-outs, there is likely to be a continuing
merry-go-round of clients as the credit crunch squeezes funding
facilities across the banking sector. The term buyer beware may well
take on a new meaning in the current climate, and extra diligence
should be taken by the incoming factor rather than relying on gut
feel.
That said we have seen an increase in the value of assignments,
income and profitability in the first six months of the year which
is a great achievement and one which we are proud of.
The mood here at ACF is one of optimism and excitement, as we
prepare to migrate the best of ACF’s experience with that of the
entrepreneurial spirit of the Bibby Financial Services Group,
embracing the opportunities that this will undoubtedly bring.
With the ground laid for the future we continue to look to the
challenges and opportunities for the coming years with great
enthusiasm.
It goes without saying that we continue to focus our efforts on
offering the best level of service to our clients.
Ashley Commercial Finance
Jonathan Cranston
This year got off to a great start for Ashley with new business
numbers 34% up on 2007 and we are continuing to see a healthy level
of new enquiries.
It seems that the credit crunch has really started to bite in the
last couple of months and, as doors close elsewhere, Ashley remains
very much open for business.
There is no doubt that in the current climate all industry players,
both large and small, must be increasingly vigilant with regard to
attempted fraud and potential customer failure.
Aston Rothbury
Nick Sellars
We are probably known as lenders who take a fairly consistent
approach to risk, whether it be a strong or poor economic climate.
As such, our lending decisions tend not to come home to roost when
there is a downturn in the economy, and our client base tends to be
fairly robust at the time.
Of course, it is true to say that we do lose customers from time due
to company failure (never through service), and in the last few
months this is slightly higher than normal, though not significant.
To date, and touching wood, we continue our run of having had no bad
debts for the past couple of years, and we are therefore very much
open for business and taking on new customers.
Most of our existing customers are managing to sustain levels of
turnover compared to previous years. However, the real sufferers are
those with any exposure to the construction sector, where we have
seeing dramatic falls in turnover, and casualties. Moreover,
insurers offering bad debt protection appear to be cutting limits
quite severely in these sectors, which inevitably has an effect on
funding availability. We hear stories from other invoice financiers
who are taking a very hard line to businesses in this sector, which
will have repercussions.
Other sectors, which seem to be suffering, are transport and
couriers, no doubt affected by heavy fuel costs.
In terms of collections and average debtor days, our particular
niche is providing a proactive telephone service in which we chase
100% of debtors, not just the top 5%. Even now we are still able to
claim that no more than 3% of our entire debtor book across every
sector remains more than 30 days over due date. We know this is not
common across the factoring industry and indeed when companies
collect their own debts, but it is testament to the fact that
regular consistent personal chasing, ensures customers get their
cash in on time, which is the lifeblood of all business.
As far as new business is concerned, there are many opportunities.
There is a lot of dissatisfaction from companies who are paying for
a full service factoring facility, who are not getting their debts
collected efficiently. There are a number of lenders offering ID
facilities to smaller businesses, who are becoming concerned at
customers ability to collect their security. Pricing is increasing,
as banks are unable to borrow in the interbank market as low as base
rate, and these prices are passed on the borrowers, and service
rates are not quite so competitive. Provided a full factoring
facility can be genuinely provided, cost is not now an issue –
efficient collections are!
Bank of Scotland Corporate, Cashflow Finance
Gordon Ferguson
A carefully structured growth strategy has provided us with a stable
platform to make the most of the resulting sales opportunities. Of
particular note is our client retention levels due, fundamentally,
to further development of our customer service proposition. It is
certainly pleasing to see this commitment now paying dividends.
It is reassuring to see that the continuous improvements implemented
in risk controls have produced greater efficiency in monitoring
potential bad debt. I take comfort that this will serve us well as
we drive the business forward for the remainder of the year in what
will be a challenging period. In addition to this we are taking an
innovative approach in enhancing our product suite and will continue
to develop additional solutions through the remainder of this year
and into 2009 to meet client needs.
Business growth continues at a satisfactory pace which is
encouraging in the current economic climate. Overall I am satisfied
that Cashflow Finance has delivered a solid performance in the first
six months and is well placed to meet the challenges that will arise
in the second half.
Barclays Asset & Sales Finance
John Bevan
Following a strong end to 2007, we started the new year full of
enthusiasm and commitment but with an air of caution around what the
external economy would bring in the coming 12 months.
Early in 2008 we implemented a new management structure which gave
me the opportunity of taking on the role of head of Barclay’s sales
finance, enabling me to ensure we put our customers at the heart of
everything that we do. The structural changes also gave me the
opportunity to re-focus my own board early in the new year to make
sure that I had the best management team around to maximise our
business potential.
I now believe that Barclays Sales Finance is well placed to assist
businesses in today’s environment. In H1 we have seen a continued
increase in the levels of new introductions both from our parent
group and also from the external marketplace. This has been
accompanied by impressive growth in our balance sheet.
We have also started to implement an exciting new global strategy
for our products that support our parent group’s strategy to develop
an international footprint, generating new markets and assisting our
customers to extend their own global reach.
We have seen strong growth in both our ABL and syndications book in
the first half of 2008 and I am confident that this will continue in
the second half of the year with a strong large corporate deal
pipeline already in place.
The second half of 2008 will continue to create exciting
opportunities for our products to support both new and existing
customers and we will continue to offer excellent customer service
whilst growing our balance sheet in a safe and sustainable manner.
Bibby Financial Services
David Robertson
Bibby Financial Services has had an impressive start to 2008
continuing the momentum that we saw in 2007. We have seen yet again
extremely strong results and record-breaking months in 2008 as the
business continues to grow. If we take a closer look, we had a very
positive start to the year, with strong pre-tax profits of £17m
being recorded for 2007. As we move through Q3 and look towards Q4
of 2008, the outlook is very promising indeed with total new
business for the year to July up 27% on the same period last year
with Q2 smashing all records for the number of new invoice finance
clients taken on in the UK and Ireland. And with assignments and
income up 13% and 15% year-on-year we are delighted with our
performance in 2008.
An important string to our bow is our continued focus on new product
development. We continue to review and refine our solutions to
ensure we provide innovative products that work hard to fit the
individual nuances of the industries involved and offer something
different from many banks’ one size fits all approach. Our bespoke
finance solutions designed for new starts, exporters and the
construction, recruitment and body shop industries are doing very
well, contributing 34% to our new business deals and proving there
is demand for product innovation within the invoice finance sector.
In particular, our expertise in providing export finance is reaping
dividends as firms shun the US market with its ongoing weak dollar
and look to the up and coming Far Eastern markets to engage in cross
border trade.
However, we need to be sensible in ensuring that as we grow our
portfolio we place our efforts in the right areas – those that
ensure the continued future profitability of this group.
Growth through acquisition remains central to our overall strategy,
and we were delighted this summer to sign the deal acquiring
Sussex-based Arbuthnot Commercial Finance, a long-established
business with an outstanding reputation for customer service and a
strong client base. And it is not just our UK business which is
reaping the rewards but we are also experiencing strong overseas
growth with deal numbers up 43% across Europe. France in particular,
experienced record levels of new business in Q2 while business is
brisk at our new office in Germany which opened in April. Our
Americas and Asia Pacific regions have also positive news to report.
There are many more opportunities to extend our global reach in the
months and years to come with lots of prospects in the pipeline
which when coupled with Bibby Financial Services ambitions will
become a reality. So watch this space!
The market is tough and times are definitely challenging but as
always the fittest will ride the storm out leaving casualties in
their wake. We can only summarise that the rate of new business
being written by our group at the moment is down to some degree a
tightening of credit policy at the banks. This will have an impact
on businesses seeking funding – both small and large. It is only a
matter of time before we start to see and feel the impact of the
credit crunch in the invoice finance industry – prices will rise;
some smaller independents will struggle to gain sufficient funding
and shareholders will be keen to remove themselves from the
industry. Some great opportunities may well present themselves and
as long as they are priced sensibly they will find good homes.
It goes without saying that without a loyal introducer base, loyal
clients who appreciate the support we are giving them and their
businesses and of course the team here at Bibby Financial Services
where would we be?
Times are more challenging but there are opportunities for the
invoice finance industry to prosper and grow and Bibby Financial
Services is doing just that. The sector still has a lot to offer,
and I for one am looking towards 2009 with great excitement and
anticipation about what there is still to achieve.
Calverton Factors
Mark Byrne
This has been a very busy six months for us. We have seen record new
business levels and our client book has seen significant growth.
We are conscious of the impact that the credit squeeze may have on
our client base particularly in terms of bad debts and we are
emphasising, or often insisting upon, satisfactory levels of debtor
insurance for clients. However, as yet we have seen no adverse
affects on our client book or the general debtor book. Indeed we are
still seeing organic growth across the client base.
The bulk of our book remains full service factoring and as always we
continue our prudent and traditional approach to lending.
There are no signs that this growth is slackening and new business
enquiries are very strong. We hope that the second half is as good
as the first and we see the coming months as one of opportunity for
Calverton Factors.
Cattles
Doug Crawford
The first half of 2008 has been a tremendous period of growth and
development for the business. Prevailing economic conditions have
seen us weathering increased costs of funds, yet despite this we
have still posted impressive growth on the same period in 2007.
Income is up 20% and profit is up 35%. Our new business efforts have
remained strong throughout with consistent levels of new business
being written.
At the same time we have implemented a relentless programme of
innovation, which has seen us launch several new products as well as
service enhancements. This resulted in us receiving an award for
innovation from the highly respected National Business Awards, as
well as independent recognition from a panel of judges at the Credit
Today Awards as the Best Factor and Invoice Discounter for the
second year running.
Times ahead may be uncertain but our appetite for success and our
ability to write business remains unchanged.
Centric Commercial Finance
John Onslow
It’s been a fascinating and rewarding 10 months. A few of us jumped
ship from GE and backed by private equity monies we acquired the old
Resource healthcare business at the end of December. We spent the
next six months getting to know the 230 plus clients we acquired
along with the 25 staff. At the same time we set about building the
required infrastructure to enable us to provide ID and ABL to our
potential client base. We are now building our book having signed
our first few ABL clients.
In terms of economic cycles this is a challenging time for UK plc
but for Centric there can’t have been a better time to expand. With
banks and larger institutions becoming increasingly nervous about
their existing books we are seeing a good flow of decent business at
rates not seen for many a long year. Looking forward we need to be
mindful of risk but just as important we need to remember to live
our USPs. For me, potential clients as well as business introducers
want to know only a few things: how much you can give them, how long
will it take and, crucially, are you really going to deliver on what
you have promised.
Charterhouse
Nigel Simkins
Following on from the retirement of founding director, Malcolm
Gilbey, in December 2007, it has been a period of adjustment for me
being the new kid on the block. A thorough review of the portfolio
has taken place with some shrinkage and rescheduling as a result.
However, the board now considers that we are well placed to grow the
business and re-establish Charterhouse as one of the truly
independent factoring companies in the UK market.
Our parent company Charterhouse Group International has recently
launched PayDynamics providing generic payroll, invoicing and
factoring service, and we look forward to capitalising on this and
other new business opportunities as they arise during the remainder
of the year.
Close Invoice Finance
David Thomson
Sector overview: few would deny that 2008 has been an interesting
year for providers operating in the receivables industry: the credit
crunch has impacted on SMEs ability to fundraise and, with an
increasing number of our clients experiencing financial pressures,
there’s been an inevitable tightening of credit control criteria and
procedures.
Providers’ ability to access capital has also been affected. To
date, rates remain extremely competitive but some providers will be
forced to review the deals they offer clients if base rates continue
to fall relative to the cost of inter bank borrowing. This
additional pressure is already proving too much for some smaller
providers and there’s been a marked increase in industry
consolidation in recent months – a trend that looks set to continue
for some time.
That said, the relative attractiveness of invoice finance products
compared to other forms of finance continues to increase and those
providers that weather the storm will be the stronger for it.
The outlook for Close: Close has enjoyed considerable organic growth
over the past six months with the opening of offices in Birmingham
and Northern Ireland. Both offices have already made a considerable
impact on our performance with special recognition due for our Irish
operation where a combination of superior product offering and local
expertise from Harry Parkinson and our Irish team has already
enabled us to win business against established international players
like Northern Bank and AIB. Following this success, we are in the
process of expanding our operations in Southern Ireland with a new
team based in Dublin. Meanwhile our German operation continues to
make a positive contribution to overall profits.
Going forward, employees and clients alike stand to benefit from
further improvements in our operational efficiency following the
transfer of all central processing to Close’s Brighton Commercial
Centre. In addition, migration to our first to market online invoice
discounting service IDeal – both from existing clients and new
business prospects – continues apace. The award winning system has
earned us recognition for unparalleled service and innovation
throughout the industry and remains unchallenged in the marketplace.
Meanwhile, products such as our bad debt protection have clearly
struck a chord with today’s SMEs and uptake is proving swift.
Going forward: in general, we remain extremely positive about our
prospects going forward and whilst we acknowledge operating in the
credit crunch creates its own difficulties, there’s also a
considerable upside for factoring and IF professionals. We envisage,
for example, the freezing of traditional finance routes making IF an
even more attractive option for many SMEs who will be obliged to
take a critical look at their
financing if they are to keep on course with growth targets.
In addition, we are currently examining potential synergies between
invoice finance and asset-based lending. This is a highly attractive
field and one in which Close Brothers already has a strong presence.
Coface Receivables Finance
John Shulman
I am delighted to report that Coface Receivables Finance is on
target for the first six months of the year despite the challenging
market conditions.
We have expanded our foothold in the provision of back-to-back
facilities and continue with progress towards our strategic goals.
The credit crisis is tempting more companies to consider the
benefits of credit insurance and our finance facilities are
benefiting from the increased interest. It also seems that, for the
first time in many years, prices are hardening in the marketplace.
Davenham Trade Finance
Neil McGivern
Davenham Trade Finance ended the financial year to 30 June 2008
taking advantage of tighter bank lending criteria by recording our
busiest quarter ever for new business. This has continued into the
new financial year. This success has been down to a number of
factors:
-
an experienced and talented
sales team led by sales director Clive Naylor with a presence
throughout England and Wales;
-
clarity throughout the
introducer base as to our positioning in the marketplace with
particular emphasis on our expertise in stock financing;
-
streamlining our
underwriting process to ensure rapid response;
-
and
the growing acceptance of and demand for ABL due to the
hardening of the
banks criteria.
During the year we have
successfully introduced a small factoring division for sub £1m
turnover clients, the rationale being the ability to cross-sell our
full ABL offering where appropriate.
IFA loans continue to grow substantially reflecting the lack of
appetite of the banks in this area, and our trade finance offering
is approaching its seasonal high. We are however taking a more
prudent stance given the turmoil in retail presently being
experienced.
A further exciting development soon to be launched after extensive
testing is our Integrated Stock Finance a supply chain concept which
links import finance, stock finance, warehousing and distribution
with the unique option of retailing via the internet.
We are under no illusions that the economic environment in which we
operate will be under severe pressure in the coming 12-18 months but
remain confident we have the products, personnel and systems to
achieve substantial growth.
Eurofactor (UK)
Jeff Longhurst
This time last year I stated that our key objectives were to
reinvigorate Eurofactor UK’s product offering through asset-based
lending and supply chain finance and recruitment of sales, audit and
client managers to strengthen the team. These we achieved.
What I didn’t say then was that plans were advanced towards the
opening of a northern office as the first step in becoming a truly
nationwide business. However, a lease has recently been signed and
under the very able stewardship of Ian Flaxman, our sales, audit and
client management office will be operational in Leeds in September.
Our new business people in Manchester, Durham and Lincoln have been
busy since the spring getting the Eurofactor name known amongst
introducers with a regular stream of new business being signed; and
we are still recruiting.
Our Docklands and particularly Thames Valley offices have had a good
start to the year and I am particularly pleased that following a
determined push to make people aware of our Credit Agricole
parentage we are becoming more and more accepted in the syndications
and participations market. Perhaps also the mere fact that we have
money available makes us an attractive partner.
There is little doubt that there is a shortage of money out there,
which has to be good news for asset-based lenders. Deals at the
bigger end are no longer as price sensitive as they once were
(although we haven’t seen much sign of this yet at the lower end
where competition seems just as fierce). We are talking to bigger
and better businesses than perhaps we ever have. Long may this
continue.
Factor 21
Graham Ethelston
The first half of 2008 (which was also the second half of our
seventh year) has been a period of steady growth and development for
Factor 21. Client numbers have increased marginally but turnover has
risen significantly, a result of our move away from the smallest
deals for whom our level of personalised service cannot be delivered
profitably.
Results to June will show a pleasing increase and we are confident
that current levels of growth can be maintained despite the
undoubted and well-publicised problems in the economy.
We have recently introduced a selective credit insurance facility
and this appears to be attractive to a number of our clients as it
not only provides peace of mind but also enables us to enhance our
already flexible handling of concentrations. We are also seeing
increasing numbers making use of the on-line facilities provided by
Dancerace’s E3 system.
All in all we move into the second half of 2008 with cautious
optimism.
Fortis Commercial Finance
Tim Corbett
Despite an increasingly difficult economy, the first half results
were good.
New business held up well, and an increasing degree of realism has
crept into pricing so that we are now starting to see margins
increase to more acceptable levels.
We have noted that certain prospects have held off in committing to
new facilities because of the amount of economic uncertainty and
this seems to be in evidence in some of the more complex structures,
nevertheless the realisation that there are potentially greater
levels of financing available through ABL or invoice finance than
traditional forms of financing means that there are still good
levels of activity.
We are working with our client teams to ensure that we can spread
the knowledge of the last economic downturn amongst the business, so
that we are able to properly support our clients through what are
undoubtedly choppy waters and that they emerge in relatively good
shape on the other side.
So the outlook for the full year remains confident.
GE Commercial Finance
John Jenkins
Building a successful growing business in any market requires an
ability to adapt to a changing environment, seek out opportunities
and challenge norms. I can’t remember a period when this was brought
into such sharp focus.
At GE we have continued to grow and build our business in the last
12 months, but perhaps at a slower rate. Our long-term focus on
customer loyalty and returns rather than just volume growth has left
us well positioned to pick up robust new business, minimise losses
and make strategic acquisitions. We have also shifted some of our
focus towards cross-border deals, where we have particular expertise
and to restructuring requirements as private equity deals slow down.
Our acquisition of Five Arrows was perhaps the highlight of the
first half of 2008, seizing an opportunity to grow scale and broaden
our offering. We remain keen to augment our organic growth in this
way.
Despite the economic uncertainty, I am excited about prospects over
the coming months, for GE and the industry generally. We will need
to be vigilant within portfolio as risk and distress will no doubt
build and ensure our reward balance is right, but we have never been
busier on new business and are looking forward to capitalising on
this changing environment.
GMAC
High profile with its ABL proposition, the Brighton team also has a
major invoice finance operation headed by the redoubtable Ian
Watson. Numbers are a scarcity with most of our American-owned
friends but I suspect that a meaty and profitable book, probably
with exposures to medium-to-upper range corporate clients.
Editor
HSBC Invoice Finance (UK) Ltd
Steve Box
The first half of 2008 saw some exciting changes here at HSBC and I
am delighted to be providing my first update in my new role as MD of
the UK business. With a new management board and organisational
structure, we have positioned ourselves to exploit the
opportunities, both in the UK and globally.
We have seen good revenue growth in all our core business lines,
with international, corporate and asset-based lending showing
particularly strong growth. The credit crunch has, of course,
brought its challenges, particularly for our non-recourse product
where certain industry sectors (non-food retail and construction)
are seeing real contraction and high profile business failures. It
has, however, also brought its fair share of opportunities as
liquidity becomes increasingly important. Our products, including
our newly launched supply chain finance/reverse factoring product,
are increasingly relevant and we are attracting some good quality
business customers.
As well as being enthusiastic about the prospects for the UK
business, as you would expect from HSBC, we also have big plans for
growing our receivables business globally with Gordon Harris adding
a new role as global head of product development to his day job as
risk director. No doubt he will have to translate “volume is vanity
but profit is sanity”.
Interesting and challenging times are undoubtedly ahead, but our
aspirations remain our possibilities.
IGF
John Benner
What a start to 2008 IGF has had. It’s been a really exciting
half-year – our sales book has been flying, with roughly 50% more
new deals coming on compared to the same period last year. This is
as a result of a more settled team, the fact that IGF is back on
track again and, most importantly, the realisation in the market
that IGF is back on track again.
In the first few months of the year IGF undertook a client,
competitor and market survey which has given us some really
interesting information regarding what SMEs, our introducers and our
clients actually want and also just how bad, as an industry, we are
at listening to our clients.
We were really pleased to have our gut feelings confirmed that the
vast majority of our clients are very happy with the service we give
them. Now the challenge is to build on that reputation, and to
achieve this, we are in the process of implementing some changes to
focus more on client service and trying to not only meet but exceed
our clients’ expectations.
The four cornerstones of IGF’s strategy for this year are developing
staff, listening to clients, risk management and income targets.
These elements are helping the business regain its direction, and
this in turn is feeding through to the staff and all the people who
use IGF. It feels good to get back the belief, confidence and
excitement of being part of a growing and fun business – and our
partners tell us that they feel the same!
Our asset finance division is starting to achieve real growth and
other new product offerings are close to completion so we will be
able to broaden our offering to our clients as the year progresses.
New product development has been helped by significant crossover
with our parent company GLE’s recent acquisition of YFM. YFM Group
is the UK’s early stage investment specialist and through this
acquisition, GLE has become the largest provider of equity capital
to small and growing enterprises in Europe, with over £330m now
under management.
Our financial year end runs to 31 March and we completed and signed
our statutory accounts in record time this year. We are back in
profit, in rude health and looking forward to the opportunities that
are out there as some of the larger players are moving away from the
smaller SME sector. It is a great time to be an independent,
especially one with a very strong balance sheet, a great team and an
acquisitive parent behind you. Watch out for IGF this year!
Leumi ABL
Paul Hird and Phil Woodward, with huge support from parent Bank
Leumi and especially from its general manager Collin Cumberland,
continue to develop this Brighton-based business at a pace. Whilst
the business thrust is receivables led, the capacity of the parent
bank to weigh in with instruments of an exotic persuasion where
required adds immensely to its appeal to clients, present and
prospective.
Paul Hird is recruiting to handle swelling workloads he told me in a
brief conversation as I was travelling to a party one evening,
numbers will be in the mid 20s soon.
Editor
Liquidity
David Totney
Liquidity is in its fourth year of trading, the preceding three
years have been fiercely competitive but provided a steady
environment to put in place the disciplines required for growth.
This new credit crunch arena is providing good opportunities for a
business of our size; with the structure in place that allows us to
select the new deals that we want to do, without the need to chase
turnover to support a large overhead. In some instances we are
benefiting from the deals that are effectively the baby that has
been thrown out in the bathwater as the embattled banks take a tough
stance with their existing portfolios.
We are mindful of the economic turmoil within which we are operating
and are managing our portfolio accordingly; we have not yet noticed
any marked deterioration in the performance of our existing client
base.
We are enjoying this market at the moment and hope that this stays
the case!
Lloyds TSB Commercial Finance
Simon Featherstone
Lloyds TSB Commercial Finance has a lot to celebrate in this, our
25th anniversary year.
In the first half of 2008 we achieved record client numbers and
advances, and reached a number of key milestones in the ongoing
development of our business.
These included: Continuing the development of our international
presence by opening our seventh international office in Madrid.
As well as funding local deals, our network (which comprises the
UK, Ireland, France, Germany, Holland, Belgium, Spain and the US) is
capable of providing major multinationals with a joined-up approach
to lending against receivables which span the continent, overcoming
the challenges posed by a the EU’s patchwork quilt of licensing, tax
and transfer frameworks.
The strength of this offering saw us complete a number of
pan-European deals during the first half of the year. This included
providing Milacron, a NYSE quoted global supplier of
plastics-processing technologies, with a five-year revolving credit
facility providing up to €27m of working capital for its operations
in six European countries.
Arranging one of the biggest multi-currency ABL deals ever completed
in the UK – a US$500m syndicated facility for Aero Inventory plc, a
business which provides inventory management and procurement
services for the consumable parts used in commercial aircraft
maintenance.
The refinancing package agreed with Lloyds TSB Commercial Finance
is secured on the company’s inventory and trade debtors in the UK,
Ireland, Canada, the United States, Hong Kong and Australia.
This included a provision for its expansion from US$425m to US$500m
which was recently utilised when Aero Inventory secured an exclusive
contract with All Nippon Airways in Japan.
Further strengthening our relationship with the private equity
community to ensure ABL is increasingly incorporated into
transaction structures and on-going investment strategies.
A great example was our work with Vision Capital to develop a £50m
funding package for its portfolio business the Eliot Group – one of
the largest ABL deals to be led by a private equity investor in the
UK.
The facilities released the value tied up in the business’ assets to
refinance the bank debt element of Vision Capital’s 2007 acquisition
of the company from Northern Foods. The transaction also
incorporated an innovative capital expenditure loan which will fund
strategic investment in new equipment in order to modernise
manufacturing processes across the group.
Over the last quarter century we’ve seen ABL in the UK move from a
niche form of finance into the mainstream and it now clearly forms
an integral part of the funding arrangements for businesses of all
sizes.
This status has come into sharp focus during 2008 as uncertainty
around economic conditions continues.
Many businesses that have not previously used ABL are now looking at
releasing the value tied up in their assets to strengthen cashflow
or generate working capital.
Our focus for the remainder of the year will be to ensure these
companies can gain quick access to our tailored flexible facilities
and client-
focused support.
Positive Cashflow Finance
David Smith
This is our first six months since we commenced trading and we are
delighted with the start we have made. All systems are bedded down
and working well and our ethos of providing a quality
service is paying dividends with a
number of successful recommendations from our client and introducer
base.
We are still in the early days of developing the business but the
foundations have been firmly
established.
We are delighted with the support we have received from the
professional community and our deal pipeline continues to be strong.
RBS Invoice Finance
Martin Morrin
2008 has been a challenging year for the finance sector. The
availability of working capital is an issue faced by most, if not
all, businesses. Therefore, borrowing to increase liquidity is a
significant part of today’s corporate environment.
When the economy is difficult it is vital to have certainty in your
lines of finance and protection from bad debts and this is where
invoice finance and, increasingly, ABL, have come to the fore as a
stable alternative to ease seasonal cashflow fluctuations. Credit is
being re-priced in the marketplace at the moment, due to the cost of
funds in the capital market, but the old maxim of the right deal at
the right price still exists.
In the first half of the year we have seen our client sales volumes
keep pace with the market and seen an increase in new business
performance. The second half of the year will continue to be
challenging but the strength of our invoice finance and ABL
capability means we are well placed to drive the business forward
for the rest of the year. Our teams are committed to helping our
customers’ businesses succeed and we do so by building a detailed
understanding of those businesses and what they want to achieve.
Communication is key and we have regular dialogue so that we know
our customers’ business well but we also take the time to understand
their personal goals and objectives.
RBS works with a number of the industry’s brightest and best
entrepreneurs. As a business, we are hugely entrepreneurial in
culture, which makes us an ideal partner for ambitious businesses
that are meeting head on the challenges faced in the current
economic climate.
Regency Factors
John Farrell
An excellent start to this year. Despite some stiff competition in
the marketplace we have managed to increase turnover and our client
numbers continue to rise.
As ever client retention remains very high; which reflects our
ability to provide fully flexible facilities to our customer base.
The recent expansion of our sales force should ensure continued
growth for the second half of the year and we confidently expect
2008 to be a very successful year for us.
Skipton Business Finance
David Thomas
How time flies! It is a while since I last contributed to Business
Money and that was in a different place. It’s good to be back and to
rejoin the industry in such interesting times.
My thanks to Jim and Tony for building a team with great
capabilities providing commercial solutions and excellent service to
our clients.
These qualities position us well to further build on a strong first
half performance achieved in an uncertain marketplace.
SME Invoice Finance
John Wilde
We approached the start of 2008 with a fresh structure which
embraced and integrated the former RDM team. The combination of
experienced and dedicated personnel, together with a number of new
hires, has afforded an excellent platform from which we aspire to
provide the highest possible levels of client service across all
products delivered from Birmingham, Brentwood, Guildford and
Sheffield.
We have continued to see our efforts in this respect rewarded by
client attrition rates which we believe are well below the industry
average throughout the first half of the year. At the same time, our
portfolio has not experienced the dramatic upsurge in business
failures predicted by many observers within the sector.
However, we remain acutely aware that in the current climate, it has
become increasingly difficult for owner-managers to utilise personal
assets to leverage their way out of problems as they might have done
in the past. For this reason, ensuring both new underwriting and
client risk management processes identify with key business
fundamentals has never been more important.
On the new business front, the creation of four new regional teams,
each headed by an experienced sales director with local autonomy,
continues to ensure that we can respond swiftly and professionally
to all new enquiries – these are up by over 30% for the period!
There is some evidence to suggest that enquiry growth may in some
part be due to a loss of appetite in certain parts of the community,
most notably the bank subsidiaries. We are aware that some have been
tasked to rid themselves of clients who don’t meet their revised
credit or yield expectations and whilst the market remains fiercely
competitive as always, our hope is that this trend might herald the
emergence of more sensible pricing across
the industry.
In summary, the first six months have been excellent! Although the
general environment is cautionary, our portfolio is robust and
growing, bolstered by new business at record levels. As a result, we
remain firmly on target to achieve our objectives for the year.
Venture Finance Group
Peter Ewen
We are fortunate to work in a sector that prospers in bad times as
well as good and the first half of the year has presented the
Venture Finance Group (including City Invoice Finance) with both
opportunities and challenges. We have been busy supporting UK
businesses during these difficult economic times and in the first
six months of 2008 our total advances grew 29% over the year to
date, compared to the first six months of 2007.
Recent reports suggest an increase in business insolvency of up to
18% between 2007 and 2009, we’ve seen a higher proportion of
businesses failing across our business, in common I believe with
most of our competitors.
On the positive side, we have seen increasing numbers of our clients
take bad debt protection which has helped push our non-recourse
turnover up by 18%, compared to the first six months of 2007. This
growth is indicative of the overall economic conditions, where the
threat of a bad debt is ever present and it is encouraging
to see entrepreneurs take steps to
mitigate economic risk.
While the tightening of credit limits has reduced overall market
liquidity, it has also heralded extra opportunity for our industry.
We’ve experienced a number of enquiries from sources that had not
previously considered the funding benefits ABL can offer – driven by
a lack of liquidity in the traditional lending arena.
The Federation of Small Businesses recently criticised larger
businesses’ payment approaches to SME partners, in dictating their
own payment terms, and damaging working capital. The invoice finance
and ABL industry has a huge role to play supporting SMEs through
current conditions, and I firmly believe that it is more crucial
than ever to provide innovative, cost effective and fast financing
solutions to UK businesses.
Looking ahead, the second half of the year will certainly be
challenging – I don’t believe we have seen the full effects of the
credit crunch and the economic conditions will continue to be
difficult. Many clients will be in for a bumpy ride, but I know our
industry will be there to provide support, but I fervently hope that
risk will be better priced and controlled throughout our industry.
As we all return from the holiday season I think it apposite to
comment that “as the economic tide turns and goes out, we will see
who has been swimming without trunks!”
At Venture, we look forward to becoming part of the highly reputable
Fortis family in October and this coincides with our head office
moving into new and larger premises in Haywards Heath. Our
introducers and clients will of course remain our main focus during
this transition period and our continued dedication to providing
creative solutions combined with top of the class service will not
be compromised.
In addition to benefiting from the financial backing of a major
European bank, integration with the Fortis Group will bring us
further opportunities and their multi-local approach to cross-border
businesses will not only complement but greatly enhance our ABL
capabilities. We will remain committed to delivering solutions to
the UK SME sector through the same great team of people. It is
business as usual at Venture.
Personally it’s been an exciting time, taking over from Tony Cox
following his retirement. It was a fitting tribute to the great man
when ABFA awarded him the Lifetime Achievement Award at its annual
ceremony in February and we all wish him the very best for the
future.
The UK receivables sector has ever prospered in difficult times
though great care must still be exercised with even the best
credits.
Personally, I view the potential disappearance of Cattles with the
sadness with which I always view the loss of a friend yet, as with
City, London Scottish, Five Arrows, RDM Factors and numerous others,
it is all part of the relentless growth of a sector that has
demonstrated time and again its capacity to adapt and grow.
The team at Cattles is now labouring under not only the uncertainty
of where they will be a few months from now, but also rumours and
some less than helpful tactics in the field from some of the
opposition’s sales forces.
Many thanks to all who made this review possible, many thanks also
to the Leonard Curtis team for its sponsorship of our Receivables
CEO’s report.
Editor
