Features                

There are many reasons why I pick up the pen to write this tale with a heavy heart.

The first is that I have known the Russell family, father and son, David and Robin, for most of the time I have been publishing Business Money. They are people whose company I enjoy and, notwithstanding a natural reserve when we first appeared in 1993 and sought information some might regard as privy to the directors, they have always been hospitable and forthcoming.

Launched as Gaelic Factors, this one blazed the trail for independents in Scotland.

When the time came for David to retire there was talk of the company being sold but the terms attaching included a high degree of protection for the staff and this did not help market appeal as most would-be buyers probably just wanted the book.

In the end the business was sold to a management buy-out team led by Robin Russell, a figure of £15m was mentioned.

Robin set about changing the profile of the book; managing away some of the larger exposures which may well have depended upon his father’s intimate knowledge of the company concerned and the personnel. In its place he sought a wider range of smaller exposures and to this end he was joined by Rob Mercer who had considerable expertise in winning business of this type.

Our regular reviews of the sector, the Receivables series, tracked the wind-down of the old-fashioned book. Sales financed of £118m in 2002 fell to £78.8m in 2003, client numbers dropped from 151 to 125, total advances at the year-end fell from £24.5m to £7.2m. A dramatic change of business style though the 65% exposure levels that characterised the Gaelic years continued though the average loan dropped from £71,200 to £57,600.

Sales financed fell again in 2004 to £71.7m though client numbers climbed back to 145 and Cashflow Partners Solutions Limited and Cashflow Partners Credit Management Limited made an appearance in the business mix.

In 2005 sales financed were virtually static at £70m but client numbers had plummeted to 105 and the average loan had climbed once again to £76,200 and exposure ratios of 67% were recorded.
I accept, as I always do, that our Receivables data is but a snapshot in time but the trend is telling, as clearly Robin’s initial philosophy had undergone change, probably in the face of fierce competition.

We felt moved to comment: “Robin Russell’s team had a distracting 2005. The year started slowly and the relocation of his business to new premises made for further difficulties but some long-time clients rallied to the cause with robust growth numbers requiring funding.
“It is as well that Robin knows them because his policy of the last couple of years has been to spread risk amongst a range of smaller exposures yet the average loan has climbed 49% to £76,000.”

It was pleasing therefore in 2006 to report sales financed up at £74m, client numbers back up to 141, average loan size £56,700 and average exposure down to 57%. Maybe there was a glitch in the numbers supplied to us for 2005 but the business looked set fair though Rob Mercer had left to be closer to home. We were happy to compliment Robin on what he had achieved in our 10-year comment slot.

Fraud is an ever present problem in the invoice finance business and the little that Robin could divulge to me for publication was to suggest that a series of frauds caused problems and that an investigation of the business by Kroll was instigated. I am assuming that this was at the behest of one of the banks holding charges over the assets of Cashflow Factors: Bank of Scotland and Clydesdale.

I am told that the report did not make bad reading but in my experience the interpretation of the findings is influenced by which chair you are sitting in and from hereon in, it is all conjecture on my part.

Should there have been elements of the report expressing reservations, and if, as Robin tells me, there had been a number of frauds; this would not inspire confidence in lenders. Should those lenders be taking a jaundiced view of the invoice finance market at the time – and one of the lending banks has every reason so to do, then maybe some loss of appetite for the sector might be displayed.
Add the credit crunch, the sub-prime jitters, Northern Rock, the economic malaise threatening our SME sector, and the outlook for the continuation of a bank’s exposure to Cashflow Partners begins to assume an uphill path.

Cashflow Partners was a member of the Asset Based Finance Association thus debentures to the funding banks have to accept that their charges cannot attach funds due to clients. The greater good of the industry is served by not having another London and Provincial to contend with.

Let us send Robin Russell and his team our best wishes for the future. This echoes the overwhelming sentiment of the calls I have received since the sad news broke.

Some, or all, of the book is in the process of being sold: an independent with links to Scotland would be most peoples’ favourite to take it on.

***************************************************************************************

Editor

< Back