The European Commission has made proposals for a single payments area in the EU which would save the EU economy between €50bn and €100bn a year. The Directive on Payments Services proposes removing legal barriers to improve payment processing times and reduce the risk of charges incurred by float time.
Spotting the good guys in the influential world of regulation is not easy and in any case ‘good’ is entirely subjective – witness the revived debate on the Operating and Financial Review (OFR) and whether it should or should not be mandatory for listed ompanies. Likewise, the Payments Directive seems to reveal the European Commission in the role of good guy, standing up for the rights of users to get the best possible service from banks and from the new Single Euro Payments Area (SEPA).
The payment service providers, however, may not share that view. Standing back from the inevitable vested interests, the question is: what is best for the overall common good? The ACT prefers to avoid the use of regulation, or at any rate to make do with light touch regulation, but it is not always the case that regulation is bad and a hindrance. Reaching a voluntary consensus is preferable, but sometimes the regulators are the good guys.
The funding of pension schemes remains a dominant issue for treasurers. Smaller companies have more to fear from Turner’s suggestions than the bigger corporates. All corporates need to think about the structure of their pension schemes in the light of the Turner recommendations.
Is a Single Euro Payments Area going to help corporates to do business better in Europe?
Kingfisher, Europe’s largest DIY group which trades in the UK as B&Q has raised around £380m via a €550m seven-year Eurobond issue which attracted strong support because it contained an investor protection clause against the takeover of the group.
Britvic, the soft drinks empire behind the likes of Tango, Robinson’s Barley Water and Pepsi in the UK, has floated on the Stock Exchange after finding itself in the extraordinary position of having three longstanding major shareholders who for historical reasons are all willing sellers at the same time.
One of Europe’s most indebted companies, France Telecom, which has around €61bn of loans and bonds outstanding, has issued a 20-year £350m sterling bond.
The financial markets have been surprisingly upbeat in the final months of 2005. In spite of a marked slowdown in global economic growth and the adverse effect of major shocks (high oil prices, hurricanes and terrorism), stock markets rose in November to their best levels for three or four years. Prospects for 2006 and 2007 appear stable and benign, albeit mediocre. But the stability is wobbly, and the global economy still faces serious dangers.
Henryk Wuppermann joined the diversified international Bayer in 2001 and is now the Head of Capital Markets within Bayer’s corporate finance division. Working across a broad range of areas, Wuppermann deals with a wide range of the group’s debt and equity-related transactions, including structuring syndicated loans, and structuring and placing hybrid bonds, for which Bayer won the emerging trend category in the ACT’s Deals of the Year for 2005.
At the beginning of 2000, Carphone Warehouse was a private company which had been growing organically and rapidly for a decade without the need for dedicated internal audit or tax functions – or a treasury department.
It has now been listed on the London Stock Exchange for five years, requiring the introduction of all the above, and diversified both geographically and into new sectors. In tandem with this public growth story, the company has implemented an integrated treasury operation, along with mature banking and lending relationships.
Will this winter be the big freeze that everyone is predicting? Will the UK’s gas supplies be enough? Can gas prices go any higher, or are they set to come back down? These are the questions occupying the UK’s major energy consumers at the moment.
Following on from the hurricane-induced spikes in oil prices, they are giving both energy buyers and treasurers a deeply concerning winter. For many, the full meaning of the Chinese curse “May you live in interesting times” has become distressingly apparent.
The Western European syndicated loan market again enjoyed a record year in 2005, with a sustained increase over the course of the year resulting in an estimated 1,500 transactions – representing a 10% rise on 2004. Volumes also rose sharply to $1.21bn (as at 12 December 2005).
The UK market, however, shows a slight decline in transaction numbers and a sharper decline in volumes from first to second half. This indicates that most viable refinancings have now taken place in the UK, with the European market likely to follow a similar pattern in 2006. An increased focus on returns should make banks think twice about very narrow margins, as has already been seen in a flattening of the pricing curve.
With a record number of treasurers taking part, JPMorgan Asset Management’s global cash management survey, conducted in conjunction with the ACT, continues to provide treasurers with valuable insights into how the industry is developing, the products that treasurers are currently using and the performance and service levels that are now demanded.
In the last decade the strategic importance of intangible assets has increased, and it is now widely recognised that intangible assets represent more corporate value than tangible assets do, which alters the way debt security needs to be considered.
We recently conducted a study of all companies quoted on the world’s top 25 stock markets. This showed that the majority of corporate value is not reflected in conventional balance sheet reporting under the historical cost convention. The study revealed that unreported intangible assets represented 62% of $31.6 trillion total enterprise value.
The Chancellor is seeking to crack down on tax arbitrage and is looking in particular at leasing and buying capital gains or losses. Treasurers undertaking any form of reorganisation need to understand the change in the rules on capital losses. The Pre-Budget Report did contain some good news on spreading extra tax payable on work in progress by service entities, the definition of a securitisation company, and the putting back of a deadline for an election under the Disregard Regulations.
Congratulations to the winners and highly commended runnersup in this year’s Deals of the Year Awards. In the eighth year of these awards, the quality and quantity of entrants have improved yet again, and the winners can feel justifiably proud that their achievements have been recognised by their treasury peers.
Chris Bunton, Adrian Buckley and Catherine Adair-Faulkner analyse the examination results of the october 2005 sitting of the mct, amct and icm. Included is a list of the names of all students who passed.
What are the things that are interesting at the beginning of the year? Well, for my money, predictions are out. Having changed offices I was sorting out some stuff and leafing through back copies of The Treasurer.
The most notable was a forecast that the oil price would not go any higher (written before the 2005 spike). It was learned, accurate, well researched – and completely wrong.
Another turn-off is lectures on behaviour. As a former oil company treasurer and now a clergyman, I am used to predictions (and left professional finance, as it happens, as I became more cynical about the likelihood of accuracy) and have little confidence in the usefulness of exhortations to do better.
Boardroom performance and diversity remain high on the agenda for shareholders and the public. Recent research shows the need to extend searches beyond personal contacts to broader sources of new talent and highlights the importance of having on board a range of different backgrounds and experience to enhance corporate decision making. The issue reaches down to all levels. Companies are being actively encouraged to stimulate the inclusion of a more diverse range of people.
