Asked about the priorities for 2008 one finance director answered succinctly: “Manage cashflow and liquidity.” No doubt those words will be the mantra for many FDs as the evidence mounts of tougher times ahead. Of course, when FDs in large corporates promise to manage cashflow and liquidity, what they mean is that they will delegate the task to the treasurer and his or her team, but the FD – and the rest of the board – will be taking a more than usual interest in the figures to make sure there are no nasty surprises.
The treasury profession is now the subject of great attention and interest because of the serious effect that the credit crunch is beginning to have on corporates. At one time it was thought (or was it hoped?) that the credit crisis would bypass the real economy, but that hope is starting to look increasingly in peril. The Deloitte CFO quarterly survey reports that nearly six in 10 chief financial officers of the UK’s major companies now believe that the recent turmoil in credit markets will hit their business this year. This is a marked deterioration from the position in September when only 42% expected a negative impact. However, CFOs are confident that their businesses can ride out the storm. We can only hope their treasurers are equally confident.
While a wider audience is now interested in cash and liquidity – an area until recently seen as the sole domain of the treasurer – the question has to be, what lessons can treasurers and others learn so far?
For corporates there is one obvious lesson. Treasurers know that the cardinal sin of the profession is to let the company run out of cash. To prevent this happening, corporates need to ensure that the people in charge of the treasury are qualified and up to date with the skills and competencies needed to cope.
Those in treasury roles need suitable ACT qualifications. This issue contains the names of those who have passed the recent diet of ACT exams, plus three mini-profiles of ACT members who are clearly adding value to their organisation through the diligent exercise of their treasury skills. We also cover the launch of a new ACT qualification, the Certificate in International Treasury Management (CertITM).
Another lesson is that life can carry on and opportunities still exist. Our Deals of the Year coverage underlines that, as, in the best football parlance, it was a year of two halves. But even the post-crunch period saw deals executed which any treasurer would be proud to call their own. In particular, the launch this year of The Treasurer’s Team of the Year Award recognises the need for financial professionals to work together, and the judging process found some outstanding teamwork across the range of treasury disciplines.
The halcyon days of cheap, easy credit and walls of cash may be over but treasurers can still play a huge part in ensuring deals can be done.
PETER WILLIAMS
Editor
No simple solutions to complex credit problems
The roots of the current credit crisis go deep, and it is unlikely that simple solutions can be found without materially reducing financial development and growth of the financial sector, according to rating agency Moody’s.
CFOs still confident companies will cope despite credit crunch
Corporates are starting to feel the effects of the credit crunch, with 58% of chief financial officers (CFOs) of some of the UK’s major companies predicting that the turmoil in the credit markets will hit their businesses in 2008.
The credit crunch may have sent a chilly blast though the capital markets but in mid-cap land the deal flow in takeovers both by trade buyers and private equity and in initial public offerings (IPOs) has kept bobbing along.
Walker Report brings clarity to private equity acquisitions
The Walker Report has published its final guidelines and recommendations on transparency and disclosure for the private equity industry.
What will be the key trends that will keep treasury departments busy in 2008?
Overall corporate and equity market performance is linked to economic growth. In 2007, UK growth remained strong despite a number of challenging events including: the Bank of England’s series of base rate increases, summer floods and food scares, the US sub-prime mortgage crisis in August and the first run on a UK bank for over 140 years.
Biscuits are the third largest grocery category in the uk. Mary Finn, treasurer of Burton’s Foods, explains her role in the business and the recent company changes to Jennifer Carruth.
Congratulations to the winners and highly commended runners-up in this year’s Deals of the Year Award and to the winners of Team of the Year.
Deals of the year judge Ian Fitzgerald of Lloyds TSB corporate markets looks back at a year in which credit crunch and liquidity crisis became familiar terms, explains the deal of the year discussions, and suggests that this may be a time of opportunity for corporate borrowers as we all face an uncertain year.
The winner of the corporated structured finance award and overall winner of the deals of the year award 2007 is beverage can and packaging manufacturer Rexam. Its landmark deal in the European corporate bond market marked the very first hybrid from a UK corporate.
Tesco
Investment-grade bonds are often described as the blue riband event of the deals of the year and this year’s winner was a corker. This £500m 50-year bond will delight both the Tesco treasury team and board for many years to come.
What gave Continental the financial firepower to see off its rivals and become a superleague automotive player through the €11.4bn acquisition of Siemens VDO was a €13.5bn committed credit facility which won this year’s loans for continental European corporates award.
Management Consulting Group
Both the winner and the highly commended in this category proved that people businesses without significant asset backing can still attract great funding if they have a great business deal to do.
Have recent market conditions changed attitudes to risk and capital structure? Over the course of the last few months the world’s credit markets have experienced significant problems. Problems that began in the US subprime mortgage market and fed through to the broader market as participants began questioning how structured credit as a whole is analysed and priced, culminating in a liquidity crunch with, for a while, uncertainty over who the credible counterparties were.
As a result of the US sub-prime mortgage crisis and the subsequent run on UK high street bank Northern Rock, the credit rating agencies have come under fierce criticism from the international financial community, regulatory bodies and politicians. Such criticism is hardly new. Commentators uestioned the inability of the agencies to predict events such as the 1997 Asian financial crisis or the corporate failures in the early part of this century. For example, the three major agencies – Moody’s, Standard & Poor’s (S&P) and Fitch – all gave Enron an investmentgrade rating until days before the US energy giant collapsed.
The medium-term impact of Basel II is not clear. However treasurers will need to be alert to negative shifts in their funding and transaction costs that are claimed by their banks to derive from Basel II. Treasurers will need to take a view on a range of complications introduced by Basel II.
Findings that stood out in JPMorgan’s 2007 Global Cash Management Survey were an unexpected rise in the number of banking relationships, an increasing focus on yield by treasurers, and a greater proportion of surplus cash being held in euro. Unexpectedly, the trend of recent years towards fewer banking relationships reversed this year, for both primary and secondary relationships. One potential reason for this change could have been the credit market turmoil, which may have prompted cash managers to cast their nets wider in search of better yield and services, and to spread risk.
This year sees the next phase in the ACT’s continuing development of the AMCT Diploma in Treasury, with the launch of the Certificate in International Treasury Management (CertITM). In April, the first round of students will start CertITM, the latest addition to the suite of papers that count towards AMCT.
CertITM will equip candidates with a fundamental understanding of the core elements of treasury and help them apply this knowledge in their day-to-day working environment. The only qualification that develops essential treasury knowledge from an international perspective, CertITM establishes a new global standard in treasury, risk and corporate finance.
Congratulations to all those who have successfully completed act qualifications following the latest set of exams. A full list of individual achievements can be seen on pages 52 and 53 and we are delighted to see success in the full range of qualifications the ACT now offers in treasury, risk and corporate finance.
