Transcript ECONOMIC OUTLOOK Oiling the wheels of growth

LLOYDS CORPORATE BANK
ENSURING YOU HAVE SUFFICIENT CASH TO GROW
Kim Collins, Head of Recruitment
March 2015
Head of Recruitment
Kim Collins – Head of Recruitment
Tel: 0207 356 1477
(M) 07515 753476
[email protected]
BACKGROUND
Kim has a background of debt
structuring and corporate finance
(M&A) work within the Mid
Markets business arena.
She has worked in Business
Development, Credit and
Relationship Management roles
for a number of years.
QUALIFICATIONS
Corporate Finance (ICAEW)
EXISTING ROLE
Kim is a Relationship Director,
based in Central London who
heads up our Recruitment Team.
With a small portfolio, typically of
no more than 25 clients, Kim is
able to work closely with your
business and work with you across
all areas of your business.
2
Growth – real or perception?
Some interesting facts around growth in sector :

London Stock Exchange Report – 1000 companies to inspire Britain. 50 Recruitment companies (double last year) with
235 from London, and a further 140 from the South East.

Market Recovery: Back to pre-recessionary levels - £28.7bn to 4/2014 (from £19.7bn in 3/2010). Turnover growth 8.2%
2013/14. The 4th consecutive year of growth

Labour supply: £26.03bn temps – 12.4% above pre-recessionary levels as job market dynamics change.

1,155,932 – Average number of total daily placements in 2013/14

Within certain sectors growth is even faster, and margins are being maintained or increased.
If you aren’t growing by at least 8.2% pa, you are falling behind your peers
3
Cash – why needed?
 EBITDA or Cash? What’s the right measure?
 EBITDA will help with valuations, but............
 Cash is needed for capital investment
If you are growing, you are probably also spending.......
4
Working capital

Confidential Invoice Discounting. Funding instrument of choice.

Cash generation only comes when service provided, invoices raised and money received (in advance from CID or
direct from client). Cannot extend creditor terms (payday is payday), and no inventory.

Can fund in Sterling, Euro, USD and most other major currencies

Lloyds has a relationship with 1 in 5 recruitment companies in the UK with over 1,300 clients.

Primary use is to fund against receivables assigned to the bank. Up to 90% advance rate, for 120 days from invoice.

Can also be used to release cash from business for capital purposes, including M&A, but is often currently used for
shareholder benefit!

If youis don’t
focus
on
the cash,
no one
else will..........
Within certain sectors growth
even faster,
and
margins
are being
maintained
or increased.
5
Building a business plan to support growth
Identify
where
to grow
Analyse business
strategy, balance
sheet and establish
whether:
 A Need is
identified
 Experience is
held
 Gaps need to
be addressed
Review
market
Using modelling and
research establish
the future market
dynamics
Take into account
historical and market
implied relationships
Review competition
in market
Identify
Risk
Profile
Identify appropriate risk
metrics for:
 Sales Growth
 Operating Profit
Margin
 Return on Capital
Employed (bank
or equity)
Model
Forecasts
For each relevant risk
metric establish the
levels which should not
be breached, and
provide mitigants where
possible
Justify and verify
assumptions based on
market research,
competition, risks and
mitigants
6
ANSOFF MODEL
EXISTING PRODUCTS & EXISTING MARKET
NEW PRODUCTS & EXISTING MARKET
MARKET PENETRATION
Increase sales to the existing market
PRODUCT DEVELOPMENT
Penetrate more deeply into the existing market
New product developed for existing markets
NEW MARKETS & EXISTING PRODUCTS
NEW MARKETS & NEW PRODUCTS
MARKET DEVELOPMENT
Existing products sold to new markets
DIVERSIFICATION
New products sold in new markets
Investment and capital. Debt or equity?
 Investments such as M&A, international expansion and new markets would normally be funded via
equity, at least initially.
 Mature and established businesses can leverage existing value to “blend” the equity/debt split
 Debt offered, even from start-up stage, for working capital.
Debt funding – key financial requirements
 Strong management team, including 2nd tier management and good FD and finance team.
 Robust financial monitoring and profit and cashflow projections.
 Sustainable revenues, profit and cash generation
 Reliable business model
 Compliance and regulatory metrics achieved
 Would I invest in you if it were my money??????
Are you worth investing in .......
8
LLOYDS BANK COMMERCIAL FINANCE
Adding value to your business: 
We offer clients seamless access to locally based decision
making teams, including credit

Dedicated Client Managers covering sector

Peer group knowledge and aligned with relevant sector
bodies

Accounting support on financial products

UK based, but supporting international businesses,
through combination of export debtor funding as well as
local in country

Debtor protection insurances
9
Ensuring you retain the cash within the business
 Review of international capabilities and protecting your profit margin from foreign exchange risk movements that
could eradicate profits.
 Time spent in your business – are your debtor collection practices and policies as good as they could be??
 Operational efficiencies/synergies from scale. Is there a tangible benefit or is it simply bigger?
Minimise cash drains eg non working shareholders. Consider buy-out to align management KPI’s and focus. Potential
bank support available.
Lloyds is able to assist in this process to ensure any policy is appropriate and relevant
10
STERLING CAUGHT IN THE CROSSFIRE OF
STRONG DOLLAR & WEAK EURO
1.75
1.45
1.70
1.40
GBP/USD
1.65
1.60
GBP/EUR
(RHS)
1.35
1.30
1.55
1.25
1.50
1.20
1.45
1.15
Source: Bloomberg
15
KEY FORECASTS
Key policy rates %
Current
Jun 15
Dec 15
Jun 16
Dec 16
Federal funds rate
0.25
0.50
1.00
1.50
2.00
UK Bank Rate
0.50
0.50
0.75
1.00
1.25
Euro refinancing rate
0.05
0.05
0.05
0.05
0.05
US
1.90
2.80
3.00
3.40
3.60
UK
1.60
2.40
2.70
3.20
3.50
Euro
0.70
1.10
1.40
1.60
1.80
EUR/USD
1.06
1.10
1.17
1.22
1.25
GBP/USD
1.51
1.47
1.55
1.55
1.54
GBP/EUR
1.42
1.34
1.32
1.27
1.23
10-yr swap rates %
FX
Source: LBCB
16
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