DP Treasury Analysis - Autocon

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Subtopic

Group Reporting CCY - should be USD

Treasury Critique

Liquidity Policy

Funding policy unusual

Lots of short term debt

Liquidity squeezes

Quick reaction to ratings

Availability

Not matching assets with liabilities

Interest Rate Risk Policy

Not specific enough in any case

Too much floating given covenant pressure

FX Policy

Specify reporting system

Not precise enough

Controls

Cash Management

20k tiny cost for control of cash

Risk Analyst

Providing input to GL

Risk of Fraud/Error

Not automatic

Crosses Front/Back Office

Inappropriate size

cover

skill levels

segregation

Organisation

Conflict of interest on Tax Reporting

Not much

Payments

Using AP function

Routing Issues

Delays

Accounting

Localised

Not using experts

Needs to control

Cash

Risk

Not close enough to business

SWOT

Threats

Needs to sort cash position quick

Opportunities

Sell Low Growth/Low Share markets

45% of PBIT in cash generative markets

drive costs down

25% of PBIT in high growth markets

improve margins

Shift to high share

Weaknesses

No High Growth/High Share Businesses

Inward Looking

Lacking some key treasury processes

Reporting

Internal complexity

Poor margins

Strengths

Fairly happy customers

Spread of Customers

By type

Good access to end customer

By industry

Diversification

Geographically

Financial Performance

Cash Flow Sustainability

Shareholder Issues

Collapse in market value

£3.2bn Mar 07

£10.5bn in Oct 04

Credit Issues

Covenant under pressure

Monitoring v. important

Leverage high

Asset Management

Asset % sales < 1

NWA % sales too high

Capex has been slashed

Profitability

Fell Quicker than sales

inability to take out costs after divestments?

Growth

Falling

underlying cause

declining markets?

divestments?

Competitive Advantage

Criteria 2:

Ensure margins are better than industry leaders.

Criteria 1:

Focus on Customer Requirements, delivering a packaeged service rather than components

Value Drivers & Strategic Risks

Strategic Risks

3

Inability to drive through the change programme

Inability to meet operating margins/growth targets

Burning Cash

Value Drivers

Growth in sales

Margin Improvement

Cost Reduction

Pricing

Cash Generation

Disposals

Operational improvements

Treasury

Netting

Commercial

Working Capital management

Commercial Factors

3:

2:

How complementary are the four divisions

1:

Bulk of Business in US - Focus there?