Review

1:

Bulk of Business in US - Focus there?

2:

How complementary are the four divisions

3:

Value Drivers

1:

Cash Generation

Operational improvements

Commercial

Working Capital management

Treasury

Netting

Disposals

2:

Margin Improvement

Pricing

Cost Reduction

3:

Growth in sales

Strategic Risks

1:

Burning Cash

2:

Inability to meet operating margins/growth targets

3

Inability to drive through the change programme

Criteria 1:

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

Criteria 2:

Ensure margins are better than industry leaders.

Growth

Falling

underlying cause

divestments?

declining markets?

Profitability

Fell Quicker than sales

inability to take out costs after divestments?

Asset Management

Capex has been slashed

NWA % sales too high

Asset % sales < 1

Credit Issues

Leverage high

Covenant under pressure

Monitoring v. important

Shareholder Issues

Collapse in market value

£10.5bn in Oct 04

£3.2bn Mar 07

Cash Flow Sustainability

Strengths

Spread of Customers

Geographically

By industry

Diversification

By type

Good access to end customer

Fairly happy customers

Weaknesses

Poor margins

Internal complexity

Lacking some key treasury processes

Netting

Reporting

Inward Looking

No High Growth/High Share Businesses

Opportunities

25% of PBIT in high growth markets

Shift to high share

improve margins

45% of PBIT in cash generative markets

drive costs down

Sell Low Growth/Low Share markets

Threats

Needs to sort cash position quick

Organisation

Not close enough to business

Needs to control

Risk

Cash

Accounting

Not using experts

Localised

Payments

Using AP function

Delays

Routing Issues

Reporting

Not much

Conflict of interest on Tax Reporting

Controls

Inappropriate size

segregation

skill levels

cover

Risk Analyst

Crosses Front/Back Office

Providing input to GL

Not automatic

Risk of Fraud/Error

Cash Management

20k tiny cost for control of cash

FX Policy

Not precise enough

Specify reporting system

Interest Rate Risk Policy

Too much floating given covenant pressure

Not specific enough in any case

Liquidity Policy

Funding policy unusual

Not matching assets with liabilities

Lots of short term debt

Quick reaction to ratings

Pricing

Availability

Liquidity squeezes

Group Reporting CCY - should be USD

Subtopic