De la Rue. The worst credit management ever?

It could of course be seen as rather amusing that a business that prints banknotes is running out of cash but of course they cannot simply run the presses to escape resolve their chronic as flow difficulties. Nice thought, but not practical

What is more alarming is the decision making that led to these difficulties which are pinned on the following

The latest statement follows a series of setbacks including two profit warnings, an investigation into suspected corruption in South Sudan and its failure to win a £490m contract to print the UK’s post-Brexit blue passport. In May, it wrote off £18m after Venezuela’s central bank failed to pay its bills.

Which of these issues was the most significant?

Clearly the South Sudan episode was damaging but hard to directly quantify the effect on the overall business. It would appear to just be an “investigation” at this stage. Losing the passport business clearly was a blow but surely that should have been factored as a possibility and the operations resized accordingly. These things happen

But a bad debt with Venezuela? Frankly what could be more idiotic than giving the worlds most dysfunctional economy a credit facility? An economy run by those who’s hatred of capitalism and “the west” is hardly going to be conducive to a relationshp with respect but more significantly Venezuela is a completely bankrupt state

Im not sure I’ve seen a worse credit decision. £18m too.

Unbelievable

 

Advice from insolvency on the other side of the world

A rather grim photo i’m afraid but this was the Pike River mining disaster in New Zealand which killed 29  and the following is an interview with the liquidator of Pike River following that terrible event

He doesn’t dwell but its a reminder of the human element of insolvency and whilst it is a little loved profession, its worthwhile considering that it can be a emotionally tough job in certain circumstances

But aside from that the remainder of the interview is interesting and perhaps there are contrasts with the nature of IP in New Zealand compared to the uk. Either way the observations are strong and to the point and whilst the following may not be original, it does serve to remind us the credit judgement is about a whole lot more than balance sheets.

Watch out for owners who spend a lot of money on things that are not core to the business. If they’re spending it on assets for the business I wouldn’t be so worried, but if they start spending up on flash cars and holidays and it all happens very quickly, I’d be asking questions. It’s also usually an indication they’ve taken their mind off the game.

Certainly seen that on many occasions. I would also add that some owners can (understandably) become bored and start expanding the business into unnecessary areas (a subject for a new blog piece I think)

All businesses go through cycles, and at some stage you will start going down what we call ‘the demise curve’. The earlier you recognise the signs the better. The old saying ‘cash flow is the lifeblood of the business’ is very true. You might be profitable, but if your cash flow dries up you’ve got a problem. Maybe you’ve grown so quickly that you can’t keep up because your creditors need to be paid more quickly than you’re collecting money in.

To keep a focus on cash flow you need to be good at forecasting, because history won’t tell you. Particularly if something’s been successful in the past but things have changed, facing up to those changes and doing something about it early is important.

So true

Do we need free broadband?

Much news has been generated following Labour’s pledge to supply “free broadband” before 2030. Naturally it is a policy designed to have widespread appeal including to businesses

Of course the counter argument is that nothing is free and I wouldn’t disagree with that point but are businesses really crying out for this?

Its been some time since I have encountered a client of mine complaining about their internet access and there is probably a good reason for this

High speed state of the art broadband is desirable but do businesses struggle with current speeds of service or not?

I suggest that it isn’t an issue unless their staff are fully engaged with the services that require ultra high speed connections

If they are then It might be worth asking why they are gaming and watching Netflix all day

 

 

 

Big news afoot in the invoice financing sector?

Asset finance is a very competitive sector with many players and as such it is frequently rife with rumours about who is going to do what.

Many of these stories are rubbish of course but one very high level and trusted source has singled me out to tell me to “keep ear to the ground” because there will be “many opportunities”

We can all read between lines but I suspect that a major lender a major bank most likely) is going to withdraw from the market.

If so, then I could hazard a guess at who that might be.

A rumour but lets see what happens

Is the high street really dead?

 

This is a fairly decent summary of the challenges for High street retailers and it is a subject I’ve covered here before. With Mothercare collapsing the issue is once again being highlighted in the press and its hard to see the slide away from the high street as anything but a slippery slope with the growing efficiency of online retailers (which are my preference)

But is the picture as bleak as it appears? Stats in the article could be looked at in two ways. The vacant premises are the “highest since 2015” to which I’m tempted to say “so what?”. The actual numbers have not changed significantly over the past four years and certainly do not indicate a trend. On the other hand the actual slice of online sales as total of the overall retail market has grown steadily over the past three years but at what rate? Look at the graph and its around 3 to 4% over that period. Significant but not as high as many might have imagined perhaps? Also not all online sales are exclusively with exclusive online retailers.

Dragging bags around a shopping mall is not my idea of a fun weekend but whilst its a declining trend, it is some way from being terminal.

For many remains a pleasurable experience and analysts underestimate that element when set alongside convenience.

Few avid readers would argue that a Kindle is more pleasurable that picking up a brand new book but there were many voices claiming that the days of print were over.

 

 

 

 

 

 

 

Peer to Peer struggles

Following on from my piece indicating a lack of enthusiasm from certain “new” lenders in the market, I received this from a PTP lender that I respect and have completed transactions with:

This opportunity is probably too large for us at the moment. Political/economic uncertainty has temporarily suppressed our investor confidence, certainly in longer term loans. We are still pretty comfortable up to say £xxx, and when Brexit is finally resolved, we expect to see an influx of cash over the platform, however for the moment we are being conservative on the size of deals we take on. Hope that makes sense.

I wont disclose their identity of course and I appreciated the honesty but the amount i was seeking for the client was certainly within their compass a couple of years ago

One lenders views and policy will not of course reflect the whole market but there is seemingly a minor trend.