John Brehcist roundwindow consultancy services

Transcription

1 John Brehcist roundwindow consultancy services

2 Questions! The Factoring and Commercial Finance Industry saw significant growth in 2010 of around 20% compared to The industry has shown considerable recovery from the previous financial crisis Will growth continue? What will happen in Europe? Are we facing a second crisis? How should factoring companies prepare themselves? What sectors will be most affected? How will the industry evolve? Does this create opportunity?

3 Rebased total factoring volumes

4 Overview of the Industry 1980 total turnover c. 50 billion, <0.5% of world GDP 2010 total turnover c billion, 3.5% of World GDP. Source IFG GIAR 2010 *The relatively low Factoring turnover in the USA is because the US receivables finance market has mostly evolved into ABL activity. Asia excludes China

5 GDP growth old vs new economies Source: IMF 8/ for

6 Overview of the Industry Globally, there are approximately 3,200 Factoring providers active. Together they financed at the end of 2010 an around 164 billion to around 320,000 factoring clients and employed around 35,000 staff. The five biggest markets were UK & Ireland (17.0%), France (11.4%), Italy (10.7%), Germany (8.8%) and Spain (8.3%). Factoring Markets are generally highly concentrated, with the five biggest Factoring Companies totaling on average 87% of the national markets. With 38% of top five companies being Bank subsidiaries and 35% being Bank Divisions, Factoring is clearly bank dominated. Data IFG GIAR 2010

7 Overview of the UK Industry 42 members of the trade association ABFA* Sales increased in 2010 to 212Bn(c. zl 1Tn), an increase of 11%* 89% by turnover recourse/ 11% non recourse* 90% by turnover invoice discounting, 10% factoring* But..c 55% of the 42,000 clients served are in factoring* c. 15Bn (zl 70Bn) advances, available funds c. 20Bn (zl 95Bn)* Mergers & Acquisitions/ New starts/ New models Turnover CR4 82%^ Barclays 26% RBS 23% Lloyds TSB 21% HSBC 12% *Data ABFA 12/2010 ^Data Business Money

8 Our Environment New entrants Traditional new starts Receivables exchanges Banks Principal industry players Liquidity issues In house Funding of independents Basel II/III Industry Higher volumes overall for now New vs old economies Growing awareness and demand Trend to increasing regulation Inconsistent cross border legal Frameworks Continued economic uncertainty Eurozone crisis? Clients Greater knowledge Changing cash requirements More value sensitive Less product sensitive More solution aware Alternatives Traditional bank lending Venture Capital/ Private Equity

9 Eurozone crisis? "If the euro were to break up, it would cause a banking crisis that would be totally outside the control of the financial authorities. It would push not only Germany, not only Europe, but the whole world into conditions very reminiscent of the Great Depression in the 1930s, which was also caused by a banking crisis that was out of control. George Soros If you agree with Mr Soros, then the choices for the eurozone countries are to surrender of some elements of national sovereignty or to face an economic disaster which would impoverish not only the whole eurozone but the rest of us too. But political imperatives and financial requirement are not matched

10 How severe would the impact of a slowdown be? Factoring was not countercyclical in the last crisis But growing strongly in recovery Europe 1.8% GDP growth, Factoring 18% growth World 3.5% GDP growth, Factoring 21% growth But if another crisis, will it reflect previous experience?

11 What are the most dangerous branches of the economy for factors? By sector perhaps Construction and property Transport and distribution Retail Personnel By business certainly Low gross margin, highly geared But We tend to lose more by fraud than by sector So what do we do Focus on risk and relationship, use statistical tools, monitor closely Spread your portfolio: by sector, by scale of client, by product, by geography, by source

12 Experience of Factors threatened with crisis? Focus on income Client retention priority Meeting needs flexibly Focus on costs Cut unnecessary costs ruthlessly Do not compromise risk management Do not ignore your sources of business Focus on people Explain and involve Listen and react Look after your talent, lose your poor performers

13 How will the Industry evolve? By products or by organisational changes? By product? Trend for greater choice Broader product ranges (both standardised and made to measure) General trend for Factoring to Invoice Discounting By organisational change? Greater automation in processes Electronic communication and interchange of data (web based) Drive to increased efficiency in costs (measured in client staff ratio) Greater appreciation of the benefits within banking groups By innovation? Integrated offerings Receivable exchanges

14 Can the crisis create opportunity for the Industry? For providers Undoubted higher returns on capital compared to traditional lends More secure advances in an age of focus on risk Closer control of the relationship, increased retention and loyalty Basel II benefits, Basel III questions For Clients More flexible funding than traditional lenders Lower thresholds for access Easier conditions and covenants Support through bad times as well as funding for growth Access to knowledge and support for international business

15 Conclusion Prepare for a battle Prepare to win Flexible and Fast Adapting providers with a Balanced Approach to Risk and a Motivated and Knowledgeable Team will have the greatest capacity to survive and flourish roundwindow consultancy services info@roundwindow.net