Tesco Personal Finance - A New Player in Store?
June 25th, 2009
Tesco’s has successfully secured a beachhead in the financial services arena and the far-sighted Sir Terry Leahy has every reason to expect big things. Benny Higgins, Shaun Doherty et al have excellent track records within RBS and HBOS and have a thorough understanding of the retail banking market. Coupled with the deep financial resources, instant branch network, ability to cross sell products to existing customers and utilise established loyalty programmes through Tesco Clubcard they make a formidable new challenger to the established players.
Under normal circumstances I would back the likes of RBS, Santander and Lloyds to fight them off however public trust in the old guard has suffered greatly in the recent credit crunch turmoil whilst dependable Tesco is a shining beacon of reliability on the highstreet. If he gets the proposition right Benny Higgins could push Tesco into a major provider of consumer banking products in a very short space of time whilst current tier one banks are inwardly distracted with major change and integration programmes, they would be wise to stop and check their rear view mirrors.
Andrew McIntee is a Director and Head of the Financial Services Practice at Interim Partners.
The recession is over
June 11th, 2009
Well it is in our office anyway. We are going to ban the use of the word and ensure that it is not viewed as an excuse but as an opportunity. I hope my title caught your attention and for a mere split second you were hopeful that it was over and that I might have some pearls of wisdom or indeed some hard facts that might suggest the recession is over. Unfortunately, I have neither. All I can say is that our team is increasingly more positive as they are experiencing greater levels of activity in the market.
I am no different to many small business owners and when bombarded with bad news in the press am left feeling that my glass is half full. However, our hard work and commitment are paying off and we are indentifying opportunities for high quality interim managers. Recent assignments have included opportunities across all the sectors that we operate in and whilst we have a strong presence in the UK we have also got current assignments based in continental Europe, the Middle East and Asia.
Within the past two weeks I have also had the opportunity to pitch to a financial services provider who are about to embark on a major change programme so can confidently predict that the pipeline for assignments is looking good.
I recently attended the Yorkshire Business Conference www.yibc.biz. As always the conference was excellent and this year it focused on speakers who had a “can do” approach to business. I can recommend this conference (or those that are similar) to everyone because you come away with a renewed sense of purpose and positivity. What key points did I come away with? A few messages struck a chord. The first is that there is enough business out there for everyone, even today. The second was switch off from the negativity that is out there, turn off the TV or ignore the papers until at least lunchtime as you will start the day better and achieve more. The third message I took was – ignore what your competition are doing, focus on your own business and don’t fret if you hear that they too are successful as there is still enough out there for all of us.
On one last positive note please wish me some luck! I recently presented our business to a panel of experts for the National Business Awards. Always difficult to judge if you hit the right notes but I hope I gave a reasonable account of the business and the excellent team within. Should find out how we did in the next few weeks. Will report our progress and hopefully have more positive news.
Doug Baird is Managing Director of Interim Partners
A time for optimism
June 11th, 2009
It’s always interesting to look back and review the year to date, and the effects of Government initiatives. The much trumpeted Credit Insurance scheme that I felt could potentially provide the catalyst to enable companies to continue trading through the credit crunch didn’t materialise – an interesting comment from an interim runs thus: ‘… we finally got ourselves through to the department responsible who then told us that they had no idea what they were meant to do or how they would do it.’ Sound familiar?
That being said, the economic news is positive, and those who scoffed at Alastair Darling’s forecasts for the economy look to have been wrong footed. The huge sums of money ‘thrown’ at the banks to release credit lines to the market, and the Bank of England’s policy of quantitative easing appear to have had the effect of reversing the steep decline we experienced far more rapidly than anyone expected – GDP increasing by 0.1% in May following a similar increase in April. Tentative, but broadly in line with data elsewhere from the housing market to the Purchasing Managers Index and, more importantly, with consumer confidence – perhaps this the summer we were hoping for, after green shoots were somewhat prematurely spotted by those in high office back in January!
It’s certainly more positive from where I’m sitting and despite trading conditions for many of my clients remaining challenging, there has been a marked increase in enquiries from clients. This is also true of the experiences of our interim managers, for whom in the manufacturing sector, has been a tough Q1 and Q2, but who are now seeing more potential assignments in the offing.
This quarter has seen requirements for Operations, Supply Chain and Finance interims – I’m delighted to have placed a top level Operations Director in Germany and fully expect to have a Supply Chain/ Ops Director and a Financial Controller (in India) placed by the month end. Fierce competition for assignments makes it a buyer’s market, not so much in terms of day rate, but in terms of experience and candidate profiles exactly matching briefs – not a long term trend and in my view a current ‘luxury’ for clients as demand catches up, but still frustrating for interims who come close, but just not quite.
Surprisingly, demand for Turnaround Specialists remains ‘cool’ although more encouraging feedback suggests that banks faced with the unexpected, and largely unwanted ownership of PE backed businesses now under water, are investing resource in turning these businesses around. Certainly there seems to be more interest from the banks, and my expectation is that there will be a subsequent increase in demand for turnaround specialists – albeit with specific industry experience, and an exact match for the client’s candidate/ job brief…
Tom Legard is a Senior Consultant in the Manufacturing Practice of Interim Partners.
Industry Update
June 10th, 2009
After the months of March and April proved to be flat I have been encouraged by the increase in activity since the final week of May. It seams that after the fragmented Easter holiday period companies are now focusing on increasing profitability through rationalisation and change management and as one leading executive said in a conversation last week “It was quietly agreed that at the start of 2009 we would almost be forgiven for not achieving profit targets but now that some of the broadsheets and analysts are talking about green shoots any lost revenue will have to be recovered in quarters 3 and 4, 2009 may not be regarded as a write off after all and we all may be measured on recovery performance”.
I’m not sure if the broadsheets and analysts are just talking up the economy to boost confidence but the recent announcement that the PMI level has risen would seem to back up the recovery theory in our sector. The real test for me will be the amount of assignments that close successfully in a market that has shown so far this year that there is a large difference between needing an Interim Manager and securing sign off from the board.
As I write this blog another one of my assignments has just closed successfully and let’s hope that in my next industry update I am complaining that I do not have enough change and programme managers for the demand !!
If you are a professional Interim Manager I would like to hear your thoughts on how you are finding the market and if you have seen an increase in activity in the last few weeks like I have.
Mark Kitchen is Head of the Construction & Support Services Practice of Interim Partners
“Deal or No Deal?”
June 10th, 2009
The landscape for private equity led buyouts is clearly barren. Only five deals have been announced this quarter to date, which is less than 10% of completions during the same period in 2008. The 1st quarter of 2009 didn’t look much better either, with only 13 completed compared to 63 last year.
Obviously the financing of deals in terms of debt remains a stumbling block or at least the price of debt finance makes it prohibitive. Vendor price expectations are still significantly higher than that of buyers. The appetite for backing relatively high risk transitions in this climate remains limited.
However, on the positive side we have seen Lloyds Development Capital complete a number of deals this year and a key client of Interim Partners, Endless llp, recently completed the acquisition of British Bookshops and Stationers plc with the aid of an Interim CEO provided by our Private Equity Practice (announced in Retail Week http://www.retail-week.com/retail-sectors/entertainment/books/ex-whsmith-man-to-run-british-bookshops-and-stationers/5002884.article )
Other bright spots have been a number of opportunities instigated by the Business Support teams within the Banks and recovery practices within the leading advisory and accountancy firms. These roles have mainly being focused around balance sheet restructuring, turnaround advisory, and Non-Executive Directorships. I still feel we are a little way from seeing the real medium to long term turnaround mandates that would create opportunities for Interim Executives across the spectrum, but seeing the banks acting on this tentative basis is still fantastic news.
Also, if we are almost at the point when the worst is over (say it quietly) perhaps these and many other opportunities will start to filter through quicker and that may also provide a catalyst for more M&A activity. Going forward one must expect the environment to become more fertile as there will be many opportunities for investors to commit some of the cash piles that have built up in the last six months. In Britain alone there is circa £90bn waiting in the war chest. There is no question 2009 has been a tough year for the buy out community, banks, and management teams of leveraged buyouts, but hopefully the summer will provide us with some momentum going in to the last quarter of the year.
Please feel free to leave your comments regarding the current M&A and Private Equity market conditions and don’t hesitate to contact me if you would like to discuss any of the issues raised here or in previous entries. Indeed I am always keen to hear from Executives operating in this space either directly or indirectly.
James Harley-Booth is Head of the Private Equity Practice of Interim Partners
The cost of procrastination
June 10th, 2009
Retail businesses are more than ever wanting to get closer to consumers and the contents of their pockets. In the last 48 hours I have watched the hour long Sainsbury’s programme on Channel 4 (I’m Running Sainsbury’s, Tuesday 9pm), seen ASDA kick off a price war on school uniforms through the social networking website Twitter and watched Oasis become the first retailer to launch an application through the Apple iPhone. In this competitive market cash, more so than ever is king. Behind the scenes, retailers are tentatively talking about allocating budgets to programmes and projects but they are not rushing to spend money on development programmes. For the majority of retailers there are still substantial cost reduction opportunities to be had.
Most retailers are aware there are inefficiencies or areas for cost reduction and have embarked on some sort of cost reduction initiatives. However, they are often not deep enough and are not embarked upon early enough and there is hesitancy to implement them because of the fear that the cost of finding and resolving the saving may outweigh the value delivered. I believe the last few months of this year will be predominantly about turnaround and distress situations where businesses are focussed on finding immediate cash in order to survive. Tactical value engineering projects that can deliver a disproportionate return on investment must now be high on retailers agenda – otherwise the next few months may see external influences (and investors) move projects from ‘tactical’ to ‘distress’.
Jonathan Flynn is Head of the Retail Practice at Interim Partners.
Survival or growth - which strategy?
June 10th, 2009
Historically pharma organisations have been ‘Cash rich and organisationally poor’ however from the Global Big Pharma’s to University spinouts a mixture of the current economic climate, governmental healthcare policy and competition driven by emerging markets has put a stop to the lacklustre attitudes of the past.
Pressures on R&D and Supply chain costs are nothing new, neither is the constant burden of balancing investment in emerging therapies with deploying generic strategies. What, however, is causing most difficulties for all levels of business is the fact that costs have been cut, talent has been rationalised, investment from traditional sources of funding has dissipated yet there is more need than ever for investment in R&D and new markets, development of talent and the need to bring infrastructure and Information technology up to speed with many non-pharma marketing led industries.
The good news in light of this pressure is for interim management once the current tactic of ‘freeze don’t do anything just yet as a precaution’ has lifted is that it would appear three survival strategies have emerged which will all have there place for Interims.
Mega mergers. We have already seen a number of big ticket transactions announced, resulting in major integration projects creeping slowly towards the horizon. Having shed in many cases up to a third of workforces I can see there being needs for specific skill sets to facilitate the operational integration left behind in the wake of strategic plans from consultancy based organisations. I see the biggest pressures in project managing the integration of organisational development, marketing, IT and Finance functions that have over the last few years been heavily reduced in numbers.
M&A, however, is not seen by all as the only route to survival, enlarging offerings and investment into generic and emerging markets has to be a key step given last year’s 70% of growth in the pharma market was in the pharma emerging area’s such as , India, Russia, Brazil, Turkey, Mexico and South Korea. This in turn will lead to the need for interims with exposure in global supply chain and procurement exposure as well as the need to manage local personnel within newly formed alliances from a HR point of view. The Far Eastern markets are also being targeted by European and US companies as potential pharma gold mines given the huge amount of government investment, large numbers of relatively cheap research subjects and low costs of R&D and manufacturing facilities. This coupled with untapped patient markets in the 10’s of millions makes it an obvious focus. We have already seen a number of opportunities for interims that are prepared to travel.
The third potentially interesting area is the investment in fledgling business by larger pharma companies along side government funded research schemes as opposed to traditionally investing in own R&D. The UK in the recent budget has pledged £750m alongside the US government’s major change in tack in terms of its cutting edge pharma development and investment. The question of where and how this is to be distributed is still to be answered. Commercial direction in the short term for these businesses is a key hot spot for interim MD’s and CEO’s prepared to balance the interests of IP versus survival and growth.
The pharma industry has and always will be a changing industry with the need to merge, collaborate and develop, however, the key to current success and survival is doing it as efficiently and as cost effectively with fewer resources. The flexibility and cost effective solution of deploying an interim manager has to be the commercial option in an academic industry.
If you have any thoughts on which strategies will prove most popular and successful or indeed your wider take on current market issues, the Pharma Interim community and myself would be interested to hear from you.
James Fargus is a Senior Consultant in the Pharmaceutical and Biosciences Practice of Interim Partners.
NHS under the knife…..
June 10th, 2009
It appears that the NHS like private organisations will pay for the banking sector’s profligacy with majorly reduced spending in future years.
NHS Chief Executive, David Nicholson, was interviewed recently and stated that “all bets are off” as the health service prepares itself for impending spending cuts. He said, “We need to move away from the NHS being built for growth to being able to sustain itself in a prolonged limitation on resources”
In a report last week it was announced that the NHS would have to make up to £15 -20 billion worth of efficiency savings between 2011-14. The squeeze to achieve those goals would have to start now. The report was based on specified budgets by the Labour Government for the coming years, but on current opinion polls it seems likely the Conservatives will get voted in at the next election. Shadow Health Secretary Andrew Lansley said he could not guarantee a Conservative Government would stick to the NHS allocations for 2010-11 let alone 2011-14. They have not ruled out changes to respond to the public finance crisis…so potentially even leaner times ahead for the NHS.
It appears the cuts in spending are coming at a time when the costs of providing new treatments and services for an ageing population are increasing. So what can be done to improve the situation?
After years of expansion the NHS is unlikely to be able to simply grow to meet demand, raising the prospect of some very difficult decisions ahead. I strongly believe that interim managers do have a major role in delivering these efficiencies, but am interested to hear from people with ideas on where these efficiencies can be made.
Paul Fleming is Head of the Health Sector at Interim Partners.
Smart metering - the biggest challenge since privatisation
June 10th, 2009
Smart metering has been a ‘hot topic’ for many years within the industry. However, without a clear strategy and leadership the industry has been slow to move. With the government’s consultation period coming to an end on August 3rd, will we start to see the beginnings of a revolution for the industry?
Smart metering is the biggest challenge the industry faces since privatisation and deregulation. For consumers a new era in pricing and customer service innovation. For the providers dealing with new technologies which will create faster paced business environments. The high initial set up costs will no doubt be offset with greater insight into their customer base a huge saving in servicing customers. Interestingly, the biggest challenge will probably be for the regulator as it will create a new landscape requiring new rules for regulation and, potentially, a reshaping of the industry as a whole.
As a final thought, I am confident smart metering represents a huge opportunity for interim managers. From delivering the associated capital investment required to reshaping energy retail strategy, interim managers have a leading role to play.
Duncan Hoggett is Head of the Utilities Practice at Interim Partners.
The Times they are a changing….
June 10th, 2009
The whispers of green shoots appear to have grown to more substantial murmurings as the media and leisure sector start facing up to their futures. ITV’s Michael Grade commented at the weekend on how he had fixed the plumbing at ITV, British Airways announces substantial losses and threats of more jobs to go at the grass roots level whilst Virgin Atlantic and Ryanair report substantial profits. Thomas Cook are asking investors to be patient whilst its 53% stakeholder has just filed for bankruptcy protection.
The printed press appears to have gained some footage on the back of the bad news of MPs gluttony with circulation figures rising. On the commercial channels there has been a canny move towards targeting through direct advertising SME businesses to use TV advertising as an essential route to market – comparing how larger businesses have capitalised on this historically.
Channel 4 again appear to have shrewdly pipped the BBC to the post by opening their back catalogue to on demand viewers in a move to boost their audience rates, whilst BskyB’s reply to a sinking Setanta’s plea for help went along the lines of ‘we are a broadcaster and not a bank’. Competition and sharp practice seems to be returning.
What does this now mean for the interim management world? There are a few things that appear to be happening that bring hope for the last two quarters of what has been beleaguered 2009. The professional services firms seem to be having a more active role in conjunction with investors as to how structurally and strategically they prepare their battered investments for the seemingly inevitable upturn. This is positive news as it is becoming increasingly obvious that management teams within larger businesses have been very much geared towards growth and profitability – they need help and advice. This is where we have an opportunity, to bolster the board rooms with experience and for want of a better analogy ‘grey hair’. There is an enormous amount of talent and experience that can assist not just businesses but the economy through to recovery.
I am keen to hear how you view the market at the moment and your comments on my perceptions of the last few months and how they might fit with your own.
Ray Nicholls is Senior Consultant in the Media Practice at Interim Partners.
