You’ve been Serco-ed…..

Ha Ha Ha. I have to admit to being extremely amused by the recent Serco fiasco. Having told the Government that, yes of course it would work with them to cut costs, their FD, Andrew Jenner, then turned around to their suppliers and told them that, er  they were going to be the people to be providing those cost cuts. Job done or so they thought.

However they reckoned without a robust government response to their shameless bullying of suppliers. Cabinet Office Minister Francis Maude intervened and the public services provider were forced to issue an unreserved apology. To cap it all the share price tanked as a result. No less than they deserved you might think and you would be right. Definitely something to cheer people up on a Monday morning.

But there is a serious side to all of this. To a certain extent big corporate Britain has been let off lightly so far. Profits are recovering, due to cost cutting it has to be said, rather than imaginative revenue growth. Balance sheets which weren’t that stretched anyway are being strengthened by a hungry bond market providing cheap money. As a result executive pay packets are soaring.

Yet, as the Serco episode above shows, they are still squeezing their suppliers, not only in terms of asking for retrospective “rebates”, but also extending payment terms by up to 90 days. This takes its toll on already cash strapped SME businesses, and is doing as much damage to their chances of survival as the current lack of available finance.

As Part Time FDs we see this frequently when working with our SME clients. If these businesses were able to just claw back a month’s worth of working capital, the cash injection into the SME sector would surely be significantly more than the government and banks have been able to manage so far.    

Big corporates more than ever have their part to play in Britain’s recovery, particularly in light of the austerity measures that the government is having to put in place to reduce its debt. A 30 day reduction in the working capital cycle will do more for enterprise Britain that any amounts of Government exhortations on banks to lend. Come on corporate Britain, it is now time for you to do your bit….

AIM and PLUS - The future beckons…

Monday 9 Feb 09- As 2009 continues to battle its way through snow, ice and the morass of gloomy economic statistics, two key elements of London’s financial infrastructure for smaller entities AIM and PLUS are both looking ahead off of the back of two contrasting 2008s.

For AIM the year ended on a somewhat low note with new admissions down on previous years and questions being raised about the suitability of the market for small cap shares. For PLUS based on 2008 the future looks extremely rosy, with admissions at a record level and their share trading platform going from strength to strength.

PLUS are old friends of ours and last year we ran two successful seminars with them and Orange Corporate Finance in Cambridge and Guildford . There is no doubt that PLUS is now a very serious option for companies seeking their first float and looking to raise funds for expansion.

But we support AIM too, and have viewed with interest a recent survey by top accountancy firm Mazars. The survey canvassed the opinions of both AIM quoted companies and a wide range of professional advisors and concluded that, whilst AIM had been tremendously successful in raising over £34 billion for companies from all around the world since its formation in June 1995, the market could provide more liquidity for companies if the market listed fewer but higher quality companies. With nearly 1,600 companies listed on AIM, over 60% of the AIM companies and advisors who responded to the survey said the sheer numbers of companies made it hard for individual businesses to raise their profiles and attract investors.

London needs both AIM and PLUS to give growing companies the best chance to continue to grow by issuing shares to a wider pool of investors. The challenge for both markets remains the need to create sufficient opportunity and liquidity to ensure that there is actually a market for those shares. Equally there is a responsibility for advisors to work closely with their clients in selecting the market that best suits them clients and give them the best opportunity to be successful. If this can be achieved then both markets can confidently move forward in the future, thus providing a much needed boost to our battered economy.