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It seems that every time I open the broadsheets someone else is attacking the Support Services Industry. Recent examples have derived from the profit warnings at Connaught and ROK and not satisfied with the fact that public sector spending on services is set to fall in the short term, the focus for criticism seems to have changed to governance related issues and the interpretation of accounting policy.
Questions have been asked about the way that long term contracts are accounted for with many leading analysts calling for a change in accounting standards to help separate the good from the bad. It seems clear to me that it is not in the best interest of the long standing CFO or Audit Partner to highlight such grey areas as that in turn will reflect badly on them and may lead to the FD’s sudden departure as we have seen recently at ROK.
I have two questions for our Interim community;
1. How can the Chairmen and Chief Executives of Support Services companies ensure that the results that they are communicating to the City are not based on accounting policy grey areas?
2. How can the Support Services companies who manage long term contracts build confidence with the City analysts?
Mark Kitchen is Head of Business & Support Services at Interim Partners.
As ever, recent contradictory headlines in the business press have me wondering which is right? Surely the BoE’s statement that QE is back on the agenda in the face of ‘weaker than expected growth’ as is at odds with GDP surging to its highest level for 4 years?!
Looking at the fundamentals, US commodities are off their May lows, and the commodity shipping market has also rebounded on the back of increased demand for steel in China – all good signs in that this indicates demand is rising, although less good if we hoped for some relief with petrol pump prices!
Closer to home, manufacturing output was reported to be at its highest for 15 years with strong domestic and overseas demand, and is set to continue rising albeit at a slower rate over the next 3 months. I was very surprised to read in the CBI Survey that more firms have reported credit availability improving, as this not what I’m hearing. I wonder if this loosening of credit is applies only to the larger firms – I would be keen to hear if any interim managers agree with the CBI findings?
It remains a tough market out there for interim managers specialising in the manufacturing sector, as the mixed messages in the Press testify – last month, we were led to believe that growth figures were going to be revised down, something that looks highly unlikely this month!
However, storm clouds do remain on the horizon – the PIGS economies panic has subsided to a murmur for the time being and the LIBOR rate remains high, but few companies are seemingly prepared to commit cash from reserves for projects. I am beginning to see an increase in finance led projects, driven in the main by the banks but operational projects remain subdued. My view is that payback periods are perceived as being too long, or the returns not deemed to outweigh the benefits of cash in the bank pending the uncertain outlook. Is this a view shared by readers?
In summary, I sense that the recovery feels more resilient than the headlines give credit for although as a business, we’re seeing very clearly that demand for interim’s varies between sectors. Financial Services (Insurers/ Retail Banks) is booming, Retail is having a tough time as is the Public Sector. Demand in the manufacturing sector remains patchy but there are opportunities, even if finding them is taking rather more effort! Historically, FS has led the UK economy out of recession – will it be the case this time, and if so, is all we have to do hold on for the next 6 to 8mths until the recovery spreads to other sectors? What are your thoughts?
Tom Legard is Head of Manufacturing at Interim Partners.
In the first half of the year many companies in the services sector
have been focussing on the front office especially within the following areas; headline growth, new revenue streams, profit contribution, operational and customer service excellence.
In the second half of the year I am expecting a focus on the back
office in particular finance and other high profile projects that require board level sponsorship.
The reason for this is that many companies are waking up after the recession with an over leverage problem that needs to be resolved. As the five year bank facilities that were negotiated in 2006 / 2007 are approaching renewal, paying down existing debt will become the prioity yet again in the service sector.
As most of my regular readers know; I operate as a generalist across all functions and my knowledge of finance is much broader than it is deep. I would be especially interested to hear contributions from any Interim Finance Directors that have experience of refinancing under difficult circumstances and would consider themselves experts at managing cash.
Mark Kitchen is Head of Support Services at Interim Partners.
The mobile market in the UK is possibly the most competitive of all global telecoms markets. With Orange and T-Mobile merging into Everything Everywhere it is further compressing such a competitive market and one might be forgiven for believing there is now only a small selection of providers from which to choose.
You’d be wrong.
Apart from the well known brands of Vodafone, Everything Everywhere, O2 and 3 there are a range of MVNOs (mobile virtual network operators) including Virgin Mobile, Tesco Mobile, BT Mobile and the rapidly growing Lebara to name but a few.
They offer relatively similar services at a range of competitive prices but there is a new trend of abolishing unlimited data packages due to network constraints. This comes at a time when roaming charges are being capped. Another trend is for operators to pair with their fixed line brethren to offer a converged service to enterprise accounts. This is a profitable model if it’s done properly and I’m sure we’ll see more of these alliances in the coming months.
I am interested in hearing from those with a view on how operators will charge for data usage, what the corresponding business models might look like and whether the networks are creaking under the weight of extra demand for data? Is this likely to be a major capex issue for the already heavily indebted operators?
Please feel free to contribute.
Steve Blake is Head of Technology, Media & Telecommunications at Interim Partners.
Good news on the surface, but a very worrying forecast.
Lets review the good news first! The Purchasing Managers Index remained at 58 for a second consecutive month in May (it stood at 45 last May – the highest reading at that point since April 2008) as UK manufacturing rebounds on the back of a continued buoyant export demand, and inventory re-stocking. Employment levels also rose for a second month in a row after almost two years of job cuts.
In terms of interim manufacturing assignments, Q2 activity mirrored the manufacturing rebound, with a good increase in the number of new assignments after a very quiet Q1. These have almost exclusively been in the Finance and Operations areas and although day rates remain under pressure, I’m seeing a much higher percentage of interim managers reporting that they are currently engaged compared to 12mths ago.
Great news all round – something we’ve all been waiting for, for a long time!
Now the bad.
The speed of deterioration in the Southern Eurozone to the point that it’s now a case of when Greece leaves the Euro, was unthinkable even 3 weeks ago. We all know what this means – the inter bank rate is already back up at levels last seen before the onset of the credit crunch. I had hoped this outcome had been at the very least postponed after Germany supported the emergency package, but I fear the market’s have decided otherwise and I’m pessimistic that the Eurozone can recover.
A second piece of news out today, and to my mind key, is regards US commodity prices. Their index of 18 industrial materials fell by an astonishing 57% in May, the biggest fall since October 2008. This is a worrying indication that growth forecasts will almost certainly be revised downwards later this year – and not just for the US.
In summary, short term I think demand will continue, but it’s likely to be patchy and continue to be frustrating for many interims as competition remains fierce. Longer term, who knows – as we’ve seen from Greece, sentiment can swing wildly between extremes and whilst the current outlook is not good it’s been worse.
With the drop in commodities and oil, at least pump prices may give us something to smile about in due course!
We continue to see mixed messages in the business press in terms of the state of manufacturing in the UK. Recent articles have highlighted UK factory output rising and in the next breath we read that more manufacturing companies are making redundancies than hiring.
The biggest threat to the manufacturing sector’s recovery was the possibility that Greece would default – thankfully the crisis was averted (or postponed!) and the global credit markets sighed with relief, rallying immediately.
Domestic uncertainty with the non-outcome of our General Election continues! The horse trading behind closed doors may dampen activity short term until we know who will govern the country, but the upside is that the uncertainty will continue to depress Sterling the benefits of which are now clearly being felt in increased exports.
Commodities is still a problem, oil continues to hover around $80 a barrel hurting both business and consumers, funnelling more cash away from the manufacturing sector that remains unable to increase prices with demand is still very fragile.
However, on a brighter note, I have definitely seen increased levels of activity with a number of interim managers recently beginning new assignments. Many roles are finance orientated at this point, but project management roles focussing on implanting cost reduction or improvement programmes are also slowly picking up after the extreme quiet we all experienced in Q1.
Summer is coming – and it promises to be better than the last, lets hope the weather is too!
Tom Legard is Head of the Manufacturing Practice of Interim Partners.
For those of you that read my blog last month I was talking about the marked increase in activity that I am experiencing across the Support Services industry.
I can now confirm that Interim Partners have just experienced their best ever quarter in terms of revenue, placement of Interim Managers and enquiries. I hope that you are also experiencing similar levels of activity and it marks the end of what has been a difficult recession for Interim Managers.
The one encouraging fact is that my clients are now asking for Professional Interim Managers who have a proven track record of supporting companies that are experiencing planned or forced change. Generally clients are becoming more aware of what to expect from Professional Interim Managers, I am sure that the broadsheets as well as the senior providers are facilitating this positive change in opinion.
I have also seen evidence this quarter of candidates that are new to Interim Management securing work through their own network. I look forward to building a relationship with these Interim Managers who I hope will continue on the Interim Management career path.
If you are new to Interim Management or are a Professional Interim Manager I would like to hear your thoughts on how you are finding the market.
Mark Kitchen is Head of the Support Services Practice at Interim Partners.
I have also seen evidence this quarter of candidates that are new to Interim Management securing work through their own network. I look forward to building a relationship with these Interim Managers who I hope will continue on the Interim Management career path.
If you are new to Interim Management or are a Professional Interim Manager I would like to hear your thoughts on how you are finding the market.
Mark Kitchen is Head of the Support Services Practice at Interim Partners.
Welcome to my Technology, Media and Telecommunications (TMT) blog. I hope you will find interesting material worthy of comment. I hope to stimulate discussion regarding a number of topics across the TMT sector and hope also that you will add comments of your own and become involved.
It’s been a fantastic start to 2010 with Interim Partners reporting a record first quarter added to a strong forward book indicating signs of continued growth. My question today centres on the telecoms sector and I wonder how is this growth manifesting itself, if at all, in this key market. I see demergers in the shape of Cable & Wireless and Carphone Warehouse/TalkTalk Group. I see acquisitions for example Bharti Airtel buying Zain’s African interests. Will this stimulate long term and healthy growth or do we need to see diversification and/or new product offerings to really grow the sector?
Conversations I’ve had recently seem to indicate that certain telecoms companies have a war chest which they are keen to utilise when the relevant acquisition is identified. Even those heavily indebted still view acquisitions essential to shut out the competition and play the long game to pay off mountains of debt.
It seems likely that M&A activity will continue to reshape the industry however should differentiation and innovation around the product portfolio be at the forefront of business strategy thereby securing market share and continued growth of revenue?
I welcome your thoughts regarding how the sector will develop this year.
Steve Blake, Head of Technology, Media and Telecommunications
My gut feeling that the Manufacturing sector was taking a battering have sadly been confirmed with publication of the latest figures from the ONS.
The Times reports today: “Sterling plunged further against the dollar after official figures revealed British manufacturing output unexpectedly fell in January at its sharpest monthly rate since last August. The Office for National Statistics (ONS) said output had declined by 0.9 per cent at the beginning of the year, compared to December, marking the biggest drop since last August and falling far below analysts’ expectations for a rise of 0.3 per cent. However, comparing January to the same month last year, output rose by 0.2 per cent.”
There is speculation that poor weather played a part in this, but there’s also speculation that the Q4 improvement last year was solely due to restocking. I fear it was the latter, in which case prepare for the inevitable political invective as Gordon will have to run very hard for his money! Time will shortly tell if it is, however, I’m very keen for readers to share their thoughts on the possible causes – and possible cures.
Before Christmas I felt fairly optimistic that we were moving back towards positive territory – and sure enough, Q4 GDP figures confirmed exactly that. All good. The Purchasing Managers’ Index rose to a 15-year high in January. Even better.
So why has the manufacturing and engineering interim market gone rather quiet? A number of interims have reported that despite enquiries picking up in January, there has been a marked decrease in activity over recent weeks.
I would be interested to know from readers if this is more widespread and their thoughts as to the cause for this? Please add your comments.
The view that recruitment bears a very close correlation to client activity would indicate a flat first quarter for GDP, and possibly worse for manufacturing. The marked increase in activity from the Financial and Business Service sectors appear to be fundamental in underpinning the overall recovery, and will I think prevent the much talked about ‘Double Dip.’
Whichever way we look at it, the recovery is very fragile and data remains mixed – surveys announced consumer confidence reaching a two year high whilst spending declined; new care sales rose again, whilst house prices fell.
So where does this leave us?
Certainly in a better place than 12mths ago, the free fall in orders and revenues have stabilised; costs have been slashed via a combination of pay cuts; reduced shifts and redundancy and the figures for the manufacturing payroll have seen a slight rise which bodes well for the longer term.
Ultimately, it’s going to be another tough year – let us hope the IMF comes to the aid of Greece and the election does not result in a hung parliament!
