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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.
It’s been an unpredictable year so far regarding interim management opportunities in the Retail & Leisure sector. The year started in a more optimistic mood with people glad to see the back of 2009 and looking forward to a more buoyant year. It was widely claimed that despite small economic growth that the retail recovery was on track and all eyes were on which businesses would be investing in change. Then came a series of events that encouraged procrastination; the financial year end came and went, the snow crisis (!), volcanic ash and finally the General Election and the formation of a coalition Government.
The recent emergency budget and the VAT increase to 20% from 2011 hasn’t derailed the recovery. A rise in VAT was widely expected and retailers seem to have prepared accordingly. They now need to decide how much of the VAT rise they pass on to consumers – ASDA has vowed to absorb all of the 2.5% increase but other retailers will struggle to do so having taken as much cost out of their businesses as possible already. The increase is more bad news for the sector, especially as non-food retailers are also being hit by the weakness of the pound against the dollar and rising product costs.
I’ve spent a lot of time out meeting retailers in the past few months and the consensus will come as no surprise to you; trading is tough, cash is king and cost cutting is still top of the agenda. So where are the investment budgets? Well they seem to be there, vastly depleted from what they were even last year but they’re not being spent………..yet. I’m concentrating more on activity than predictions, but I’d like to open this up to our interim management community for discussion on your thoughts on the sector and views on the next few months – it’s time for change but who has the appetite and more importantly the budget or is it going to be a similar run in to Christmas as seen last year? As industry leaders and practitioners many of you will have seen similar conditions before, weathered the storm and come out the other end.
Is retail the football equivalent of the England Football Team – high expectations from the outset, struggles through with a series of disappointing results but ultimately fails to fulfil potential. Fortunately we haven’t been knocked out but as we’re running out for the second half what is our tactic – sit back and defend or take the game to them?
Jonathan Flynn is Head of Retail 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.
I am delighted to announce that the Financial Services practice has appointed Natalie Fennell as an Account Manager. Natalie will have special responsibility for delivering our preferred supplier agreement with Lloyds Banking Group, which includes brands such as Lloyds TSB, Halifax, Cheltenham & Gloucester, Scottish Widows, Clerical Medical and Bank of Scotland.
Given the amount of change being undertaken by the organisation and the subsequent demand for interim resources we have taken the decision to invest in our relationship with LBG. Natalie has an extensive track record of developing and delivering contract resourcing solutions within large organisations and will without doubt be a valuable addition to the team.
Clearly this represents a significant opportunity for Interim Partners to expand further into the financial services market and we would be delighted engage with interim managers who have experience within the sector.
Andrew McIntee is Director, Financial Services at Interim Partners.
The Department of Health published the revised operating framework for the NHS last week which set out some new policy direction. Of potential concern to the NHS interim management community will be the targets for Strategic Health Authorities and PCTs to cut their management costs so they “do not exceed 66% of the 2008 / 2009 management costs”, which is particularly bad news if your management costs grew quite significantly from 2008 / 2009 to 2009 / 2010. In terms of the numbers, that means a reduction from 1.8B to roughly 1B over the next two years.
Of course, often the most obvious solution is bringing to an immediate end all interim contracts, and in fact I spoke to two PCTs last week who are doing just that, one was finishing all interim contracts at the end of July including the contract of their interim Director of Finance, who might be considered to be fairly secure in covering a board level statutory position. The solution imposed by the SHA is to share a substantive Director of Finance with a neighbouring PCT, but you do wonder in such scenarios when the internal resource will be stretched that little bit too thin? The other PCT was ending all interim contracts, or asking interims to consider fixed term contracts on a salary appropriate to the band at which they have been working, but I imagine the uptake will be low, given the drop the potential drop in income between a daily rate and a salary but also because the semi permanent characteristics of a fixed term contract will not sit well with purist interim managers.
Clearly there will be two competing forces at work, on the one hand PCTs will be under pressure to reduce those management costs and finish interims, but so often I speak to clients who admit that interims are operating in vital roles and on pieces of work that they do not have the internal capability or capacity to deliver. My hope and expectation is that although there may be a short term drop in demand for interim resource as PCTs identify way to cut management costs, ultimately demand will return as the use of interim managers is seen as the only way to drive through business critical pieces of work.
Steve Melber is Senior Consultant, Health at Interim Partners.
The newspapers have been full of stories relating to poor leadership over the past few weeks. We have seen General Stanley McChrystall loose his position due to communicating with the press directly and criticising the Obama administration. John Terry has also been talking directly to the media about his boss but has survived despite making a “big mistake”. My favorite of the current batch though is Tony Hayward embattled CEO of BP who continues to get a roasting from all sides for his handling of the Gulf oil crisis.
Knowing what to do in a crisis is a rare skill. The decisions you make have a habit of following you around for many months or even years after. Good judgment is often hard to quantify immediately – it is often only in hindsight that we can see the real and lasting benefits.
It is important that as we represent our interim managers we focus on where they have added value, what they have achieved in previous assignments and if they have a positive legacy. We want to demonstrate to our clients that their organisation is better off; that our interim manager made a contribution that met their expectations and that they passed on their knowledge so that their efforts made a lasting impact.
We place leaders – perhaps they are not leading the national team or running one of the world’s largest oil companies but they are providing excellent leadership to businesses, departments, projects or teams. We like many, are also searching for the illusive characteristics that make good leaders and therefore good interim managers. I would like our clients and interim managers to get involved in this debate and tell me what they believe makes good leaders and good interim managers.
We will all see greater competition for assignments especially as opportunities for interims in the public sector run dry. We will need to fight against the impulse to make a commodity out of interim management and therefore interim managers. We will need to re-enforce the added value message to our clients – the lasting benefits and importantly that the value and contribution of a good interim manager is always far greater than their cost.
Doug Baird is Managing Director of 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!
It’s been an interesting time of late within the consumer market, much has been anticipated with the new financial year upon us, Easter out of the way and the imminent change in government, but what has actually happened? Well not as much as expected seems to be the general theme in the consumer market. There has been a rapid move towards restocking the shelves with regards to permanent hires and change appears to be on its way with the agenda for Interims coming back into play.
Over the past few years the area within consumer that has really driven the market had been the amount of deals that had been done within this space, whilst almost completely drying up in 2009, they have shown some signs already this year of coming back to the table. There have been talks of clients being more aggressive and some strategic deals have already gone through with what we hope to be a significant amount on the horizon. The change agenda following these deals has been one of the biggest users of Interim Managers and will continue to be the way in my opinion. I anticipate that the back half of the year will see us very active in this area and until then we will see the demand in businesses looking to get their houses in order following the great cut backs. Commercial Interims may well lead the way on these changes as clients look to reposition themselves. The most senior part of the Interim market remains tight but it is starting to ease up as deals come back and the top table merry-go-round begins once again.
I’d be really keen to hear your thoughts on where the market is going and the timescales involved in getting there. As our practice progresses we want to be much more involved with the Interim managers that we’re currently working with as well as those that we want to get closer to. Please give me your thoughts and get involved.
Simon Gough is Head of the FMCG Practice at Interim Partners.
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.
The votes are in, deals are currently being struck and we will shortly know what the make up of our new Government looks like. The party leaders talked a good game during the campaign when it came to recognising retail’s role as a generator of jobs and prosperity. David Cameron spoke of postponing the National Insurance rise (or “jobs tax”) and this is essential for the sector to continue to grow. The sector has had its fair share of incremental costs from minimum wage to business rates and it can not keep absorbing them forever.
Maintaining low interest rates and inflation will help the sector but it’s crucial that the new Government thinks long and hard about tax increases because of the knock-on impact on UK shoppers. The public deficit being what it is makes tax rises inevitable but needs to be administered carefully for consumers to keep their nerve at a time when the UK economy is more reliant on the sector than ever.
I would be interested to hear your views on how the new Government can help support growth in the retail sector.
On a personal note, I am undertaking a 174 mile Coast to Coast bike ride over 3 days and aim to raise £1,000 for our Company Charity, St. Michael’s Hospice. If you would like to support me and pledge a donation please do so by following this link www.justgiving.com/Interim-Partners-OnYourBike
Jonathan Flynn is Head of the Retail Practice at Interim Partners.
I would be interested to hear your views on how the new Government can help support growth in the retail sector.
On a personal note, I am undertaking a 174 mile Coast to Coast bike ride over 3 days and aim to raise £1,000 for our Company Charity, St. Michael’s Hospice. If you would like to support me and pledge a donation please do so by following this link www.justgiving.com/Interim-Partners-OnYourBike
Jonathan Flynn is Head of the Retail Practice at Interim Partners.
