Glossary
H1: First 6 months of the year.
FC1: Full year forecast conducted in April, based on 3 months actual results and 9 months forecast.
6 + 6 Forecast: Full year forecast conducted in August, based on 6 months actual results and 6 months forecast. Also called ‘summer forecast’.
Adverse: lower or worse than expected/forecasted.
KPI: Key Performance Indicator.
2018 OUTCOME
As previously communicated, Lindéngruppen’s and Colart’s focus on cash increased significantly in 2018, reflecting the adverse cash impact of Colart’s transformation (clean-up and investment) and an increase in working capital.
Our collective efforts, whilst not returning cash to the level set out in our 2018 FC1, delivered on our commitment to significantly improve cash outflow vs the position set out in our 6+6 forecast. In summary, against an internal target to be £4m cash adverse to FC1 we closed 2018 £2.7m adverse.
2019 IN CONTEXT
We have committed to recover this £2.7m cash gap during 2019 as well as achieving an underlying cash positive result. We have established this cash recovery within 2019 Budget, though our aim is to beat Budget and it is in that context that all cash decisions should be taken (i.e. simply because there is a budget for a role or an activity does not mean it needs to be recruited or spent – ask yourself the “why” question).
To achieve this our focus on cash will remain intense for at least H1 2019, and even when in a more stable position cash will remain a KPI for the business.
Our “natural” cash cycle is negative in H1 and positive in H2, though there are several “exceptional” cash outflows during H1 (such as completion of the US Distribution Centre, the closure of the Huaibei canvas assembly site) that compound the “natural” cash outflow in H1. To this end, and in addition to targeting increased cash generation vs budget, we are seeking ways to smooth our 2019 cash usage profile through delaying activities where possible.
CASH COMMITTEE
The monthly Cash Committee meeting schedule is now well established and has transitioned to be a business process. All Business Units have engaged really well in this process and we are making progress. The latest monthly rolling forecast shows a smoothing of our cash profile and an improved end position vs budget so thanks for the energy on this so far!
We will continue with the Cash Committees to ensure that the upsides we are seeing in January are maintained, and I look forward to having a robust FC1 to sit alongside the rolling cash forecasts.
2019 CASH MANAGEMENT ACTIONS
To ensure we deliver on our cash ambition in 2019 additional controls will be implemented. These will remain in force until we feel we are in a robust cash position and behaviours have changed. As such we will revisit these at the half-year point and hope to be able to re-introduce a degree of flexibility, all being well.
The following actions will be implemented with immediate effect:
• All recruitment, whether budgeted or not, must be signed off by the CEO after presentation of a robust business case, submitted with and as part of the recruitment requisition process
• “Indirect/project” temps (i.e. not direct factory/warehouse roles) and consultants (including in both case renewals), whether budgeted or not, must be signed off by the CEO after presentation of a robust business case
• Any travel over 4 hours end-to-end duration should be approved by the relevant GLT member, who will expect non-travel alternatives to have been considered and early request/booking to have been actioned to secure best price
• Conferences, whether budgeted or not, must be signed off by the CEO after presentation of a robust business case
• Renew our focus on minimising write-off costs on both finished goods and raw/packaging materials when discontinuing products
• Everyday savings should also be top-of-mind so that we change our behaviour, for example:
– Use WIFI where available (avoids data roaming charges)
– Print only when necessary
– Use Skype/WeChat/Teams
– Re-use existing content and don’t develop new content unless signed off by CCO
– Re-use phones/PCs
– Review the need for all entertainment, and where it is still felt to be required / appropriate then make it modest
– Turn lights off when not in use
• As a general reminder, corporate and personally-incurred expenses must be reconciled and submitted monthly – we have some way to go on this one!
This is a collective effort – we are all in this together. We recognise that there will be some great ideas over and above this list and success stories across the business, so please share these freely through the GLT.
Jonathan Spight_
Jonathan Spight
Chief Financial Officer