BlogsThe return of 'Loadsofmoney'
Some corporate have so much cash CFOs struggle to find a decent home for it
By Peter Williams | Published 14:58, 11 January 12
Search on YouTube for ‘Harry Enfield loads of money’ and you will be transported back to the delights of 1980s alternative comedy. (For those too young, or otherwise engaged, to be watching Channel 4’s Saturday Live, ‘Loadsofmoney’ was an obnoxious character perpetually boasting about how much money he earned while the rest of the nation was suffering harsh economic times.)
It was a joke - and a catchphrase - that caught the zeitgeist, and as far as a few chief financial officers are concerned a revival may be in order. Although while no CFO would be as indiscrete to boast about the corporate’s cash position, there are a few who would be in a position to wave around the company’s wad.
Indeed, one of the figures to look out for in the upcoming reporting season is the cash number. Liquidity management remains a top priority for many companies: and that means raising funds, rolling over loans, generating working capital savings and keeping a close eye on cash generation and those banking covenants.
However, for other corporates the problem is entirely the opposite: the business is generating so much cash it is a question for some CFOs of trying to find a home for it that produces something nearing a decent return.
At the end of 2011, financial service group Shore Capital released analysis that said UK companies have grown their cash flow by 40 percent since the depth of the financial crisis in 2008. The reason, according to Shore, is due to growth in global GDP, internationally-focussed UK companies have been able to raise revenues and profits, and increase their cash inflow.
For some sectors this is not too difficult to understand. The strong performance of commodity prices will mean that natural resource producers are filling their boots: Royal Dutch Shell latest third quarter results showed that cash flow from operating activities was $10.6 billion, compared with $8.1 billion in the same quarter in 2010; a leap of 30 percent.
And earlier in the year presenting its half year results mining group Rio Tinto told shareholders it had been counting record amounts of cash from its operations, up 31 percent to $12.9 billion. Even making a strategically significant acquisition for $660 million as Rio has just done, does little more than dent the loose change.
CFOs in cash-strapped industries would have to be superhuman not to cast envious glances at such bank statements. For instance, in the same period one well known high street retailer saw its cash pile shrink by nearly £68 million - a tale of two halves, no less.
But such wealth brings its own problems, notably shareholder pressure - real or imagined - to do something. The Rio deal is the exception. The M&A market is on its knees: takeovers require confidence, as well as cash. And at the moment while only some are short of cash we’re all short on confidence.
It was a joke - and a catchphrase - that caught the zeitgeist, and as far as a few chief financial officers are concerned a revival may be in order. Although while no CFO would be as indiscrete to boast about the corporate’s cash position, there are a few who would be in a position to wave around the company’s wad.
Indeed, one of the figures to look out for in the upcoming reporting season is the cash number. Liquidity management remains a top priority for many companies: and that means raising funds, rolling over loans, generating working capital savings and keeping a close eye on cash generation and those banking covenants.
However, for other corporates the problem is entirely the opposite: the business is generating so much cash it is a question for some CFOs of trying to find a home for it that produces something nearing a decent return.
At the end of 2011, financial service group Shore Capital released analysis that said UK companies have grown their cash flow by 40 percent since the depth of the financial crisis in 2008. The reason, according to Shore, is due to growth in global GDP, internationally-focussed UK companies have been able to raise revenues and profits, and increase their cash inflow.
For some sectors this is not too difficult to understand. The strong performance of commodity prices will mean that natural resource producers are filling their boots: Royal Dutch Shell latest third quarter results showed that cash flow from operating activities was $10.6 billion, compared with $8.1 billion in the same quarter in 2010; a leap of 30 percent.
And earlier in the year presenting its half year results mining group Rio Tinto told shareholders it had been counting record amounts of cash from its operations, up 31 percent to $12.9 billion. Even making a strategically significant acquisition for $660 million as Rio has just done, does little more than dent the loose change.
CFOs in cash-strapped industries would have to be superhuman not to cast envious glances at such bank statements. For instance, in the same period one well known high street retailer saw its cash pile shrink by nearly £68 million - a tale of two halves, no less.
But such wealth brings its own problems, notably shareholder pressure - real or imagined - to do something. The Rio deal is the exception. The M&A market is on its knees: takeovers require confidence, as well as cash. And at the moment while only some are short of cash we’re all short on confidence.
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