Summer of opportunity

It’s August. A time to shift down a gear and, if you are a finance director,
take advantage of the fact your MD or CEO is probably either on holiday or
enjoying business life at a slightly less frantic pace. You can ease off the
pressure of preparing up-to-the-second management accounts or monthly cashflow
and budget forecasts while the boss is enjoying some welcome downtime. Wrong.

That was then and this is now. Increasingly, active finance directors are
treating August as a good month to get their houses in order. For FDs of
publicly quoted companies, including the 1,200 members of fast-growing junior
companies market AIM, they may even be working on what used to be unthinkable in
August in the City – a major corporate move, such as a large share placing to
raise new funds, or a major merger or acquisition.

August used to be a complete no-go month for companies trying to raise money,
or admit their shares to stock markets like AIM.

Only a year or so ago, before the surge in AIM membership, August was the one
time of year when the City reliably went on holiday and major corporate
activities, like flotations or large fund raisings, were put on ice while
brokers and other City advisers topped up their tans under the Tuscan sun.

These days a complete August City shutdown is a thing of the past, and the
active, client-focused brokerages now treat it like any other working month in
the year. This means that they are spending more time talking to FDs, with whom
they often have a closer daily working relationship than with the CEO.

The FD of a quoted company wants his broker to keep an active eye on changes
in the company’s share price. He will be asking the broker to explain why, for
example, the share price has risen or fallen, especially if there are no obvious
reasons such as general market swings, or because the company has made an
important stock exchange announcement.

Ironically, retaining this close dialogue between FD and broker becomes even
more important during the quieter summer months. In fact, as trading in August
is generally thinner than any other month of the year, including December, small
amounts of buying and selling can have exaggerated effects on share prices. The
FD, who answers questions from institutional and private shareholders on his
company’s behalf, needs to have very active communications with the broker
all-year round.

FDs working in publicly-quoted companies on active markets like AIM need to
be able to provide cover for the summer months. While it’s ridiculous to suggest
they shouldn’t or won’t take a summer break, many are using technology, such as
a Blackberry or other types of PDA, to keep in touch with the company and
markets while away.

Another job for the summer that should be considered by FDs of quoted
companies is to meet institutions and keep abreast of any changes in investment
policy in the second half of the year. They will want to gauge whether their
company might be in a sector that the institution feels has become over- or
under-valued, and might be seeking to generally reduce or increase its
investment exposure.

Whatever the month, FDs of quoted companies have to report to the exchange
‘material’ news, such as major new contract wins, within 24 hours of the deal
being signed. Again, these deals can happen on any given working day, summer or
no summer, and the company must work with the broker to ensure sure deals are
presented accurately to investors.

Finance directors of private companies, like those of quoted companies, are
increasingly evaluated by their strategic input. The ability to present accurate
figures and to comply with all the relevant accounting standards and corporate
governance conventions is seen as something of a given.

The more strategic FD uses any quieter time at his disposal during the summer
to monitor more closely the activities of close competitors and the marketplace
as a whole.

Even with the best will in the world, keeping track of changes at rivals,
while an essential task, is one that companies are rarely on top of when
expanding or fending off new entrants.

A particularly important task is staying closely in touch with pricing, and
making sure your company remains in line with the competition. Tracking
competitors’ pricing doesn’t necessarily have to mean that your company’s will
need to be lowered. Research over the quieter summer months may reveal good
news: that there is room in the market to increase prices without scaring off
clients or customers. Ability to raise prices without damaging your business
will immediately improve net profit margins.

Another summer job worth tackling is a review of the cost of your suppliers.
While time is on your side, take a look at how much their costs have risen, and
see if there is any room to negotiate discounts. If the supplier’s service has
deteriorated, or if a hungry rival is offering to replace them at a discount
with no loss of service, then the time you spend on this is also going to
enhance the bottom line.

Again, it’s part of the FD’s strategic role to get out of the office and into
the customer’s to help keep them closer to the marketplace. It’s always possible
while away from the coal face to do a little judicious digging, using your
grapevine to discover if a rival is planning to launch a new product or service.
Any concrete findings should be reported to the board.

In summary (or summery?), with a little effort and a bit more communication,
there is clearly much that an active FD can do to make August a highly
productive month.

Luke Ahern is director of broking at AIM-specialist stockbroker Corporate

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