Category

Case Studies

How Dechra Centralised Cash and Transformed Global Treasury Reporting with Salmon TMS

Transformed Globarl Treasury Reporting - Press Release Header Image

With revenues doubling and rapid expansion leading to an increase from 16 to 36 global business units, Dechra Pharmaceuticals faced a major challenge in managing its cash and treasury operations across the group. In this case study, Dechra’s group treasurer Steve Card explains how they met the challenge.

 

The Challenge

 

In 2014, Dechra did not have any formalised treasury operations, no intercompany netting system, no formal intercompany loans reporting, and no cash pooling arrangements. Essentially, the group operated as 14 autonomous businesses from a cash perspective.

However, with an increasing need for cash within the group’s head office (to fund both acquisitions and an increasing group dividend), a growing number of bank accounts across the globe which required more disciplined control and reporting, a greater volume of intercompany trading that was resulting in increased bank charges and adverse FX charges, and a complex network of intercompany lending, it was necessary that the group implemented some form of central control.

The major obstacles to creating an effective intercompany system, without using a TMS solution, were:

  • The sheer volume of transactions that would need to be captured and
    reported (presumably by using some form of Excel system);
  • Intercompany activity in different systems, i.e. ZBAs from all the
    different banks and all other activity in the netting system;
  • The volume of multi-currency movements and positions, and the desire
    to report only in the functional currency of the business unit;
  • Calculating interest accurately on moving positions;
  • Handling the different taxation regimes in different jurisdictions;
  • Combining and collating these disparate activities.

This process was further complicated by the growth of the group, introducing both new acquisitions and new geographic jurisdictions into the ongoing process.

 

The Solution

 

Having established a central group treasury, the group initially reaped the benefits of the ‘low-hanging fruit’ by implementing a group-wide netting system and a notional cash pool in Europe, which covered, at that time, the majority of the group’s cash operations.

The next objectives were to implement a cash pool in the USA, introduce zero balancing in Europe and to formalise the intercompany loan positions, effectively by expanding group treasury into an in-house bank.

This required the implementation of a TMS. The group went through a formal RFP selection process in 2016/17 that resulted in the group choosing Salmon Treasurer.

The group had a number of requirements for the TMS, but the two primary objectives were:

  • Allow better transparency into Dechra’s consolidated cash positions and FX exposure – and in real time;
  • Ability to hold intercompany positions and capture zero balancing and Netting movements, thus allowing the implementation of an in-house bank.

The first of these objectives, prior to the introduction of Zero Balancing, was achieved by the implementation of MT-940 reporting of bank account balances and transactions – though we did not realise the protracted time it would take the banks to deliver the necessary files in the format required.

The second objective was not so easily achieved, requiring a close relationship with Salmon Software to deliver a solution that covers not only the daily balances and transactions of 36 business units, but is also able to account for both the daily interest and any withholding taxes arising on those balances and transactions.

 

The Benefits/Results

 

Dechra and Salmon worked together over a period of some nine months to deliver a comprehensive Intercompany module that allows for:

  • Merging the data, from both Bank ZBA activity and intercompany netting activity, into one intercompany management system;
  • Handling the different currencies across intercompany positions, which manages FX transactions within each business unit and reports in functional currencies;
  • Accurate interest and tax applied to the reported intercompany positions;
  • Real time maintenance of the transactions and balances;
  • Accurate reporting of the individual and summary (treasury) positions.

and allows Dechra to report:

  • Accurate and up to the minute intercompany positions;
  • Accurate and up to the minute group cash positions;
  • Group FX exposures;
  • Tax liabilities, both to the business unit and to global tax authorities.

The Intercompany system on Salmon Treasurer allows all business units to receive balance, transaction and interest reporting, on a daily basis if necessary, in both paper (pdf) format and also in file formats that can be loaded directly in their business unit ERP system

Most importantly, all these benefits are being achieved with a minimum of manual intervention on behalf of the (two) group treasury staff. This allows the group treasury team to concentrate on the management, control and reporting of the group’s cash, FX and intercompany positions rather than being focussed on the collation and preparation of the data.

Furthermore, the Salmon system will allow for the inclusion of any future growth within the group, organically or by acquisition, and to respond to the inevitable changes in reporting requirements and group structures, as the business develops.

The implementation of Salmon Treasurer, particularly the Intercompany module, is a significant and valuable development of the group’s treasury operations, which will enable Dechra to continue to grow globally whilst providing accurate, timely and relevant cash and interest reporting.

 

About Steve Card, Group Treasurer at Dechra Pharmaceuticals

 

After graduating from Loughborough University, Steve spent 10 years in the City with Midland Bank and TSB Bank, before moving into Corporate Treasury with Littlewoods Group in Liverpool. Group Treasurer roles followed with Scapa plc, Signet plc and Ideal Stelrad, together with treasury consultancy positions for Nycomed Amersham plc, Northumbria University and Findus Group, whilst running his own company. Steve has now been in position with Dechra Pharmaceuticals PLC for four years as Group Treasurer, building a new Treasury department from scratch. Married with four children, a staunch Sheffield Wednesday supporter and an eternal optimist.

 

Automated Treasury System

Automated Treasury System - Press Release Header Image

TO HELP MANAGE DEBT AND OTHER TREASURY FACILITIES SERCO IMPLEMENTED AUTOMATED TREASURY MANAGEMENT SYSTEM

 

Serco Group plc (FTSE – SRP), the international service and outsourcing company, which had revenues of £3.5 billion in 2015, has installed a Treasury Management System (TMS) from Salmon Software.. Salmon Treasurer TMS was implemented in order to provide increased efficiency, control and transparency in managing Serco’s extensive treasury operations.

This includes managing its portfolio of US private debt and revolving credit facilities, a large volume of bank guarantees, as well as significant levels of intercompany lending across over 70 subsidiaries and joint venture companies. Serco also utilises a number of other Salmon Treasurer modules including FX, cash management, account reconciliation, intercompany position keeping, automated electronic payments and direct interfaces to SAP and FXAll.

“We had been using spreadsheets combined with a treasury module linked to our ERP system. We wanted to move on from manual processes and data rekeying across multiple systems in order to boost efficiency, accuracy, reporting, control and to provide real time transparency,” commented Doug Wagstaff, Assistant Treasurer, Serco Group plc.

Serco went out to international tender and conducted a detailed evaluation of a shortlist of three TMS providers before selecting Salmon Software. “We chose Salmon because of its track record, robustness, the level of comfort we had around efficiency and control as well as the value for money that it offered us. Salmon also scored highly on its flexibility,” added Doug Wagstaff.

“If we need to add new deal types or transactions, or develop new reporting, Salmon Treasurer has the flexibility to manage this and to deliver the required results in a very timely manner.”

He also referred to Salmon’s level of support. “I’ve implemented and used a number of rival treasury management systems in other companies. Salmon stands out in terms of its responsiveness, flexibility and immediate access to very knowledgeable experts.”

John Byrne, CEO, Salmon Software, which is headquartered in Dublin, Ireland, added, “As one of the few remaining independent specialist TMS providers, we are winning increased business globally. Salmon Treasurer is rich in functionality, highly robust, very reliable. It is easy to implement and is very competitively priced. Its flexibility is particularly valued by customers such as Serco and we work hard to maximise service after the initial sale. Our implementation offers 100% fit to need.”

The software is part of the Salmon Treasurer TMS aimed at corporate treasurers to manage debt, foreign exchange, money market, treasury, banking transactions and many other related corporate treasury activities.

 

About Serco Group PLC.

 

Serco specialises in the delivery of essential public services, with over 50,000 people working in defence, transport, justice, immigration, healthcare and other citizen services across four regions:

  • UK & Europe
  • North America
  • Asia Pacific
  • Middle East

How Salmon Rose to Segro’s Treasury Challenge

How Salmon Rose to Segro's Treasury Challenge - Press Release Header Image

SEGRO is a UK Real Estate Investment Trust (REIT), and a leading owner, manager and developer of modern warehouses
and light industrial property. It is the largest listed pan-European warehouse owner and developer.

The group owns or manages eight million square metres of space (86 million square feet) valued at £12.2bn serving
customers from a wide range of industry sectors. Its properties are in and around major cities and at key transportation
hubs in the UK and in eight other European countries.

When a new treasury team arrived at SEGRO, it found an ageing treasury management system. The group had been using
a TMS from a major international provider which was accessed through Citrix. However, the new team quickly discovered
that it was unable to perform many of the critical treasury management tasks required.

For example, cash reporting across its 10 UK banks had to be extracted manually using an Excel spreadsheet-based
system.

“It was laborious and time consuming,” comments Jayesh Hirani, assistant treasurer, SEGRO. “By the time we managed
to pull the data together it was out of date. We ended up spending more time gathering data than analysing it to help make
management decisions.”

Managing its cash position is critically important to a group such as SEGRO which has major capital expenditure on land
and construction in order to generate rental income. Total development capex for 2019, including infrastructure and land
acquisitions, totalled over £550m. In 2019 SEGRO reported that it has over £1.4bn of cash and available facilities at its
disposal.

SEGRO also had a major treasury challenge in keeping track of intercompany deals and exposure across its 30+
subsidiaries.

Operating across Europe, it also needed to monitor its foreign exchange exposure including swaps. It required up to date
information on interest rates, Sterling and Eurobonds as well as banking and secured debt.

“It soon became clear that our legacy system was not fit for purpose and vendor support to fix it was lacking,” says Hirani. “So we decided to go to market to seek a replacement. We needed something that not only met our current, specific needs, but which was scalable as the company expanded in the future.”

 

The Solution

After reviewing the market, SEGRO ended up with a final shortlist of six international TMS providers. Following detailed analysis by the team, it selected Salmon Software’s, Salmon Treasurer solution.

“Salmon Treasurer provided us with extended treasury management system functionality enabling us to manage accounts, facilities, books, funds, dealers and companies,” says Jayesh.

“Furthermore, by automating the majority of treasury management processes, Salmon Treasurer effectively eliminates the need for spreadsheets and allows us to focus on adding value elsewhere.”

The system supports all currencies, facilitates and manages trades across an extensive range of financial instruments. It provides real-time revaluation of all deals and positions while interfacing with a wide variety of external and internal systems. Salmon Treasurer’s in-house banking and netting modules allow SEGRO to access and analyse cash balances and positions across its subsidiaries and banks.

“Salmon had as good or better technology and functionality than anything we saw on the market,” commented Hirani. “This probably reflects their focus on TMS and the fact that they have specialised in this sector over three decades.

“But where Salmon really scored was in the fact that the people we met at the pitch were the same folks who would implement the system.

“That gave our treasury team massive reassurance and confidence in what was a major step for us.”

 

The results

Implementation began at the end of August with the goal of completion by December.

“In reality, the system was implemented well ahead of schedule by the end of October,” says Hirani. “Also important is that it was on budget.”

“SEGRO set up a dedicated in-house team which was refreshingly clear in what it wanted,” says Tassos Dimopoulos, director, Salmon Software. “This clarity of purpose undoubtedly facilitated the smooth implementation.”

Hirani adds: “It also helped that we were working with skilled Salmon professionals, well used to implementing best practice. The quality of their people meant that they had the experience to raise issues that we might not have thought of.”

Another feature of the of the implementation was that it was conducted remotely.

“This worked perfectly,” says Hirani. “Despite operating remotely, we built valuable personal relationships.”

“We make our money from software licences rather than implementation hours,” comments Peter Shea, director, Salmon Software. “Remote implementation works out a lot less expensive both for us and the end user.

 “The last thing we or the customer want is to have expensive hourly assets sitting around drinking coffee on their site.”

Referring to benefits Hirani says, “We now have much better control and management of critical functions, in particular cash, inter company assets, interest rate derivatives and debt.

A key challenge of managing its cash position across 10 UK banks has been solved. Salmon Treasurer manages the entire cash management and forecasting cycle including both daily and intraday bank statement support and automated reconciliation.

This incorporates an integrated forecasting module which can draw on any data within the system and features complete flexibility to create unlimited forecasts with powerful analytics.

“In addition, our intercompany visibility across over 30 subsidiaries, which was a major challenge, has been transformed and is far easier to manage,” comments Hirani. “For example, subsidiaries can now request funding using a web portal. This provides data in real time rather than the unwieldy and time consuming, error prone manual processes of the past.”

Salmon Treasurer’s sophisticated intercompany position keeping and intercompany ordering is embedded within the system, removing the need to mirror deals entirely. It includes a full workflow for subsidiaries to place orders, including intercompany limits, approval and execution.

“We now have at our fingertips an automated system which delivers vital treasury real time and accurate information to management,” concludes Hirani. “The increased visibility of our treasury position helps to ensure better informed decision making.

“In addition, thanks to Salmon Treasurer 4.5, we have the reassurance of a solution which is scalable and future proofed.”