ABFA

ABFA statistics part 3

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As most industry insiders are aware a large number of independent factoring companies are funded by the big banks by means of back to back facilities. It occured to me that it’s possible that some of the 35 companies with annual turnovers in excess of £100m recorded in the quarterly statistics of the ABFA are actually the factoring companies that Lloyds TSB Commercial Finance and their ilk are funding.

If that is the case then all of the statistics are grossly inaccurate as many of the figures for the independents will have been included twice – once as the £100m+ funding from Lloyds TSB to the factoring company and again as the same funds are put out to the many clients of the factoring company.

I did ask some of the great and good of the factoring industry if they knew the answer but all said that whilst it was an interesting question they didn’t know.

ABFA statistics part 2

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Having a closer look at the ABFA statistics for the factoring and invoice discounting industry for the first quarter of 2009 I was struck by one seemingly insignificant statistic that the number of clients with annual sales in excess of £100m had dropped from 248 to 213

I wonder what happened to these 35 companies? Some may have shrunk to a stage where their turnover was less than £100m so came into a lower category but that is fairly unlikely. Some more may have ceased using their invoice discounting facilities replacing them with something else but again I think it unlikely which leaves the worrying fact that 35 companies turning over in excess of £100m each have gone bust in the first quarter of this year.

Assuming that each of those companies were turning over the bare minimum of £100m and their debts turned in the ABFA average of 59 days the total outstanding debts of these companies would be in the region of £650m and assuming an average investment of 70% there would be factors funds invested of £455m

Most of us who have been involved in the “collect out” of bust clients will know that there is often a shortfall in collections as the disputes start to crawl out of the woodwork and the clients customers go bust and there is a good likelihood that losses may be incurred in that situation.

I guess that due to the size of the facilities these will all be bank factors involved and I wonder what sort of losses will be involved when collecting out an investment of at least £455m from 35 bust clients. My guess is that some of the bank factoring companies will be sitting on potentially enormous losses at the moment

ABFA statistics

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The ABFA have recently published the factoring and invoice discounting statistics covering the first quarter of 2009. Whilst this shows a small decline in almost every area from numbers of clients to advances made it should come as no surprise in the present economic climate.

The number of clients at the end of March 2009 was down to 46,999 from 48,536 at the end of the previous quarter and whilst 2,260 new companies were welcomed to the world of factoring and invoice discounting 3,027 disappeared in the same period.  Assuming that the majority of the 3,027 went bust in one way or another it’s not surprising that insolvency practitioners are the factoring companies new best friends.

I wonder if Eric Cantona was thinking of the relationship between insolvency practitioners and factoring companies when he came out with his now legendary quote ” When seagulls follow the trawler it is because they think sardines will be thrown into the sea”

Lies, damned lies, and ABFA statistics

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The Asset Based Finance Association (ABFA) released their statistics earlier this month which summarised the factoring and invoice discounting activity of their members for 2008

 

The headline figures were that the number of active clients at the year end were down marginally to 48,152 whilst the advances outstanding at the year end rose by nearly 8% to £17billion and I guess that the initial reaction is that the figures are typical of what one might expect in the current economic climate with increasing pressure on companies cash flow resulting in higher funding levels overall.

 

The two interesting statistics that caught my eye were firstly that of the 48,152 clients using factoring and invoice discounting at the end of the year 248 of them had annual turnovers in excess of £100m

 

Advances to clients at the year end were £17 billion but a quarter of that sum was advanced to the 0.52% of clients with sales in excess of £100m and those figures skew the averages so much as to make them meaningless.

 

The other statistic that intrigued me was that the largest client sector in terms of annual sales was the zero to £500,000 sector with 18,500 clients which represented 39% of the total. The number of clients was virtually static compared to the end of 2007 but the advances outstanding to them at the year end was up from £542m to £908m which was a huge 40% rise

 

One would think that in the ordinary course of events that should be impossible. If we asssume that the average client has an advance rate of 80% and always has done – how could the overall average jump by 40%.

 

One possibility is that the figures include a large number of terminated accounts whose balances have been inflated by “extra fees” but the difference between 2008 and the previous year is £360m which is a hell of a lot of fees so I sincerely hope that is not the case.

 

If anyone has any other theories please feel free to post them here.

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Bibby Factors wins interesting award

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According to an email just received from the Chief Executive of Bibby Factors one of their “rising sales stars” has just won a prestigious ABFA Students award for “measuring performance on the night”

The things that these students get up to 😀