探索金融弹性：一个专注于反向保理的强化框架

1、Global Research6 April 2020Fundamental AnalyticsExploring financial resilience: An enhanced framework focused on reverse factoringUnderstanding reverse factoring: Adding a credit risk overlay to our analysis We first wrote about reverse factoring a year ago in our note Do YOU understand reverse fact

2、oring? How to enhance analytical and valuation transparency. Reverse factoring can be a sensible cash management tool for companies; however, the associated accounting disclosures are often limited. The majority of the companies we analysed classify reverse factoring as part of operating payables, w

3、hich can impact operating metrics such as operating cash flow conversion and can misrepresent credit risk by lowering the debt of the company. We overlay our work with an analysis of company credit ratings to enhance our view of credit risk.COVID-19 brings credit risk & resilience analysis to the to

4、p of the agendaSince our note last year, interest in this topic has increased. Recent events related to the global COVID-19 outbreak and our collective need to analyse companies financial resilience makes this topic even more relevant (see our note: Your guide to identify which companies have the re

5、silience to weather the COVID-19 crisis). Our analysis of earnings call transcripts using AlphaSense found that there has been an increase in mentions of reverse factoring over the past year. Therefore, we have re-run our analysis on the disclosures of companies and found 58 companies that disclosed

6、 reverse factoring out of 1,300 companies analysed. However, as we only analysed companies documents that are in English, we could have missed out disclosures written in other languages, but we still believe that the quality of these disclosures could be improved.Creating a clearer view: How can you

7、 adjust for reverse factoring?We previously looked at how you can adjust for the effects of reverse factoring on companies which disclosed the value of their factor payables. However, we suspect that many companies do not disclose this information. In this note, we provide an alternative method to a

8、djust for potential reverse factoring: by normalising the companys payable days to the sector median level. One of the limitations of this method assumes that excess payable days is entirely due to reverse factoring, which is a simplification of reality. We can then back out adjusted payables which

9、is net of factor payables, which allows us to adjust other metrics such as operating cash flow and total debt. This provides investors with a view on the potential downside risks of companies.Valuation, Modelling & AccountingGlobalEquitiesGeoff Robinson, CA FCAAnalyst HYPERLINK mailto:geoff.robinson

10、 geoff.robinson+44-20-7567 1706Yiding Lu, CFAAnalyst HYPERLINK mailto:yiding.lu yiding.lu+44-20-7568 9091Renier Swanepoel, CA(SA), CMAAnalyst HYPERLINK mailto:renier.swanepoel renier.swanepoel+44-20-7568 9025Courtney Cook, CFAAnalyst HYPERLINK mailto:courtney.cook courtney.cook+44-20-7567 4871 HYPER

11、LINK /investmentresearch /investmentresearchThis report has been prepared by UBS AG London Branch. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 32. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm m

12、ay have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.ContentsTOC o 1-2 h z u HYPERLINK l _TOC_250012 Financial resilience analysis: An enhanced framework focused on reverse f

13、actoring 4 HYPERLINK l _TOC_250011 What is reverse factoring? 5 HYPERLINK l _TOC_250010 How big is the market? 7 HYPERLINK l _TOC_250009 Reverse factoring: Why do companies use it? 9 HYPERLINK l _TOC_250008 What does the market want to know? 11 HYPERLINK l _TOC_250007 Enhancing risk identification 1

14、3 HYPERLINK l _TOC_250006 What are companies disclosing? 13 HYPERLINK l _TOC_250005 Credit risk for companies with reverse factoring 17 HYPERLINK l _TOC_250004 How does reverse factoring affect companies? 18 HYPERLINK l _TOC_250003 Normalising operating metrics using sector median payable days 22 HY

15、PERLINK l _TOC_250002 Adjusting Company Xs net debt using sector median payable days 26 HYPERLINK l _TOC_250001 Appendix 28 HYPERLINK l _TOC_250000 How should a reverse factoring structure be accounted for? 28Geoff Robinson, CA FCAAnalyst HYPERLINK mailto:geoff.robinson geoff.robinson+44-20-7567 170

16、6Yiding Lu, CFAAnalyst HYPERLINK mailto:yiding.lu yiding.lu+44-20-7568 9091Renier Swanepoel, CA(SA), CMAAnalyst HYPERLINK mailto:renier.swanepoel renier.swanepoel+44-20-7568 9025Courtney Cook, CFAAnalyst HYPERLINK mailto:courtney.cook courtney.cook+44-20-7567 4871UBS Research AcademySharpen your inv

17、estment edgeThe UBS Research Academy is an education platform built for clients and is delivered by our #1 ranked* Fundamental Analytics team and by our Equity Research platform. The main objective of the Research Academy is to sharpen your investment edge by raising the bar on your technical and fu

18、ndamental knowledge. We have a depth of resource; tap into it and make the most of yours.Look through new analytical lenses.Uncover previously missed insights.Develop and improve your analytical frameworks.Simulate uncertain outcomes by building better models.Ultimately, ask better questions.In shor

19、t, Know. More. HYPERLINK mailto:researchacademy researchacademy*EMEA ExtelFinancial resilience analysis: An enhanced framework focused on reverse factoringReverse factoring is an analytical issue worthy of attention. Why? Because the information in the reporting disclosure is generally limited while

20、 the structure can impact financial metrics such as operating cash flow and total debt.We first published on reverse factoring in March 2019. Since then, the market has shown noticeably more interest in this issue based on search analytics provided by AlphaSense.More: Do you understand reverse facto

21、ring?We revisit the issue again in this note, this time with:an enhanced analytical review of who may be using the structure;a stronger assessment of the liquidity and leverage risk.Our catalyst for revisiting the topic of reverse factoring is three-fold:The continued sheer weight of investor intere

22、st in the topic;The 2019 Financial Reporting Council letter to audit committee chairs and Financial Director outlining its concern related the level of disclosures associated with supplier financing arrangements; andThe need to gain a clearer view of a companys credit risk amidst the COVID-19 crisis

23、.The Financial Reporting Council has been concerned for a number of years about the treatment of complex supplier financing arrangements (it outlined its concern in a 2014 press release urging companies to focus on the clarity and transparency of their accounting policies, judgements and estimates r

24、elated to complex supplier arrangements).Despite this concern, we have found very little evidence to support any material enhancement to the quality of disclosure associated with reverse factoring. This is a problem given the current market conditions, as we need a have a clear view of a companys ob

25、ligations to analyse its financial resilience. Therefore, we will look at how we can potentially measure the impact of reverse factoring for companies which do not disclose their factor payables value.More: Your guide to identify which companies have the resilience to survive theCOVID-19 crisisWhat

26、is reverse factoring?Reverse factoring(also known as supply chain or trade financing) is a working capital and cash flowmanagement tool.In its simplest terms, reverse factoring is a structure where a financial institution agrees to pay a companys payables (outstanding invoices) at an accelerated rat

27、e in exchange for a discount. The company pays a fee to the financial institution and settles its liability to the bank at a later date, extending its payables days. The factoring solution is often initiated by the ordering company to help suppliers finance their receivables more easily.Figure 1: A

28、simple reverse factoring structureSource: UBSA company (Company A) purchasing goods arranges for a reverse factoring provider (often a bank) to pay its suppliers earlier than requested. In exchange for the early payment, the bank receives a discount on the invoice, which is passed back to Company A.

29、 Company A pays a fee to the bank for the arrangement.Company A settles its financial obligation with the bank in 75 days (longer than the original settlement date required by Company C). This has the effect of extending Company As payables days.You will notice we say the operating payable (should b

30、e) de-recognised from the balance sheet and (should be) replaced with a financial liability in the image above.As neither IFRS nor US GAAP specifically addresses reverse factoring, companies can exercise discretion in classification of factored payables, continuing to include the balance within the

31、operating balance sheet line of trade payables1.We would use an assessment of trade payable days and the identification of an inflection point suggesting a renegotiation of payment terms, as an indicator of a change in the nature of the liability. We prefer, from an analytical, valuation and a trans

32、parency perspective, to treat reverse factoring as a financial liability (i.e. debt), thus reflecting the debt-like features of the arrangement.More: HYPERLINK l _bookmark20 Operating-Financial indebtedness reclassificationThe bank arrangement is a short-term commitment. As a result, the risk-weight

33、ed asset commitment is low, thus increasing the product attractiveness for the bank.1 There is a little guidance within IFRS.IAS 32 defines a financial instrument as a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity”.As a r

34、esult IFRS will classify trade transactions between a buyer and a seller as financial instruments. IAS 39 (IFRS 9) provides some additional de-recognition guidance stating that an entity shall remove a financial liability from its balance sheet when, and only when, it is extinguished; that is when t

35、he obligation specified in the contract is discharged, cancelled or expired. This condition is met when an operating liability is settled, releasing the creditor from the primary legal responsibility.US GAAP is similarly lacking in terms of detailed reverse factoring guidance. SEC staff papers have

36、discussed the issue in some depth in the past. These staff papers suggested that in cases where the economic substance (where the terms of the arrangement are significantly different from a typical operating payable arrangement) of the transaction suggests that the buyer (holding the operating payab

37、le) is making use of financing to pay amounts to its suppliers, the outstanding obligations to the financing intermediary should be classified as debt. See appendix for more details.How big is the market?European Factoring Association estimates that the reverse factoring market in 2017 was350bn (UK

38、and Ireland alone)55% of respondents are running a supply chain finance programme223% are running more than one programme 41% are thinking of implementing a programmeBut very few companies disclose they use the structureWe looked at 1,300 companies.Transparent disclosure is rare ($5bn (as of20 Febru

39、ary 2020) that disclosed reverse factoring. For these companies, we analysed the quality of the disclosures provided by the companies identified, similar to the exercise performed in our previous note. We assessed the quality using the following criteria in HYPERLINK l _bookmark2 Figure 4.Figure 4:

40、Criteria used to assess the quality of the disclosuresQuestionRationaleWhere is the disclosure found?A transparent disclosure should ideally be presented in annual reports and interim reports as they are used by the general public. On the other hand, disclosures made in earnings calls are not as tra

41、nsparent as they are not as easily accessible.Does the company provide a description for its reverse factoring programme?A transparent disclosure should have a section in the annual report pertaining to its reverse factoring programme describing its nature and purpose.Does the company provide a valu

42、e of its factor payables?A transparent disclosure should provide the amount of factor payables that it currently holds and how this number has moved year on year.How are factor payables accounted for?In the absence of information to the contrary, we prefer to account for factored payables as debt in

43、struments rather than trade payables.Any additional disclosures?Additional disclosures such as payment terms, counterparties to the reverse factoring contracts, risks associated with reverse factoring, restrictive covenants, etc. can be useful in determining the potential risk from reverse factoring

44、.Source: UBSThe results of our analysis are shown in HYPERLINK l _bookmark3 Figure 5, HYPERLINK l _bookmark4 Figure 6, and HYPERLINK l _bookmark5 Figure 7 on the following pages.We identified more companies that disclosed their use of reverse factoring (58 companies compared with 34 companies in our

45、 last report), partially driven by increased market interest in this topic as highlighted by AlphaSense data on earnings calls in HYPERLINK l _bookmark1 Figure 3. However, the quality of the disclosures remained limited based on our analysis.Fundamental Analytics 6 April 2020 14Figure 5: Quality of

46、reverse factoring by companies identified (1/3)CompanyWhere were the disclosures found?Did it describe its reverse factoring programme?Did it disclose the value of the factor payables?How did they classify the factor payables?Any additional info disclosed?Public FilingsCompany PresentationsEarnings

47、TranscriptsTrade PayablesDebtUnknownAstraZenecaLowesVodafone GroupCompass GroupSodexoCarrefourMosaicBATEDFZalandoKeurig Dr Pepper IncValeoTOTALNaspersAltice USA IncGeneral ElectricOrangeGeneral MillsFerrovialTelenetSainsburysDeutsche TelekomDanoneAtlas CopcoGrifolsDS SmithFundamental Analytics 6 Apr

48、il 2020 15Figure 6: Quality of reverse factoring by companies identified (2/3)CompanyWhere were the disclosures found?Did it describe what is reverse factoring?Did it disclose the value of the factor payables?How did they classify the factor payables?Any additional info disclosed?Public FilingsCompa

49、ny PresentationsEarnings TranscriptsTrade PayablesDebtUnknownReckitt BenckiserMichelinConagraInditexZTEPearsonRepsolAcsDCCSemen IndonesiaEnelEricssonProcter & GambleDaimlerChina VankeDSVRolls-RoyceAdvance Auto PartsOrklaSyneos HealthCIMICMorrisonsMondelez IntlOMVMolson CoorsKuehne + NagelFundamental

50、 Analytics 6 April 2020 16Figure 7: Quality of reverse factoring by companies identified (3/3)CompanyWhere were the disclosures found?Did it describe what is reverse factoring?Did it disclose the value of the factor payables?How did they classify the factor payables?Any additional info disclosed?Pub

51、lic FilingsCompany PresentationsEarnings TranscriptsTrade PayablesDebtUnknownNissan MotorKohlsFaureciaVolvoAhold DelhaizeCurtiss-WrightSource: Various companies disclosures, UBSCredit risk for companies with reverse factoringOne effect of reverse factoring is potentially understating debt, as factor

52、 payables are debt-like obligations but are often classified as payables by companies based on our analysis. Thus, the financial leverage of the companies which classify factor payables as payables could be underestimated.Classifying factor payables as payables potentially understates the financial

53、leverage of these companiesIn HYPERLINK l _bookmark6 Figure 8, we show the credit rating of the long-term debts for the companies which classified factor payables as payables sourced from FactSet, removing those without a credit rating. We have converted all credit ratings to Standard & Poors rating

54、s for easy comparison.Figure 8: Credit rating for the companies which classify reverse factoring under payablesCompany NameMarket Cap (in US$bn)Credit RatingProcter & Gamble294.3AA-Atlas Copco A36.1A+Compass Group21.4AReckitt Benckiser54.4A-EDF24.3A-Michelin15.3A-OMV9.5A-Sodexo9.3A-AstraZeneca127.8B

55、BB+BAT102.0BBB+General Electric98.9BBB+Lowes93.7BBB+Danone39.7BBB+Orange31.5BBB+Nissan Motor11.4BBB+Deutsche Telekom58.0BBBMondelez Intl83.0BBBVodafone Group37.3BBBGeneral Mills33.3BBBKeurig Dr Pepper Inc33.1BBBFerrovial16.1BBBCarrefour12.8BBBMorrisons5.4BBBCIMIC4.5BBBConagra12.6BBB-Molson Coors8.8B

56、BB-DS Smith4.3BBB-Valeo3.6BBB-Kohls1.9BBB-Ericsson25.5BB+Grifols18.9BBSource: FactSet, UBS (data as of 6 April 2020)As we mentioned earlier, reverse factoring can be a good method of cash management for the company while keeping suppliers happy. We are fine with higher quality names using it; it is

57、the lower credit rating companies that we would pay more attention to.The risk here is that if these companies financials worsen, it might lead to a credit de-rating and the provider of factoring facilities (i.e. the banks) might withdraw their lines of credit. There will likely be significant press

58、ure on the companies cash flows. This is especially relevant in the current highly volatile market as many businesses are already feeling the pressure.In addition, we would closely inspect companies with low amounts of net debt while having a low credit rating. As credit agencies typically have bett

59、er understanding of reverse factoring than the market, a low credit rating while having low debt or even net cash might indicate unrecognised debt on the balance sheet, which could be caused by reverse factoring.How does reverse factoring affect companies?Based on our analysis of the disclosures, we

60、 find that majority of the companies still classify factor payables as trade payables, and not debt. As shown in HYPERLINK l _bookmark7 Figure 9, 35 companies classified factor payables as trade payables, while only 10 companies classified them as debt.Figure 9: 35 out of 45 companies which disclose