Pepijn Asselberghs’ arrival at Brand Loyalty in 2010 heralded some rapid growth within the company, seeing it expand into new territories and inevitably taking on greater FX risk and cash management complexity.
Brand Loyalty is a global leader in short-term consumer loyalty programmes, offering the full service from initial strategic advice through to management, logistics, implementation and analysis. Founded in Hong Kong in 1995 but now with its headquarters in the Netherlands, the company is active in over 50 countries. It has loyalty programmes running in more than 20,000 stores for a roster of clients that include Tesco, Auchan, Rewe and Metro. With the acquisition in 2012 of Dutch firm, IceMobile, Brand Loyalty added the digital dimension to consumer loyalty with ‘Bright Stamps’, a unique app-based system for consumers to collect and redeem points.
A rewarding career
Customer loyalty in the food retail sector is all about creating consumer engagement. Retaining customers, increasing the frequency of their shop or site visits, driving up average spend and generating more profitable sales can make a huge difference to the bottom-line of any business – but how can customers be drawn into a profitable relationship when there is so much choice?
This is where Brand Loyalty offers a solution through its short-term loyalty programmes, typically based on exchanging collected ‘points’ for free products or services. The company is now pushing forward with a new app-based offering that allows consumers to collect and redeem points using their mobile device; a digital collecting system which is intended to appeal to new customers whilst offering the possibility to communicate one-to-one and generate insights in real-time consumer behaviour.
But running multiple programmes around the world for some of the most recognisable brands requires skill and judgement, not just in tailoring the right programme at the right time for the client but also in managing the funds to be able to set up and run so many concurrent schemes in the first place. Taking charge of financial matters for Brand Loyalty is Pepijn Asselberghs, its Den Bosch-based Corporate Treasurer.
Asselberghs took on the role in July 2010, the financial function having been managed by the company’s CFO until it was apparent that employing a permanent professional treasurer was essential to take the business forward. Indeed, his arrival heralded some rapid growth within Brand Loyalty, seeing it expand into new territories and inevitably taking on greater foreign exchange (FX) risk and cash management complexity. For Asselberghs, this was the challenge he had been seeking.
“I’d seen during the interview that there were many possibilities to make improvements.”
With almost 15 years of professional treasury experience under his belt, Asselberghs started his career with a six-year stint on the treasury desk at computer manufacturer, Packard Bell (since 2008 a subsidiary of Acer), where he specialised in FX trades. He then moved in April 2006 to the Dutch treasury operations of the Nasdaq-listed manufacturer of scientific instruments, FEI Inc. He remained here for the next three years as Cash Manager, managing the working capital team. During his time at FEI, Asselberghs implemented several new treasury processes and systems, introduced a credit insurance agreement and assumed responsibility for international cash management, tackling FEI’s significant currency exposures.
The role of Senior Treasury Manager at another US-owned business, the biopharmaceutical company, Amgen, beckoned in June 2009. This saw Asselberghs run the firm’s international treasury team, again out of the Netherlands, and gave him a place on the management team of Amgen’s international Shared Service Centre.
The next phase of his career saw Asselberghs intent on joining a Dutch corporate where he could stamp his own authority on treasury. When the call to Brand Loyalty came, having discussed the role at length with the firm’s CFO, Asselberghs was already clear in his mind that the position would offer him what he needed. “I’d seen during the interview that there were many possibilities to make improvements,” he comments, adding that the promise shown by the company and its almost clean sheet of treasury opportunities has indeed been born out. “I’m very happy here.”
The single view
Brand Loyalty has always been a financially de-centralised organisation. It has multiple entities based around the world, each undertaking a similar role in its respective country. Each has its own financial team charged with managing its own core activities, mostly around working capital, such as payments and collections. “When I arrived it was my goal to place more of a central focus on those activities,” recalls Asselberghs.
He discovered that the firm had a multiple bank/multiple account structure which has since been halved in size. Indeed, one of his first “quick wins” was to consolidate a number of existing accounts onto the platform of a single cash management provider. As a result of this, at an operational level, Brand Loyalty’s liquidity management in Europe is now modelled on a notional pooling structure where on a daily basis the combined credit and debit balances of all its accounts are used to calculate interest. Beyond Europe all excess cash is currently managed manually, mainly with domestic banks. These institutions are able to offer essential local services, local knowledge and expertise especially where Brand Loyalty’s main bank or another primary bank does not have reach.
Taking to technology
As part of the central team, Asselberghs’ treasury is joined by a corporate controller’s office (which oversees accounting operations) and a group reporting function (for internal and external reporting) – all requiring consolidated financial data from the entities. All reporting is thus channelled via a “limited” roll-out of an ERP system which was implemented two years ago alongside the vendor’s Business Intelligence (BI) module.
Since go-live of this system, Asselberghs has added new reports, mostly around working capital (such as days sales outstanding, days payable outstanding and days inventory outstanding data) which are extracted to Excel. This, he notes, enables him to easily drill down into the detail to analyse the company’s positions and exposures worldwide.
With the international expansion of Brand Loyalty continuing unabated, Asselberghs does not rule out the possibility of installing a proprietary trading system such as 360T or FXall, but this is not currently on the agenda. For now, his preference is voice-trading across a panel of several banks. He uses a Bloomberg terminal as a lever in price negotiation but also draws on the benefits of long-established working relationships with his banks to achieve the most appropriate price; Asselberghs is quick to point out that this is not always the cheapest. With entities spread across the world, he is more than happy to work with his providers, to draw on their local knowledge, experience and advice, rather than against them, extracting the lowest possible pricing every time. “There are only a few banks in our syndicate; we all know what we are doing and they are all happy to participate in our business.”
“As a company, Brand Loyalty is focusing on technology and mobile solutions – so treasury should be in line with the business!”
Technology is clearly a treasury front-office enabler for Brand Loyalty. Because middle and back office management of the company’s bank accounts, FX and forecasting functions are currently spreadsheet-based, Asselberghs is keen to automate here too and is working towards the implementation of a treasury management system (TMS). With experience of a variety of systems from previous employment, and having seen some vendor demonstrations as part of the current search, planning for this outcome will move up a gear in early 2014. “I’m already thinking about fitting the new system into our processes,” he says, adding that the system will enable him to create a worldwide automated netting process. In addition, as the only treasurer in Brand Loyalty his work tends to follow him wherever he goes and so the prospect of acquiring a mobile treasury solution as part of the TMS implementation has piqued his interest. “As a company, Brand Loyalty is focusing on technology and mobile solutions – so treasury should be in line with the business!”
Managing the global crisis
Many businesses have felt the keen edge of the financial crisis; some have collapsed, some have struggled on bravely but a few have found themselves in a rather interesting situation; Brand Loyalty is such a company. “We develop loyalty programmes for retailers and many of these sell essential goods; things that consumers will always need. People have less to spend but they still need to buy these products. If we can combine the purchase of essential goods with savings programmes, people like it,” explains Asselberghs. The net result is that during the crisis Brand Loyalty has experienced continued growth and has been able to expand. Europe remains the stronghold but the fastest growth regions for the company are Asia and South America.
For Brand Loyalty, cash management is closely linked to funding. As the company is set on a heading for growth and the number of loyalty programmes it runs increases, it needs to stock up on promotional materials. To help with inventory management and to lower its working capital requirement, Brand Loyalty offers a ‘sale or return’ option to clients which means once a programme with a retailer has ended wherever possible any goods left over can be re-used for another programme with a different client in another country.
“What I see now is greater difficulty in bringing new entities into our notional pooling structure.”
Where funding is required the company’s main source is the debt facilities it has arranged with its banks. It has not yet tapped the debt capital markets or alternative sources of funding (such as a US private placement).
Facing up to regulatory change
As Brand Loyalty continues its expansion, the focus of attention on Asia and South America has seen the business face a range of legal and regulatory hurdles, some of which can add complexity to cross-border liquidity management. For example, the trapped cash situation (not easily being able to repatriate profits) is slowly being addressed by China’s central bank (the Peoples Bank of China) but in the meantime although traditional models of repatriation such as dividend, royalty payments and service payments (and even cross-border lending to related companies) can be used these still come with many restrictions, sometimes even requiring approval from the country’s governing body for foreign exchange market activities, State Administration of Foreign Exchange (SAFE).
Of course, China is not the only market where financial change affects corporates. Much of the global bank regulatory landscape has shifted in the last few years with notable impact from Basel III. “What I see now is greater difficulty in bringing new entities into our notional pooling structure,” says Asselberghs. He explains that under Basel III a bank needs to consider the risk perspective of each new entity Brand Loyalty wants to bring into its centralisation programme because it must place a certain amount of equity on the balance sheet to support the arrangement. “It costs the banks more, so they are less willing to take on new entities,” he states. To counter this, he plans to establish an in-house bank as part of Brand Loyalty’s TMS implementation. This will enable him to move cash between entities without the need for the notional pool structure.
“My goal was to have live SEPA payments before the end of October so we can avoid the rush.”
Another regulatory push in the banking space is SEPA. With a number of operations and clients in Europe, Brand Loyalty will be affected; at least on the credit transfer side (it has limited use for the direct debit aspect, which Asselberghs believes to be the most onerous element). An internal team has been working towards the migration deadline of February 2014 for around one year, alongside consultants. “My goal was to have live SEPA payments before the end of October so we can avoid the rush,” he says. “A lot of companies are waiting until November or December – they may have internal resources available but they will also be dependent on the resources of the bank; if a lot of companies have issues and they are one of them, they will have to wait.” Brand Loyalty’s first tests have been completed successfully within ERP and the banking systems. “We are,” he confirms, “ahead of the game”.
With every new entity formed within Brand Loyalty generating ever more spread sheets, the “nightmare” of Excel Hell is becoming a reality for Asselberghs. Much of his energy is now focused on the TMS project. Indeed, a lot is riding on the success of this, with the expectation that the technology will enhance treasury and risk management processes significantly and help the business grow. But there is another change in treasury that is planned and that is to take on a Treasury and Reporting Assistant within Group Finance. The role is intended to release Asselberghs from some of his operational duties, allowing him to focus more on the strategic side of corporate finance and on core projects such as the TMS implementation, as well as enabling him to offer more support to the overseas entities which, given their rate of expansion, he admits can be rather testing at times.
Between balancing working capital and FX risk, moving into new markets, sourcing new technologies and meeting regulatory demands, Asselberghs is kept on his toes. But then he wouldn’t have it any other way. Every day is different, he says, “and that is what keeps it interesting”.