Hollister Incorporated is an independently-owned global company that develops, manufactures and markets healthcare products, servicing over 90 countries. Treasury’s goal is to provide confidence to the Board and enable the company to implement its investment strategy. This is achieved with tight control over its cash and liquidity positions, complemented by both short and long-term forecasting that stands out for its accuracy.
Private companies often have restricted access to free capital compared to listed businesses – one member of the Hollister team described the position as having “less margin for error”. And, with the general tightening of liquidity, Hollister’s treasury team works hand in glove with the Board to support the long-term strategy with a sound financial platform. Hollister is a business that takes a long-term view of planning with cash flow forecasts stretching out over five years.
Sheila Johnson, Vice President and Treasurer, explains: “In a refreshing change, the business is encouraged to measure success more by the balance sheet, cash flow and liquidity positions. Treasury has supported this shift in financial culture with changes to deliver tight controls that provide a predictable foundation for the board to grow the business.”
Key objectives of the treasury team are:
To hit cash flow and profitability targets, with improved forecasting.
To achieve 100% visibility over cash on a daily basis.
To improve working capital, measured as a percentage against sales.
Over the past three years the treasury team has focused on enhancing cash flow and liquidity. Cash flow and forecasting has always had a disciplined planning process, but Hollister has strengthened this further in two key areas. Firstly, on the P&L side, it has implemented SAP’s Business Objects for Planning and Consolidation. Secondly, to achieve further efficiencies, treasury has implemented Oracle Hyperion Strategic Finance to provide a smooth interface with the P&L input. From a cash standpoint, the treasury team is aiming for 100% visibility. It is already above 90%, and expects to achieve the goal of 100% visibility in the short to near term.
This is being achieved through best practice initiatives: implementing an inter-company netting process, moving to Bank of America Merrill Lynch for global banking and using notional pooling structures for euro and sterling transactions. Within the next 12/24 months all entities will have moved to the Bank of America Merrill Lynch banking platform, enabling complete visibility and reducing operating costs.
With treasury practices that, by any measure, are disciplined and diligent, the team is delivering outstanding results.
92% visibility over Hollister’s cash position – with the goal of hitting 100%.
Reduced banking costs: Hollister now holds 63 accounts with Bank of America Merrill Lynch across 23 countries and is in the process of converting another five countries to Bank of America Merrill Lynch. This consolidation is reducing banking costs.
Operating cash flow and liquidity that significantly exceeded goals for 2012.
88% accuracy, on average, in short-term forecasting.
Johnson concludes: “The Hollister Board can deliver its strategic vision in confidence thanks to the stable, predictable financial position built by its partners in treasury. Its work deserves recognition, not just for the results but the way these are achieved, with a best practice culture permeating throughout the treasury group. The treasury team has also implemented new systems and processes to enhance efficiencies and performance.” The highly experienced client manager at Bank of America Merrill Lynch simply states that “Hollister’s treasury operation is the most disciplined I have ever seen – anywhere.”