Corporate View: Chris Corner, BBC Worldwide

Published: Sep 2011

BBC Worldwide is the commercial arm and a wholly owned subsidiary of the British Broadcasting Corporation (BBC). Its remit is to maximise the value of the BBC’s assets for the benefit of the licence fee payer. In 2010, it had its most successful year ever with headline sales up 8% to £1.158 billion and profits up 10% to £160m. International sales also increased by 10% to nearly £650m in November 2010.

Chris Corner


Chris became Treasurer at BBC Worldwide in 2010. He has held treasury-related positions at a number of blue-chip multinationals, including GE Insurance Solutions, Johnson Matthey plc and Lloyd’s of London. Immediately prior to joining the BBC, Chris was Group Treasurer at Capita PLC. He possesses an MCT qualification and a Bachelor’s degree in Government from the University of Essex.

It is easy to forget that the British Broadcasting Corporation (BBC) is in the business of making money. Largely funded by the licence fee and having to stick closely to its public service remit, the broadcaster is often bracketed with those other British institutions whose focus remains the quality of its service, not the bottom-line. It is perhaps understandable that that’s the case, but it is something of a misrepresentation. In fact, over the past five years, the corporation has undergone a revolution in its approach to the commercial side of the business. “There has been a recognition that we need to expand the commercial side to the BBC. I think we are pretty much over that barrier now,” says Chris.

As part of the corporation’s efforts to make money from its back catalogue and exploit the commercial opportunities afforded by its flagship programmes, a stand-alone treasury team was established in 2008 to oversee its commercial arm, BBC Worldwide. Previously, the corporation’s commercial activities were performed at the group level.

Chris joined BBC Worldwide in 2009 on a six month interim contract. A temporary team had already established a skeleton treasury function. It was left to him to build on that foundation. “In terms of where we are at and our development, I very much saw my first year as getting the right people on board and establishing governance and processes. It is now a case of doing things better and streamlining the function.”

“The US is the focal point of our international growth strategy. I can see us having a local treasury presence in Australia or the United States or both countries in the future.”

A significant part of Chris’ focus is now on growth and positioning the department so that it plays a more central role in the broadcaster’s expansion – both at home and abroad. A self-confessed ‘centraliser’, he has had to come to terms with the realities of working for a broadcasting company with operations on all five continents.

“The US is the focal point of our international growth strategy. I can see us having a local treasury presence in Australia or the United States or both countries in the future.”

The rise of digital media has also given him pause for thought. The rapid transformation that is taking place in the way people consume music and video content has meant that the treasury is facing the prospect of a whole new receivables cycle; a paradigm shift Chris’ team hasn’t yet come to terms with, he admits. “We’re not sure if the micro payment relationships are going to be directly between BBC Worldwide and the consumers, or through a payments service provider (PSP) – it is something we’re looking at.”

In this interview, Chris talks about the past, present and future of treasury at BBC Worldwide.

How is your treasury structured?

The BBC Worldwide treasury function was established in late 2008 in recognition of the growing size and scale of the company, and in particular its international activities and projected growth. Working closely alongside the BBC Group treasury team, there are three of us in the treasury team based in the Media Village, just up the road from the Television Centre in London.

I am the treasurer and reporting to me is a treasury manager who is responsible for all treasury reporting and accounting, a number of projects, and working with divisions and subsidiaries across the group as their primary point of treasury contact. There is also a treasury analyst, who is responsible for cash flow forecasting and centralising as much cash as possible, and managing our banking relationships. A fourth role is performed by BBC Group Treasury, which is responsible for our day-to-day cash management and deal execution.

To support the team’s development, we employed three contractors to deliver specific functionality – for example around reporting, hedge accounting and cash flow forecasting. Whilst these contractors have now moved on, their contributions rank alongside the permanent team in getting us to the ‘steady-state’ that we have now achieved.

Which banks do you bank with?

HSBC is our primary bank. They now have 80% of our bank accounts, with the remainder spread across around 15 banks, down from 25 in the last couple of years.

In the early days, I did give the optimum number of bank accounts some thought and then came to realise that this wasn’t necessarily an appropriate target for us. This is because in the US, we often have to open new accounts for each new production to reflect the legal entity structure. So, being on our thirteenth series of Dancing with the Stars (the international version of Strictly Come Dancing) for example, maintaining a specified number of accounts would be unduly restrictive.

“The BBC has just refinanced a revolving credit facility for its commercial subsidiaries with eight banks.”

I want to achieve further consolidation of our accounts within our bank relationship group, given the operational benefits that can be achieved, but I also recognise the logistical implications of moving banks are considerable, so we have to ensure that we’re maintaining the right balance.

The BBC has just refinanced a revolving credit facility for its commercial subsidiaries with eight banks. That facility is managed and owned by BBC Group Treasury, but as the principal credit and profit generator, BBC Worldwide is a key consideration for the lenders. We share the BBC’s relationship management approach to these banks, and are looking forward to continuing to deepen the established relationships and to identifying opportunities to work more closely with those banks that are new to the group. This bank group provides us with good global banking coverage which should facilitate BBC Worldwide’s growth in international markets.

What do you do with your short-term cash?

Our short-term cash goes back to the BBC to reduce our inter-company debt. That money is then used elsewhere across the BBC until such time as we need to draw down additional debt.

Float balances are maintained in numerous locations, with target balances set at immaterial levels such that surplus funds are centralised negating any requirement for local investment structures.

What’s your debt situation like?

The BBC’s Charter limits debt to £350m for its commercial activities, and this is allocated across the various commercial subsidiaries. As the BBC’s largest commercial subsidiary, BBC Worldwide has the largest share of this, but it is still less than 1x our EBITDA.

For a business of our size to be operating with such a debt cap does have an effect on our liquidity management and does mean that our cash flow forecasting is very critical to what we do. We also have a £50m facility from the European Investment Bank which is maturing next year and will be repaid when it does. Once that matures, all our debt will be intercompany from the BBC.

Our debt position varies with programme investments and dividends – we returned £182m back to the BBC last year, and over £1 billion over the last seven years, which has been used to supplement the licence fee – as well as disposals and acquisitions, but our underlying cash flow profile was broadly neutral for the six months to September, and strongly cash generative in the build-up to Christmas and ahead of our March year-end.

Does the BBC have a credit rating? If not, would you be prepared to solicit one in the future?

No, we don’t. It is unlikely that we will solicit one, unless there is an absolute requirement to obtain a rating to provide the necessary funding for the business. There are of course various funding alternatives available without needing a rating, for example the private placement market.

How much FX exposure do you have?

We trade in more than 200 countries and territories worldwide, and overseas sales last year amounted to £650m of the £1.2 billion total. We achieve a considerable amount of natural hedging across the group, to the extent that our annual FX exposures are in the region of £130m. We generate currency in each of our major markets – the US, Australia and Europe – so sterling’s relative weakness in recent years has benefitted us.

“The cost and tax implications of pooling on a global basis have been prohibitive in light of the cash management alternatives available to us.”

We maintain a rolling 24-month hedging programme whereby we hedge 80% of the forecast exposures for the next 12 months, and 40% for the subsequent 12 months. Our FX deals are executed using the 360T and Misys platforms.

We have a strong and growing channels business, and sell a lot of our programmes and DVDs in Australia, hence generating local currency. We also have the Lonely Planet business, which historically has been primarily Australian dollar cost and foreign currency income.

At the group level, the Australian dollar’s strength has helped us. However, for the Lonely Planet business, it has made that even more challenging. It was already facing a tough time with the downturn in the global travel market and recession.

In light of that, we have restructured the Lonely Planet business and taken a lot of the cost out of Australia by relocating some parts of the business to London and New York.

Do you expect the strength of the Australian dollar to unwind?

When I joined the company it was 2.2 to the pound. The banks were saying it’s not going to go below two, then 1.80, then 1.60. And it is still going! I’m always reluctant to offer an opinion on FX moves, and especially so on the Australian dollar.

Do you hedge your interest rate risk?

Yes, we do. We currently have a largely fixed interest rate profile for our debt, and are in the process of revisiting this strategy to reflect the increasingly global nature of the business aligned to the business cycle.

Whilst our existing interest rate swaps, executed back in 2008 and 2009, are out of the money, they have obviously provided the benefit of cash flow certainty, which is very important given the group’s debt cap. From that point of view, the hedges have done what they set out to do. We had an exposure and managed that risk at the prevailing rates.

Do you pool your cash?

We pool almost all our UK-based cash via an HSBC notional cash pool. We have decided not to pool cash in the rest of the world, but we do look at that on a regular basis. We maintain relatively low cash balances across the world. The cost and tax implications of pooling on a global basis have been prohibitive in light of the cash management alternatives available to us.

We concentrate on using cash efficiently in terms of inter-company loans if we can go down that route and building interest enhancement structures in countries where there is a particular rationale for keeping a material balance away from the centre; but we tend to centralise all our cash so we can reduce the group’s debt.

Do you plan to pool your international balances in the future?

Further international growth will drive this, so it’s always on the radar. As some of our smaller currency balances become material, we are more likely to pursue the idea of an international cash pool. Having HSBC – with its global presence – as our primary cash management bank is very important to us in this regard.

What payment terms are your customers on?

Simple answer: many and varied. We are trying to standardise as much as possible. We operate across many markets and in many different countries; large counterparties, such as the big US network companies, to small independent companies. As such, targeting standard terms across the group is not something we prioritise, but where we can at least achieve consistency in part of the group rather than across the group as whole, that’s what we strive to do whilst recognising that there are different commercial drivers at play here.

What do digital sales mean for your payables/receivables cycle?

It is a very interesting area for BBC Worldwide as we go forward. It will represent quite a material change to our receivables processes. Digital sales, predominantly online and mobile, amounted to 8.1% of all sales last year, on course for our target of 10% by 2012. Digital sales will accelerate the receivables cycle and increase our exposure to micro payments.

“The sovereign debt problems represent a very real danger to the world economy.”

The results of our Global BBC iPlayer pilot, being piloted in 11 European countries now, will influence the extent to which we handle micro payment relationships directly between BBC Worldwide and the consumers, through a distribution partner or through a payments service provider.

This is a very exciting initiative for BBC Worldwide. The pilot will explore the potential international demand for high-quality British programmes that can be accessed via digital platforms, and the things we learn from this will define the service to be rolled out worldwide.

Do you use a TMS?

BBC Group Treasury has recently implemented the ETC system, and is in the final stages of user testing. We are looking forward to accessing all our data through ETC which looks like a very comprehensive, robust system that will give us all the functionality we require.

Do you use spreadsheets?

Yes. Ahead of full go-live with ETC, we’re working on spreadsheets, with all their limitations and risks. In due course, the new system will make our processes more robust and less manual.

We have a number of spreadsheets that we manage across the team. We produce a monthly reporting pack that takes a number of working days, and that should be done in half a day once we have the ETC in place. On-going use of spreadsheets will then be on ad hoc reporting work.

Have you embraced SEPA?

There is work to be done to make sure that we have every last supplier covered, but we have made good progress on the SEPA front, with the vast majority of the bases covered.

What are your thoughts on the Eurozone’s sovereign debt problems?

It worries me. The sovereign debt problems represent a very real danger to the world economy. We may get through the next 12-18 months and no country defaults and things return to relative normality, but also we might have a Greek default and I can’t say what the implications of that will be – will it be contained or will it then snowball? Who can say? It makes me very nervous. As a treasurer, I like to form an opinion of the various scenarios that could result from any market dislocation, but I really struggle to see how anyone can predict with any confidence what the post-default world may look like.

I’m not unduly concerned about HSBC’s exposure to single countries, but if contagion spreads and we have multiple defaults, we don’t know what will happen. If HSBC goes down, they wouldn’t be the first and other big banks would go with them so we’re into a dire scenario. In the UK, there is political will to bail the banks out. Across Europe, I cannot say, given the difficulty of co-ordinating a number of national interests. Minimising exposure to the banking sector as a whole is key.

What does the future hold for your treasury?

The on-going evolution of the treasury team is a priority. We now have a stable team in place, and have established the governance structure and operational processes. It is now a case of enhancing and streamlining those processes to achieve best practice whilst extending our scope and working more actively as a partner with other parts of the group.

“The treasury function has come a long way in just a few years, and will need to continue to grow as the group delivers further growth and expands into new markets.”

Each element of BBC Worldwide’s growth strategy – digital transformation, becoming more international, building the scale of our TV channels, investing in new content, and getting closer to our consumers – contains challenges and opportunities for the treasury team. Foremost among them, I see the international growth requiring us to consider how best we support our overseas markets, reflecting the size of our major international operations and also the risks inherent with expanding into markets such as China, Vietnam and India.

The treasury function has come a long way in just a few years, and will need to continue to grow as the group delivers further growth and expands into new markets.

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