Sponsored statement: UniCredit case study: Buongiorno
Mobile media and technology firm Buongiorno thought it was impossible to find a cash pooling solution to meet its needs. Working with UniCredit, it was able to meet all of its goals across Europe.
Gianluca Elmosi, group treasurer, Buongiorno
Buongiorno is a dynamic, independent mobile media and technology company driving the burgeoning mobile content industry. It has become the world’s number one company in mobile entertainment – active in 57 countries – and the market leader in Europe and Latin America with 80% of the revenues coming from international sources. Directly and indirectly, Buongiorno reaches more than 300 million consumers, and it has over 9 million subscribers to its B2C services. The company’s scale, geographical presence, unrivalled portfolio of content and services, and flexible strategy, executed by an expert team of more than 1,000 professionals in 24 offices around the world, make Buongiorno the world’s largest enabler of mobile content and digital entertainment.
Despite such an internationally focused and technologically sophisticated business model, Buongiorno, which is publicly traded on Borsa Italiana’s MTA Star exchange and had revenues for 2009 of €259 million, had until recently to rely on decidedly basic technology to move cash between its European companies. "Buongiorno simply performed cash sweep manually on a weekly/monthly basis to the central treasury in Italy," explains Gianluca Elmosi, group treasurer at Buongiorno.
Not only was this arrangement cumbersome and time-consuming for Buongiorno treasury staff, it also limited the company’s ability to pay down its debt in accordance with its amortization plan. Most of Buongiorno’s revenues are generated abroad, while its financing is organized in Italy and relates to the parent company. As cash was being transferred only once a month, Buongiorno was effectively missing out on part of the benefit that improved cash balances could have delivered to the company if held in Italy.
"Buongiorno continued to perform manual monthly transfers of cash from its European operations not because it wanted to but because it could not see a viable alternative," says Elmosi. Indeed, the search for an alternative was only sparked by a comment made by Buongiorno’s CEO, Andrea Casalini, who declared at an Aspen Institute meeting that "no Italian bank had been able to provide a cross-border pooling system" to meet his company’s needs.
"Buongiorno’s needs remained unmet possibly for a number of reasons," says Stefano Gemelli, head of international cash management sales, Italy, Global Transaction Banking, at UniCredit. "Firstly, despite the global nature of Buongiorno its local entities have relatively thin structures, so the size of the company meant that global transaction banking players were uninterested in serving it. Secondly, the Italian market is still relatively unsophisticated – just a few banks are really able to provide the relevant services and manage a widespread sales team. In Italy we cover the market with coordinated specialized teams, assisting customers in every transactional they express. Buongiorno, for example, is assisted by myself and Vittorio Gariboldi"
Spurred on by UniCredit’s firm belief that a multi-country cash pooling structure with a daily sweep was possible for Buongiorno, the company set out to find a suitable bank to design a solution. "We reviewed our list of bank counterparties and looked closely at their proposals," says Buongiorno’s Elmosi. "We determined that UniCredit was best positioned to meet our requirements. Moreover, we have a strong existing relationship with UniCredit and were happy to choose it, given that we are an Italian company."
UniCredit has the largest international banking network in the CEE region with around 4,000 branches. The bank operates in Austria, Azerbaijan, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia, Germany, Hungary, Italy, Latvia, Lithuania, Kazakhstan, Kyrgyzstan, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Turkey and Ukraine.
Global Transaction Banking
UniCredit’s solution for Buongiorno is unusual. It requires very low intraday limits, because, as already noted, the company’s local entities have thin structures. To implement the solution in the countries where Buongiorno operates, UniCredit made use of its own footprint and the flexibility offered by its membership of international banking alliance the IBOS Association.
IBOS is based on its 12 members and their subsidiaries, each of which is a leading supplier of local banking services in its domestic markets. It consists of competitive local services at the IBOS bank in the country concerned and the meshing of local services into regional, multi-country cash management arrangements using IBOS cross-border services.
"UniCredit’s core strength is in Central and Eastern Europe but through its membership of IBOS, Buongiorno has access to market-leading local services in Spain and France, for example," explains Gemelli at UniCredit. "From Buongiorno’s perspective the relationship is solely with UniCredit and we maintain standards and seamlessly integrate with the local bank on the ground."
Implementation of the cross-border cash pooling structure began initially in Italy and Spain in 2010 followed by France and Austria. Germany is expected to join the structure during the first quarter of 2011 and Portugal will be added during the first half of the year. "At that time we will have six countries in the pooling structure and will be making significant inroads into Buongiorno’s European operations," says Elmosi. The company plans to have eight countries implemented – all euro members – by the end of 2011.
Thanks to Unicredit Service model we were able to talk just with one Cash Management focal point and implement several countries without the problem to align several people or discuss implementation with several units. Benefits for Buongiorno
Buongiorno has benefited from cost savings and an improved financial structure as a result of UniCredit’s cross-border cash pooling structure. "At the most simple level, we are saving around a30,000 every six months on commission through automatic sweeping," says Elmosi. The company also gains from improved interest rates as cash is now centralized in Italy.
"The most important benefit of the centralization of Buongiorno’s cash in Italy is its effect on our debt," says Elmosi. "Our revolving debt facility is subject to repayment when cash is available. Consequently, by centralizing cash we are both saving commission and reducing the amount of interest the company pays."
At the same time, automatic sweeping has improved risk management because there are no manual processes involved in moving cash, reducing the potential for error or fraud. "There have been no savings in terms of personnel because the number of transactions has remained the same – they are just being conducted at master pool level in Italy," says Elmosi. However, the cash pooling structure does mean that treasury staff are able to concentrate on the more important header account rather than working on country accounts.
An additional benefit of the multi-country cash pooling structure is a rationalization of Buongiorno’s banking relationships. "Given our history it has always been natural for the company to centralize its accounting, cash and banking relationships in Italy," says Elmosi. "In countries where cash pooling has been implemented we have been able to close almost all accounts with banks other than UniCredit."
In some countries, such as Spain, it has proved necessary to retain accounts with other banks to maintain existing non-recourse factoring arrangements. "Nevertheless, even in Spain, Buongiorno has been able to reduce the number of accounts it held from eight to just three," says Elmosi. "Overall, after just four months of implementation, we have been able to close more than 30 accounts."
By reducing the number of bank counterparties that it works with, central treasury staff at Buongiorno can more easily manage their banking relationships. "It’s great just to have to speak to one institution," says Elmosi. "A total of 60% of our cash is now collected by UniCredit, so by communicating with them we have almost a complete view of our cash situation at any time. For myself and the CFO this saves a lot of time and effort."
By concentrating most of its European business with UniCredit, Buongiorno also gains the maximum benefit from the bank’s monthly reporting, which is sent automatically. "It allows us to look at all transactions across all our accounts for all entities in all countries in the cash pool," says Elmosi. "It means that we can make an immediate assessment how much cash must be liquidated to meet our interest payments."