something to smile about? - Euromoney Institutional Investor PLC

EDITOR’SNOTEFor the finance executiveMarch 2004Issue 229Editor Tabitha NevilleDeputy editor Robert PinkReporters Monica Woodley, Jason EdenProduction editor Emma PearceResearch editor Sarah ChuleCover photography Maarten UdemaIllustrations Russ TudorHead of sales Graham CombeAdvertising managersDan Brennan, Jonathan WrightMarketing manager Maeve DohertyPublisher Will GoodhartCorporate FinanceNestor House, Playhouse YardLondon EC4V 5EX, UKSwitchboard: +44 20 7779 8888Advertising: +44 20 7779 8715Fax: +44 20 7779 7971E-mail: gcombe@euromoneyplc.comFor subscription information please contactour hotline on +44 207 779 8999Corporate Finance is published byEuromoney Institutional Investor plc,Nestor House, Playhouse Yard,London EC4V 5EX, UK.Annual subscription rate: US$534/£318(UK only)/€520. ISSN 0958-2053USPS No. 745-890. Periodicals PostagePaid at Rahway, NJThis publication is not included in theCLA license. Copying without permissionof the publisher is prohibited.Directors Padraic Fallon (Chairman andeditor-in-chief), The Viscount Rothermere,Sir Patrick Sergeant, Richard Ensor(managing director), CJ Sinclair, NeilOsborn, Christopher Brown, Dan Cohen,Gerard Strahan, JP Williams, John Botts,Edoardo Bounous, Colin Jones, Simon Brady,Tom Lamont, Diane Alfano, Gary Mueller,John Bolsover, Mike Carroll.Printed by The Grange Press in the UK.Customer services UK: Tel: +44 20 77798610; Subscription and book sales in NorthAmerica to: US hotline, Tel: +1 800 437 9997.©Euromoney Institutional Investor plc,London 2002. Although EuromoneyInstitutional Investor plc has made everyeffort to ensure the accuracy of thispublication, neither it nor any contributor canaccept any legal responsibility whatsoever forconsequences that may arise from errors oromissions or any opinions or advice given.The publication is not a substitute forprofessional advice on a specific transaction.Next publication date: April 2004Cash, cash and cashShareholder value is a mantrathat gained sway many years ago.But almost as soon as the phrasehad been coined, detractors beganto ridicule the reality of theconcept, claiming that mostcompanies simply paid lip serviceto the idea of building value fortheir shareholders. CF’s coverstory reveals that – for somecompanies at least – shareholdervalue is more than just rhetoric.In association with globalconsultants Stern Stewart, CF hassurveyed corporates in the US,Europe and Japan on a marketvalue-added (MVA) performancebasis. MVA is a measure of excesscash generated by a company andso a positive MVA is a sign that acompany has managed its cashwell and that shareholders canbreathe easy about how theircompany is being run.But MVA is more than just ameasure to see if a corporate isspending and using money wisely.In a corporate world gripped bygovernance fever, it is just theapproach a company needs toadopt to prevent money goingastray and accounting scandals.So how do corporates defineand measure shareholder valuecreation? Tabitha Neville talks tosome of the top 75 companies onpage 22 to find out and revealswhich CFOs really know how tomanage cash.In CF’s Managing Cash featureon page 34 we look at short-termdebt, with a particular focus oncommercial paper. The CP marketis currently a shadow of its formerself. A combination of ratingsdowngrades and the economicslowdown has seen the size of theUS market fall to $1.3 trillion - thelowest level since 1999. So whatare corporates doing to fund theirshort-term debt? Those who canmuster the ratings are still usingCP – and banks and ratingagencies all claim that an upswingis just around the corner – butalternative short-term debtfinancing solutions are availableas Robert Pink discovers.On page 30, Jason Eden puts FXforecasters to the test in CF’sManaging Risk feature and revealsCF’s Forecaster of the year. Howaccurate are the forecasts theyprovide and what currencies havetaken them by surprise over thelast 12 months? cfEditorial tneville@euromoneyplc.comFor reprints of any article in this issueplease contact Liz Onisiforou:+44 (0)20 7779 8591 or eoni@euromoneyplc.comcorporatefinancemag.com March 2004 cf 1