Published: November 15, 2011
La Lettre du Trésorier
Isn’t your company, Dassault Systems, about to celebrate an anniversary?
John Colleemallay
Yes, its thirtieth anniversary is very soon. It was in 1981 that a few engineers from Dassault Aviation started a business that would become the worldwide standard in its area of expertise, that is, product life cycle management (PLM). Dassault Systems’ software allows one to imagine, to simulate and to experiment with products in three dimensions. Dassault Systems today employs almost 9,000 people in over 80 countries. The company, which had a turnover of €1.3bn in 2009 and boasts an operating margin of 25%, has seen very sustained growth, marked by numerous acquisitions, mainly in the United States and in Europe. At one stage, it became necessary to consolidate the group, and, in order to do that, to move towards a convergence of management methods. That is the task of the aptly-named One Company which was set up three years ago and which, specifically in the context of the treasury, aims to rationalise banking, to put in place shared service centres and to centralise risk. In short, this means going from a holding company treasury to a group treasury which can have a precise and reliable vision when it comes to the generation of cash.
At the end of this transition to a centrally-driven treasury, can you describe the resulting organisation?
The treasury group, based in Vélizy, near Paris, at the worldwide company headquarters, is responsible for three large areas: market transactions – investments and foreign exchange transactions or front office; cash management and cash pooling, and finally a unit which manages reporting, control, analysis of financial results, large projects and the treasury’s IT systems. Additionally there is a treasury for the American zone, in Boston, and another in Asia, in Tokyo. These two treasury centres report back to the headquarters in Vélizy. We also have three shared service centres, focused above all on compatibility, in the United States, the United Kingdom and France.
What are the main tasks that you have been working on over the last few years?
Starting in 2007, we started to reduce significantly the number of our banking partners, so that for cash flow we only have two banks in the United States, two main banks in France and one in Asia. Shortly after that, in 2009, we began to tackle the formation of cash pools, one in Europe, outside France, co-ordinated with Société Générale, which was chosen after a call for bids, another in the United States with Bank of America, and a third in Japan with Bank of Tokyo-Mitsubishi UFG. The cash pool in France is managed by BNP Paribas. The final stage of this process of concentration of liquidity was reached in October 2010, when we put in place a worldwide cash pool co-ordinated by the Dutch bank BMG – Bank Mendez Ganz, a 100% subsidiary of ING – which allows us to centralise all our currencies without exchange rate risk and to manage our asset allocation exclusively in euro for all the group cash from our headquarters in France, with a more flexible market and better yields on investments than in America.[[[PAGE]]]
What about banking communication?
Taking into account the rapid advances in the field of cash management, we decided it was necessary to adapt our banking communication tools as soon as possible. So, at the end of 2009, we launched the SEPA project and in mid-2010, all our transfers were in the European format. At the same time, we set up a task force whose job it was to think about the replacement of Etebac 5, at the same time keeping the electronic signature, a service which this protocol allows, but which SWIFTNet, our chosen substitute, has yet to obtain, in a way which is equally reliable and secure. We have asked Kyriba, retained to manage SWIFTNet’s office service after a call for bids, as well as our banks, to put a system in place which is capable of carrying XML from Etebac 5. The task was quickly completed and we have been leaders in this field, because according to our banking partners, the issue and transmission of transfers in an XML format, signed electronically via Etebac 5, had not up until now been tested with success, whilst waiting for the arrival of the SWIFTNet signature. At the same time, the complete transfer was carried out for the receipt of bank statements in MT 940 format.
The complete transfer to SWIFTNet with the electronic signature is currently in its test phase and we expect to deploy it during the course of this trimester.
The company has seen a rapid growth: are there still liquid assets to invest?
Yes. The average reserve of available cash has risen to just over €1bn, and we have tried hard over the past few years to optimise the cash we have invested, which currently accounts for 95% of the total. Our approach allows us to invest, in part, beyond the very short term, without going as far as bond investments or having to carry out frequent arbitrage.
What are the politics of risk management?
By far the largest part of our hedging concerns foreign currency and in particular the American dollar and the Japanese yen. As far as the former is concerned, the group is protected by considerable natural hedging due to its presence in the United States and therefore to charges in dollars. For the balance, we use classic hedging based on options or futures. Our exposure to the yen is stronger and is handled using the same financial instruments: forward sales and/or options. As far as interest rates are concerned, debt is minimal: it consists solely of a line of credit obtained in 2005 which is entirely ‘swapped’.
Did you go straight into treasury after your studies?
Yes. My first professional experience, after having received a Masters in Banking and Finance (international trade) at Bordeaux, took place in the treasury of a metallurgy company, where I quickly became involved in risk management, foreign exchange and raw materials. I continued on this path at Rémy Cointreau, where I started with market operations and currency and rate risks, before developing my role to include cash management and financing. Before joining Dassault Systems, two and a half years ago, I had been treasurer at Editis for four years.
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