Interview – Virginie Mercier

Treasurer, Editis Group

“Very high demands when it comes to forecasts”

La Lettre du Trésorier

How is the Editis group structured?

Virginie Mercier

With around twenty publishers and forty brands, covering literature, education and reference and distribution, Editis is the second largest publisher in France. It is in first place when it comes to large format and pocket literature – working with publishing houses such as Robert Laffont, Plon-Perrin, La Decouverte, Le Cherche-Midi, Les Editions XO, Les Editions First-Gründ and Univers Poche. Editis is also in pole position in the education and reference market, with success in books for schools, extracurricular books, educational material, dictionaries, practical and illustrated works, with brands such as Nathan, Le Robert, Bordas. In Belgium, De Boeck is the undisputed leader of school, university and legal publishing.

Editis is also a key player in distribution thanks to its subsidiary Interforum which, through its logistical expertise and numerous points of sale in France and branches abroad – Belgium, Switzerland, Canada, deals with all the group’s works and around twenty-four external editors. Editis is also at the heart of digital publishing, with E-Platform, which is a communal platform, developed by Editis, which brings together over one hundred publishing houses including Media-Participation, Michelin guides, Michel Lafon and Grupo Planeta. It gives unique access to the catalogues of partner editors to all those involved in the sale of online content. Bought from Wendel in 2008 by Groupe Planeta, one of three main communication groups in Spain, Editis has a turnover of around €750m. Its publishing houses, which enjoy total editorial independence, have access to the circulation and distribution capabilities of Interforum.

The publishing houses have complete editorial independence. Is that also the case in treasury?

No. Although the subsidiaries keep their own specialisation and manage their own brands, the prevailing logic in the treasury is very centralist. Management of cash flow, banking relations, risk and finance are carried out at group level. When it comes to cash flow, we use manual cash pooling where all the cash flow is centralised on a daily basis at one point in the treasury group, with a first level cash pool for the three main areas of activity – literature, education and reference, and distribution – to which a cash pool is added every day from our activities in Belgium, mostly from De Boeck. In addition we bring back the cash from our distribution subsidiaries in Canada and Switzerland once a month. Almost all collection is carried out by Interforum, our subsidiary which distributes and circulates the publications from the two main areas of business along with third party editors. Our activity generates a large working capital at certain times of year: we are sometimes borrowers, mostly in the summer, and investors at the end of the year.

What sort of investments have you used?

Bearing in mind the cyclical nature of our cash returns, we never have a structural ‘cushion’ for long-term investments. We therefore try above all to invest in liquid and secure products. For the time being, all of the available liquidity has been put in a very short-term money-based unit trust. However, the follow-up of results is systematic, and we watch products and the performance of the competition carefully. Moreover, we are very mindful of interest-bearing liquidity accounts, of whose merits certain local banks speak highly. Their ease of use – returns known in advance, money can be transferred at any time – could be of interest to us.[[[PAGE]]]

How many banks do you work with?

In 2007, the group had organised a call for bids with the aim of renegotiating banking conditions and rationalising the number of banks it uses and reducing bank charges. Our cash flow was therefore reallocated. At the time of the buyout by Planeta, a syndicated credit was put in place, which involved new banks: the pool has since stabilised and it consists mainly of five French banks which share cash flow and participate in financing.

How is financing carried out?

For financing the operating cycle, we have a renewable line of credit, part of which has been converted into an authorised overdraft, which is more flexible to use and less expensive. Overdraft margins are subject to annual negotiation. In the long term, it’s a matter of senior debt at a variable rate. Until recently, we used to convert two-thirds of it into debt at a fixed rate, using simple instruments like swaps and vanilla options, which comply with hedge accounting rules as defined by IFRS norms. In 2010-2011, taking into consideration the large number of instruments maturing and the circumstances at the time, we have reduced this hedging and financial costs have naturally decreased. These days we are thinking about protecting ourselves against an unfavourable change in interest rates, since we know that the schedule of key interest rate increases by the European Central Bank is far from being agreed.

Is there also hedging on exchange rates?

The processes are standard and involve modest amounts, but we make sure we optimise our exchange gains. We hedge our revenue in Canadian dollars and Swiss francs with the aim of guaranteeing a fixed exchange rate to the subsidiaries concerned at the beginning of the year. In addition, a few payments, particularly copyrights, are made in American dollars, pounds sterling or Polish zloty.

What are your forecast procedures?

When it comes to forecasts, the demands of general management are very high. Treasury forecasts are structured on three levels. To begin with, net debt forecasts are ascertained annually at the time of the budget process and are broken down into monthly figures. Then the forecasts are revised every month focusing specifically on m + 1. Then, on a weekly basis, the subsidiaries give us rolling forecasts for the coming fortnight, allowing us to react quickly. The gap between the monthly figures achieved and what has been forecast is analysed every month by looking at the accounts and management cash flow in each division. Our financial costs are equally subject to our attention: minimising the net costs of our financing is a constant worry. In this department, the forecasts for financial costs, average outstanding debt and average interest rates are established according to the same process, and are then analysed each month.

What stage are you at in the transition to new banking protocols and European payment systems?

We have had to reconsider our treasury management computer system on a worldwide basis and in conjunction with Grupo Planeta, due to our integration into Grupo Planeta, SEPA, the winding up of Etebac and our growing requirements in security, efficiency and reporting. We also want to further dematerialise our payment methods. Today, we use Etebac 3 and Etebac 5. We have chosen to keep the Ebics programme, but our banks are not all in a position to supply corresponding contracts for transactions relating to Ebics, the most secure protocol. We will plan European transfers, SCT, at another point, when new banking communication protocols are installed in the group.[[[PAGE]]]

How did you get started in the world of treasury?

It was pure coincidence. I had taken a year out in order to decide on what to specialise in after finishing a Master’s in Economics and Management, having chosen finance as my option, at the University of Bourgogne – and so had requested placements in business. I was contacted by the treasury at Saur, where I had the opportunity to consider both business finance and market finance, two areas about which I was unsure. I was taken on permanently after a few months and learnt about treasury from scratch, before sitting the finance exam. I stayed at Saur for five years before going to Editis, where I was appointed joint group treasurer for two and a half years before becoming group treasurer.