Happy Easter everyone and I hope you all managed to enjoy a bit of sunshine even during lockdown.

Investment Week have just released an interesting article about the amount of cash that the average FTSE 100 company holds.

‘The average FTSE 100 firm has enough cash to operate for 20 months without incurring more debt or raising more funds, research from Bowmore Asset Management suggests, placing them in ‘good shape’ to face the turmoil posed by the Coronavirus pandemic.

The research found the average firm has 618 ‘days cash on hand’ which measure the number of days an organisation can continue paying its operating expenses with the cash it has currently available, regardless of any future sale.

A high number of average days cash on hand for the FTSE 100 is a sign the largest UK companies have the financial resource to cope with the economic disruption Coronavirus is causing. The ability to fund over a year and a half of operations without any new sales gives businesses breathing room in terms of how they manage their expenditure.’

So even though times are tough we would expect the largest corporations to be able to weather the storms we are having and one would expect they would be the ones to react quicker when lockdown is over and we return to some sort of normal.

MPA Financial Management Ltd

I took a call this morning from a client who wondered, quite rightly, how MPA are doing and would we survive this crisis, and would we continue to be able to offer her advice going forward. She also wondered, quite rightly, whether her pension would be affected if MPA went out of business.

Good questions, and I thought I should let you all know how we are faring as a company so that you can be certain that MPA will survive the crisis.

As you know we are all working remotely, and we have just placed half of the administration team on furlough for three weeks. Work has certainly dried up and we have staff sitting around twiddling their thumbs with not a lot to do. Therefore, half the staff are furloughed and they will swap over with the other half in three weeks time. Hopefully, if lockdown ends then we will be back in the office earlier.

Financially, we always carry a healthy balance of cash in the bank so we will be able to survive for many months, even if we stay in lockdown. Nearly 80% of our annual income comes from recurring income so we are not dependent on new sales or new clients to be financially viable. The business model we operate is based on long standing client relationships and it was built so we could withstand various economic shocks we could not predict. I estimate that our turnover will be down around 15% – 20% this year but we are easily able to survive that situation.

If however, the worse case scenario happened and MPA went bust then your pensions and investments we have arranged would not be affected as we do not hold any of the money. The money is held via the pension and investment companies we recommend and part of our due diligence is based on their financial stability. Investments are held in nominee accounts and all pensions are written in trust with large amounts of financial compensation covering everything.

Anyway that is the worse case scenario and lets hope we don’t end up in that situation. So there is no need to worry and all you need to think about is remaining safe and healthy.

Phil J McGovern FPFS