I am writing to reassure that all is going well with your company’s strategy. A few shareholders have asked me to explain what is going on in our Irish subsidiary. Let me confirm that we have every intention of supporting our Irish company, and are engaged in helpful talks with them so that in future it can be organised in a sound way. We need to ensure that local management follows Group policy and observes all the wise controls on borrowing, spending and revenue collection that have been so successful in our core areas of operation.
There is absolutely no question of us wanting to change the Irish management. As in all our subsidiaries, the choice of management is a locally determined matter and should stay so. We have found that they now understand fully the position, and wish to work with us to resolve it as quickly as possible. They realise that they cannot allow their overdraft from the Group banking subsidiary to build up at the rate it was growing, and want to seek longer term proper financing facilities. They also value Head Office assistance in tackling the losses in their banking division. We will of course work positively with whoever local election chooses when the management falls due for re-election to the local Board.
Some have said that the Irish company’s low pricing policy in corporate markets was one of the ingredients in their past fast growth phase. We beg to differ. We think all subsidiaries should set realistic prices, and should not be seeking to undercut other group companies. We do think higher prices and charges are an integral part of a successful solution to their trading problems.
Some have also argued that the Irish company needs to set its prices in a different currency to the Group currency, to allow for softer pricing. This is another variant of the mistaken notion that profitable trading comes from trading down. We will assist with more training on how to run a successful operation with firm prices using our ever popular “Never knowingly undercutting” philosophy.
We wish to spread best practice around the Group more successfully. Our German subsidiary has an excellent record at controlling its borrowings. It has recently come up with imaginative proposals for controlling loans in all subsidiaries. It recommends that each subsidiary should remain resp0nsible for raising its own money in the Group currency, but that each loan agreement should have clauses that require the lender to accept less interest and capital repayment if the subsidiary concerned is unable to meet all the payments. This way will avoid other Group subsidiaries having to assist in providing cash for the loan repayments for a subsidiary which has spent too much and earned too little. This seems to me to be an excellent discipline, and I look forward to agreement to introduce it soon.
I would also like to express my thanks to Group companies that do not share our common bank account at the moment for nonetheless being so helpful in assisting our Irish subsidiary. It shows the true spirit of solidarity for which our Group is rightly famous. We now need to ensure all other Group companies have learned the lessons, and will take immediate and strong action to rein in their spending.
I give notice to all speculators that we will not stand idly by and watch them trying to make money by weakening us collectively. We are currently looking again at what legal actions we can take to stop them selling our debt short, or failing to appreciate the underlying strength and health of our trading position.
As always, we are grateful to all our subsidiaries which are trading well for their continued contributions to cover the central overheads. At times like these the value of a strong Head Office is so clear to all.