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Friday afternoon arrived and the senior team comprising Piers, Brett, Melanie and Jonathan were assembled to hear Melanie’s financial plan to take them forward. Despite it being the start of a new phase for BioQex with their new Chief Financial Officer at the helm, the mood was generally subdued. They had the visit from the FCA hanging over them the following Monday, added to that, the team minus Melanie had attended Bob’s wife’s funeral, and they also had the worry that perhaps animal rights activists were becoming more active in the area. As usual, on Friday afternoon, everyone was tired. They’d considered postponing to next week but Melanie was champing at the bit to show what she was made of so Piers felt it would be unfair to take the wind out of her sails. Also, they had no idea whether next week might be dominated by providing files and documents to the FCA investigators.
Brett had been the last to join the meeting. Piers sensed a palpable tension between him and Melanie which he found irritating. After all, they had taken a chance with Brett, he’d had no experience of running a whole science department and their judgement had been proven. As far as he could see Brett had been an excellent choice. Piers wished that Brett would extend the same feeling of magnanimity towards others and give Melanie a chance to prove her worth.
‘Right, well we won’t delay, so I’ll ask Melanie to take us through her financial plan for the next six months. Then there will be an opportunity for questions. After that, we need to agree whether we support the plans as a team. If we are in agreement then each of the team will have actions assigned which we need to implement in order to carry the plan forward.’
His short introduction was accompanied by discreet nodding from his colleagues. Melanie remained seated as it was an informal presentation, woke up her laptop and her first slide appeared on the screen. Unsurprisingly it contained the word vision.
‘Thanks, Piers, I’ve got about ten slides summarising my analysis of the financial landscape of the company. Then I’ll move on to my specific costings for how we allocate resources and my plans for expansion. OK?’
‘Sounds great Melanie,’ fawned Jonathan, embarrassingly.
‘OK, here we go,’ enthused Melanie.
‘As you can see, BioQex is operating well within its means, which is good but as I’ll come on to in a later slide, in my opinion far too conservative, and could mean that the company gets left behind.’
Melanie then produced a mind-boggling set of screenshots of spreadsheets along with bulleted points summarising each major topic of assets, liabilities, equity and capital. She rattled through figures relevant to property and equipment, followed by intangible and financial assets. She touched on prepaid expansion which was baffling to Brett as he momentarily lost concentration. She then moved on to cash and accounts payable, then deferred tax before moving on to issued capital and no controlling interest in equity which was even more confusing.
Then it was time for a couple of summary slides which were a slight modification of the plans she had flagged up to Brett in their initial encounter on her first day. Melanie wanted the company to take on an extra eight scientists and use all their remaining laboratories which were currently dormant and she wanted the extra staff to be in post by the end of the next quarter. As it was now early autumn she would be expecting staff to be recruited by Christmas, just when people didn’t want to move thought Brett.
This whole scheme was to be partly funded by borrowing and partly by the company offering additional services which Melanie claimed would reduce their actual expenditure as well as providing revenue.
‘So any questions?’ asked Melanie, smiling broadly.
‘Yes, I have several,’ said Brett, unsmiling.
‘Fire away,’ said Melanie, her confidence undented.
‘You are proposing that the company borrows ten million to fund your plans. This is double the amount we raised from a rights issue. Don’t you feel that this is a huge increase in our debt burden?’
‘Well if I can bring up my slide, here, it shows that due to the increase in the share price, the actual debt ratio is no higher than it was six months ago. Borrowing is very cheap at the moment and we can take advantage of it, we really aren’t doing that at the moment.’
‘So why don’t we relinquish some of our capital, that is, take advantage of the increased share price to generate money rather than take on extra borrowing?’
‘It’s more cost effective to borrow than relinquish capital,’ replied Melanie sternly.
‘Oh, can you explain further? I don’t quite understand,’ challenged Brett.
Melanie stood up and wandered over to the flip chart, Brett thought he detected a surreptitious sigh of exasperation. She picked up a marker pen and proceeded to go through an example at a rapid rate. Brett knew he was fighting a losing battle but he was determined to put her under as much pressure as possible. There was no chance she was going to get an easy ride.
‘As this example shows, it’s a complete no-brainer,’ she said smugly, casting around for approbation.
‘So couldn’t we at times buy back shares to increase their value, even if we were to use some capital to finance expansion. That would serve to increase our market capitalisation and counter any reduction in the capital.’
‘We could, but as your Chief Financial Officer I wouldn’t advise it,’ replied Melanie, her steely gaze piercing right through Brett.
The standoff was broken by Piers who thanked Melanie profusely for her detailed explanation and presentation, ‘So any further questions?’
‘Yes,’ interjected Brett, ‘I want to come on to the utilisation of the empty laboratories and your proposal for BioQex to bring in house all our contracted large-scale syntheses. This seems completely at odds with our remit of being a research organisation with a relatively small workforce.’
‘Which we are intending to expand, Brett,’ countered Mel immediately. ‘As I said previously, the contract house you have used up to now has increased its costs exorbitantly over the last three years, a matter which seemed to have escaped my predecessor,’ this was a clever dig at Frank who was unable to defend himself. He was remembered for running a tight ship yet had strangely never pointed out this fact presumably because on balance it was still cheaper to contract out when all things were fully costed, ‘and,’ she continued, ‘is downsizing their workforce due to post-Brexit concerns. My proposal would give us more control over matters and could be cash generative, we have enough capacity to offer a service to the science park,’ and Melanie flashed a smile at the other occupants of the room.
‘Have you considered the hazards of taking on large-scale work Melanie?’ asked Brett.
‘Yes, of course, but I’m sure you would relish the opportunity to make this work for the company,’ she said with a hint of malice, ‘it’s all about embracing new challenges. That’s my mantra.’
Brett was inwardly fuming, she was being so patronising. Trying to make it look like he was some sort of Luddite set in his ways, ultra-cautious, a complete killjoy. Arguing with Mel was like being tied in a sack trying to fight your way out, just when you thought you had some way of making an impact it was countered, the path of escape sealed up. He refused to grace her last comment with any sort of reply, he looked away towards the window, his jaw set in an angry grimace.
‘So, I’m sure you would all agree with me that Melanie has done a super job in drawing up this exciting plan to take us forward. And in such a short time. Is it only really a week since you joined us?’ Ever the diplomat Piers decided to try to gloss over the recent spat, making it clear where his loyalties lay.
‘Certainly, but I always like to hit the ground running,’ added Melanie, relishing the opportunity to throw in another cliché.
‘So, a quick show of hands to whether we endorse this plan,’ entreated Piers.
Three hands were raised, one remained firmly on the desk and that belonged to Brett. There was an uncomfortable frisson of embarrassment.
‘Brett, I am rather concerned that you aren’t able to join us in wholeheartedly supporting these plans,’ said Piers.
‘I can’t they’re too risky, I would like to see them scaled back. There’s no way we can recruit so many staff in such a short time without compromising our current research plans. Add to that the dilution of activity which will obviously result from essentially setting up a new enterprise in the shape of a large-scale facility. To put it bluntly, I think we will be fucked.’ Any team members starting to doze off were immediately wide awake after that comment.
‘Brett, there’s really no need for that sort of common language,’ admonished Piers, ‘organisations need to evolve and not stand still. From what I can see Mel has done the detailed costings and they all look sound. It saddens me that we are not all fully behind this but it’s a majority decision and I declare the plans carried and I will ask Melanie to draw up detailed actions for all parties with realistic timelines. I have a good feeling about this, we are on the cusp of a new era.’
So with that presidential pep talk, the meeting was ended. Brett gathered his papers and his cup and walked solemnly back to his office. It was only 3 p.m. but he’d had enough. He started to pack up his things, he would visit the gym to burn off some anger, then he would be ready for his evening drink with Matt. He only hoped that his chat with his old adversary wasn’t going to be more bad news.
