"It took quite some time to survive the crisis, and it had a huge impact on the culture of the company," the CFO says. "Even today, when we are highly profitable again, everyone is still very conscious of costs."

Since the crisis, sales, profits and cash flow at the company have all risen strongly. Despite nearly doubling investments last year, cash flow rose by 7%, to SFr252m. The airport operator's 2006 CCE of 50% lifted it into the top three of the transport infrastructure sector.

Since its near-death experience in 2001, the airport has taken subsequent shocks in its stride. Consider the decision prohibiting passengers from carrying liquids on to aeroplanes last summer. Given only a couple of weeks to implement the new security measures, it was up to the airport to "ensure smooth passenger flow at any cost," says Spalinger. "An absolute headache from a CFO's point of view," it took nine months before the airport could recoup the heavier cost of security screening via increased passenger charges. The company's ability to protect budgets and plans, and conserve cash, in the face of such events is its key strength, the CFO maintains. The markets seem to agree. Having fallen below SFr20 in early 2003, the company's share price recently reached above SFr500, setting record highs.

Though the shift in business conditions for Telenor, a NKr80 billion (€10.3 billion) Norwegian telecom, weren't as abrupt, it is also more mindful of cash flow these days nonetheless. Mobile and web-based alternatives to fixed-line telephony are relentlessly eroding sales in Telenor's Nordic home markets. In response, the company launched a three-year, NKr1.5 billion cost-cutting programme at its Norwegian fixed-line unit in 2004. In May, executives said that the Nordic unit will generate more than NKr10 billion in annual operating cash flow within two to three years, up from NKr9.6 billion in 2006.

Many analysts doubt this is achievable, but "that doesn't mean we will lower our ambitions," says Trond Westlie, Telenor's CFO. After all, the group followed an 11% rise in operating cash flow last year — giving it a CCE of 34%, one of the highest in its sector — with a 22% rise in the first half of this year.

A key reason for the company's resilience, especially at under-siege divisions such as fixed-line telephony, is that employees "wear more than one hat every day," Westlie explains. And rather than launching cost cuts dictated by rigid financial timetables, employees across all functions are asked to manage a "delicate balance" of short-term financial targets and long-term customer relationship goals. These shared, wide-ranging incentives encourage "a common understanding of each other's jobs," says Westlie. "Everyone contributes to decisions, and there is a lot of local autonomy."

Another important step in "tearing down silos," he explains, is to abandon the budgeting process. Next year Telenor will introduce a rolling five-quarter forecast covering both financial and non-financial metrics updated each quarter, in addition to a three-year outlook that's revised annually. Doing so, he predicts, will bolster the company's agility and shorten time-to-market. By "going dynamic" — the term used around Telenor — employees will be able to react faster to changes in the market, both in terms of chasing new opportunities and adjusting spending and other costs in response to business conditions. The goal is to capture as much cash as possible.

The Plot Thickens
For one reason or another, CCE leaders such as Telenor, Unique and ProSiebenSat.1 were forced to think more seriously about generating and managing cash because of external events beyond their control. For others, attention from private equity suitors or agitation from impatient shareholder activists may have provided a similar spur. More recently, turmoil in the credit markets is sure to put highly leveraged, lower rated corporates on notice.

Judging by the performance of the average company in the scorecard's sample, however, cash isn't necessarily king. The question is whether firms will voluntarily make cash a priority, or whether they will need change forced upon them before that happens. Stay tuned to watch the drama unfold.

Jason Karaian is a senior editor at CFO Europe.

Rainy Day Funds

For years, analysts and investors berated companies for being too conservative when it came to cash on their balance sheets. Last year, companies started to take heed, and cash as a percentage of sales at the 1,000 largest listed companies in Europe fell to 8% from 9% in 2005. Good opportunities for growth, shareholder demands for buybacks and dividends, and frenzied dealmaking driven by private equity all helped lift the old clouds that lingered from the dotcom downturn.

Historically speaking, though, corporate cash balances remain high. (See "Hoarders" at the end of this article.) Many companies say that they are keeping large piles of cash for the proverbial rainy day. "But why is that rainy day more substantial now than it was ten or 20 years ago?" asks Henri Servaes, a professor of finance at the London Business School who is currently studying the merits and dangers of idle cash on corporate balance sheets. Despite the recent credit market turmoil, "one could argue that it's easier to raise money now that capital markets are so much more developed, so companies should hold less cash," he adds.

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