CFO Interview: Suzanne Baxter, group finance director of outsourcing company Mitie
By Michelle Perry | CFO UK | Published 15:42, 04 October 12
Not many FTSE finance chiefs get to enact a ‘business talent’ show as part of their day-to-day responsibilities, but Suzanne Baxter, group finance director of outsourcing company Mitie, is one of the few.
Earlier this year the FTSE 250 company held its inaugural ‘Mitie Millions’ pitching event on the rooftop of the National Theatre on London’s South Bank having created a £10 million fund to encourage more entrepreneurs to start-up Mitie Model businesses.
As one half of the rare, all-female CEO-CFO partnership among FTSE companies, Baxter – together with her chief executive Ruby McGregor-Smith – sat on the Dragons’ Den-style panel to judge the applicants.
ProFinda, an online talent-matching agency that uses the technology behind dating websites to connect people to positions or projects, scooped the first prize of £300,000 investment capital on the day. Baxter says that Mitie Millions was a great experience and was just another example of the variety in her job.
The company, now in its 25th year, is based on the so-called Mitie model which is a fairly classic entrepreneurial-style startup model in which Mitie invests at least 51 percent of the capital required to start up a new business. In this case the business is integrated for at least five years into the Mitie group and the ultimate distinction is that the entrepreneurial team has a definite ‘get-out’ clause because between the fifth and the 10th years, the team can request that Mitie buy the shareholding.
Although Baxter doesn’t come from an entrepreneurial background her experience in corporate finance at Deloitte, coupled with her role as finance director of Serco Solutions, a division of outsourcing giant Serco group, created the critical blend of skills, knowledge and experience for the group FD to work with and understand the drive behind the people who have made Mitie into the £2 billion revenue success story it is today.
“The kind of business we have plays to my strengths in terms of understanding acquisitions and the growth agenda as well as understanding the day to day operations,” she says.
Unlike most companies in other industry sectors, now well into their second round of cost-cutting because of the worsening second recession the economy is facing in four years, Mitie’s industry – which is all about saving clients money – continues to grow.
“We’re lucky in that the outsourcing market tends to be somewhat counter-cyclical, so when other organisations are looking to do things differently or save money, then on the back of that we have an opportunity for growth, even when other industries are having a more difficult time,” Baxter explains.
This year Mitie signed a £775 million, five-year contract to deliver integrated facilities and energy management for Lloyds Banking Group (LBG). It is the largest contact Mitie has ever won, and will see it add an extra 3,000 people to its team as a result. The contract wins stems from a single service cleaning contract secured in 1987. In its 2012 report, Mitie says: “… this is a fine example of how a good working relationship can blossom into a great and much more extensive one”.
“We’ve commented to the market that we expect growth to be in the 5-to?10 percent range this financial year,” Baxter explains. “That will be supported by some of the larger integrated contracts we have been awarded over the last year, which have increased our order book significantly.”
The company is waiting to hear about a rebid for the Cumbrian Collaboration, with the new expanded contract to provide integrated FM and energy services valued at over £200 million over five years. But in the meantime, the new contract with drinks giant Diageo is keeping the company busy.
And it’s not just the private sector where Mitie has been gaining ground either. The government’s need to cut costs across the public sector has also indirectly boosted contracts for the outsourcer.
In January Mitie entered into a new partnership agreement with the Prison Service to bid for the management of nine prisons, which, if won, would bring in between £200 million and £455 million over five to seven years.
The company also formed a 10-year partnership with Essex County Council worth up to £10 million to service more than 350 sites.
“We’re seeing good growth across most of our markets. We’re exposed to a wide range of sectors as well so are not dependent on any particular sector,” Baxter explains.
“The landscape isn’t changing but the scale of what we’re doing for each of our clients is changing. We’ve expanded our footprint,” she adds.
And that footprint is clear in the latest annual figures. In June the outsourcing company reported pre-tax profit of £94.5 million, up 8.9 percent on last year, on revenues of £2,002.5 million, up 5.9 percent.
Basic earnings per share increased by 10.2 percent to 20.5p compared to 18.6 pence in 2011. The company, which employs 63,569 staff across the UK, retains a strong focus on cash, and the balance sheet remains robust with net debt at year end at 0.81x EBITDA at £106.9 million.
Mitie’s main focus has traditionally been financial management but its energy services offering is now a core part of its client proposition, making it the second largest energy services company in the UK.
To get to this point Baxter says she and her team have been pivotal in structuring the company and its finances in order to mould itself into a multi-services provider.
The company can now provide a whole suite of energy offerings from buying energy to delivering energy services. “Not a lot of organisations have fully taken on board the savings they can generate by looking at renewable and alternative sources for their energy supply. And that’s where we’re finding huge savings for our clients and it makes all the difference,” says Baxter.
Technology cuts a dash
With the mantra of ‘people, technology and client strategy’, the company has invested heavily in technology to provide a dashboard with heightened visibility so clients can easily see how and what they’re saving on.
“It also helps [clients] to understand where they need to invest in their infrastructure and which assets are more efficient than others,” Baxter explains.
“That visibility is something that hasn’t always been there for the facilities management industry, particularly in engineering and maintenance. Providing those tools differentiates us in the market.”
In her parallel role as head of IT, Baxter ensures a seamless offering from her finance and technology teams to the business, making sure her teams work closely with the operations, bid and client teams in understanding the requirements in the field and translating that into a front-end systems for Mitie’s financial and operating systems but also for the clients’ systems.
“That has been the key to making that as successful as it has been,” she explains.
Despite the worsening economic situation the company has maintained its upbeat outlook when, in its most recent interim trading statement on 13 August, it said: “We are confident that we will continue to build on our long track record of sustainable profitable growth.”
Mitie has extended its reach overseas through a contract with Rolls-Royce which took it in Central Europe, but although Baxter says the company has an appetite to expand outside the UK, “the uncertainty in the eurozone has put our plans on hold”.
“I think it’s a brave organisation to make any significant move into Europe currently,” she says, although she admits overseas expansion is definitely on the cards in the longer-term.
“It’s certainly something for Mitie to be doing over the longer term, but we need to see more stability before we have the confidence to do it in any scale at the moment,” she confirms.
“Our strategy so far has been to follow the footprints that our clients have got. From that perspective that’s a lower risk solution.”
Baxter, who splits her time between the London and Bristol offices of Mitie, is a clearly cautious woman, which fits comfortably into her role as advocate of responsible sustainable business.
She considers her win at the ICAEW Inspiring Confidence in Business award in 2010 for her responsible business outlook one of her greatest achievements. “There’s a responsibility to act in a particular way and I think there’s a real tie up between a good commercial business sense and sustainable business,” she says.
The group finance chief is also passionate about equality opportunities in business, which again is fitting as she clearly makes a great role model for future female leaders in finance and broader business roles.
CV: Suzanne Baxter
April 2006-present: Group Finance Director, Mitie group plc
1997–2006: Finance Director, Serco Solutions, Serco plc
1996-1997: Senior Manager, Deloitte Corporate Finance, Deloitte Consulting
1989-1995: Trainee Accountant to Manager, PwC
Financing the future
Mitie’s credit rating has been historically good, and it has rarely gone to market to raise cash because it has a track record of holding cash.
However in recent years the company has been growing by acquisition and therefore needed to beef up its available spending money to support the purchases.
In 2009 the company raised equity to support an acquisition. “Again we were supported by our shareholders, which is a great place to be as a finance director on a board,” group finance director Suzanne Baxter admits.
The share register is predominantly long-standing UK-based investors but, says Baxter, there is an increasing US presence.
For this reason she felt comfortable taking Mitie for the first time to the US private placement market last year to raise finance in a bid to diversify the company’s borrowings too.
“We were on that usual five-year cycle of refinancing last year and chose to vary the sources of financing, which was important given the uncertainties around the general banking sector,” she explains.
In December 2010 Baxter raised £100 million on the US private placement market with the result that the offer was eight times oversubscribed.
“It was positive and one we’d look to again,” says Baxter of the experience.
She also extended the company’s banking group from four to six banks, and renegotiated £250 million worth of banking facilities which are available for drawdown until September 2015.
“Although more expensive than previously, [it] was a very positive [experience] for us”, she says.
“When you come from 25 years of consecutive growth in revenues and earnings, then it’s a pretty compelling story compared to some other organisations that may have a less stable track record from a financial perspective. We trade very much on our long-term financial record.”