CFO Interview: ITV chief financial officer Ian Griffiths
By Michelle Perry | CFO UK | Published 14:33, 01 December 11
Viewers of ITV will probably have little idea of what’s been going on behind the scenes of their favourite channel during the past three years. And we’re not talking verbal fisticuffs between the judges of Britain’s top talent show here.
If in 2008 ITV’s executive team – of which Ian Griffiths, former finance director of media company Emap and current CFO of ITV, forms a central part – had not transformed its outdated business model it’s very likely the FTSE 100 company could have gone the way of other former British FTSE darlings – into extinction.
But a new management team led by CEO Adam Crozier was catapulted in to save the day and has turned around the fortunes of this very British of institutions to transform the business into one ready to take on the challenges in the increasingly mobile, digitised world of media.
It has a long way to go, admits finance chief Griffiths, but at least now the company is still in the game.
“The business was not in great shape operationally. It had a very stretched balance sheet. If nothing had happened across 2009 it would have been a very different business to what we now have today,” Griffiths tells CFO World in an exclusive interview..
It’s rather an understatement. Clearly, he must have been itching for a challenge when he took on the role because things were dire. ITV went from being an investment grade to a low single-B credit very quickly.
Griffiths joined ITV halfway into the broadcaster’s ratings decline when banks weren’t rushing to talk to him and he had to hand back the banking facility “which wasn’t a nice thing to do”. But rather than breach covenants he dealt with it proactively.
In 2010 ITV chairman Archie Norman hired CEO Crozier, the former Royal Mail chief executive and FA boss, to develop and execute a new strategy. The move was seen as controversial by some observers who thought Norman should have opted for a heavyweight broadcaster.
But before being in a position to set out a new vision, the previous two years had been all about cost-cutting, which Griffiths helped to oversee. A total of £150 million in costs had to be taken out of the business.
As well as cutting jobs – and over 1,000 jobs went in total – the CFO took £200 million out of working capital through improved cash management. They cut back on capital expenditure because “there was no point in investing before we were clear on strategy”, he says.
Griffiths says that the biggest investment has come from tight control on costs and clear strategies of cash management. One big change where the business has been able to make savings is in how it buys programmes.
In the past ITV used to have a large stock of programmes that weren’t scheduled to air but that it had been already paid for. Now however the CFO says the company has moved to a ‘just-in-time’ commissioning process where it only takes delivery – and therefore becomes liable for payment – when it is going to air the programme.
Although an obvious call for finance, such changes took a lot of getting used for the commissioning teams – as Griffiths will openly admit – as broadcasters like to have a stockpile to fall back on in emergencies because of the nature of the media business.
Persuading staff of the need to change wasn’t hard, he says, because they could see the urgency of the situation. His experience of media businesses and those within them would have undoubtedly helped in achieving his goal despite his modesty.
“That’s a great example of where value can be unlocked from a business. It didn’t take too many conversations with our commissioning teams to explain that the impact of their decisions does have a financial consequence to the organisation over and above what they see coming through in the P&L numbers,” he says.
Griffiths is very much a people person, unlike the stereotypical image of the numbers man. He holds great weight in developing and maintaining relationships both internally and externally. Indeed he says if he and his treasurer hadn’t ensured a good working relationship with ITV’s banks during the tough times his job would have been much harder.
Once costs were cut the challenge was, and still is, to retain the savings and ensure the right disciplines are in place to maintain the efficiencies in the good times.
“The journey,” says Griffiths, slipping into ‘X-Factor speak’ – ITV’s audience-grabbing talent show –”we’re trying to take finance on now is to keep it close to the business but turn them into being true business partners that can help us make decisions in a joined up way.”
The role of finance during this period has been to “educate” the business on the impact of the decisions they’re taking. One of the key skills the CFO has brought to ITV that he learned at his previous employer is cash management. During the cost cutting process, Griffiths says he was simultaneously running a project on cash management with the objective of a ratio of profit to cash conversion.
Griffiths and his finance team – numbering just under 300 but 10 percent smaller after the job cuts – have delivered over 100 percent profit-to-cash conversion for the past two years. This year he says the ratio is looking “pretty strong” too.
Tighter cash management disciplines also means that Griffiths has managed to reduce debt from around £800 million to nearly cash positive in a very short space of time.
“One of the challenges we’ve faced is that the lessons from 2009/10 have to stay in place. We can’t relax and take our foot off the pedal, so disciplines around cost and cash have to stay firmly embedded in the organisation and again finance can help do that,” he explains.
Despite all the upheaval in recent years, Griffiths says “our performance has never been stronger”.
“It’s not about how much you spend but what you spend it on and getting the best value out of it. Value doesn’t have to be in pound notes – in this case it’s audience. For us, audience translates into advertising.”
Just over a year ago ITV management held meetings across London, Manchester and Leeds for all staff outlining the new management team’s plan. ITV had missed out on opportunities in pay-TV services and online offerings so its five-year transformation plan is focused on gaining traction in these areas as well as capturing some of the international market.
In July, as ITV reported on its progress 12 months into its five-year plan, the company had increased its profits by 45 percent in the first half compared with last year. The good news continued in October when the broadcaster reported better-than-expected revenues up 4 percent to £1.5 billion for the first nine months and said it expected to outperform the wider TV market in 2011.
Net advertising revenues improved 1 percent in the three months to the end of September, better than a forecast decline of 2 percent, but it warned that it expected net advertising revenues to fall 2 percent in the last three months of the year, including a 10 percent drop in December.
The company is just about to go back to staff and hold another series of progress meetings informing them how the business is faring.
“We won’t be spending too much time saying ‘this is what we’ve got to fix’ this time. Now it feels very different. We haven’t cracked everything but the progress in the last 12 to 18 months is significant. We’re ahead of where we expected to be but there’s a hell of a lot more to do. That’s a good start,” says Griffiths.
The CFO’s focus for the next 12 to 18 months to ensure that finance is further embedded in the business to provide the right information in real time. He’s turning finance into less of an historical data centre and more into one of a forward looking analytic centre “moving away from the monthly cycle … and getting the guys to be much more engaged in the strategy”.
“It may be uncomfortable for some of them because they’re used to looking at the past, adding up numbers, doing the accounts, looking at variances and digging into transactions. That’s not what this is about. It’s about taking the broader KPIs and indicators and looking at them in the round,” he explains.
The CFO is in the process of overseeing the implementation of a new system that will allow management to have one place to go for all key information – or what is fast becoming known as ‘a single version of the truth’. “It’ll become the tool that transforms finance,” he says.
It’s a project that Griffiths has some experience of. “I did this at [publishers] Emap. It was difficult sitting centrally to have a view other than manually playing around with spreadsheets.”
It will help not just finance, as all departments in the business will have clear oversight of real-time data allowing them to make better-informed decisions – a vital tool in an ever-faster moving media world.
Despite his obvious technical ability, he confides that it helps to do a good job there if you have an affinity with media. “You can’t work in this type of organisation if you haven’t got a feel for people,” he says, but it seem it’s just as likely that a healthy dose of enthusiasm and ambition helps the CFO as much.
“The ITV story is massive and just beginning,” he enthuses. A story that it likely to take his career on as much of a rollercoaster ride.
CV: Ian Griffiths
2008-present: Chief Financial Officer, ITV
2005-2008: Group Finance Director, Emap
2001-2005: Group Head of Finance and Director of Financial Control, Emap
1995-2000: Head of Finance, Emap Business Communications
1988-1994: Manager of audit and corporate finance, Ernst & Young
Acquisitions and ITV
Given ITV’s five-year transformation strategy to turn the business into a modern media company and its robust balance sheet the company is regularly linked to acquisitions.
ITV has already been linked with a potential bid for All3Media, which makes some of ITV’s most popular shows, including Midsomer Murders and The Only Way Is Essex, and is run by former ITV executives including Steve Morrison, David Liddiment, Jules Burns and Wayne Garvie.
More recently however ITV has been linked with Netflix, the US video streaming service, as it is about to launch in the UK and Ireland.
The latest news reports suggest ITV is in advanced discussions with Netflix about an output deal for the digital rights to films and TV shows.
On the surface such a deal would fit with ITV’s strategy of building pay?TV and for Netflix it would mean a huge marketing partner in the UK but ITV may balk at the price tag. But for now it’s all hearsay.
“We get linked to acquisitions all the time because people can see our balance sheet improving and because our strategy is clear and we want to create a different business and part of the way that people see us doing that is through acquisition,” says Griffiths.
“The focus for us is to concentrate on the core business but it’s nice for us to be able to look at things like that when they come up because we have the balance sheet.”
He adds that his job has been all about “sorting out the balance sheet and giving the business the headroom to make” these kind of decisions. So the possibility that will hear some tie-ups soon shouldn’t be ruled out.