Boxing clever

Adrian Marsh, CFO of packaging business DS Smith, explains some of the challenges that are facing his industry and how the business is primed for growth

It has been a busy first year for Adrian Marsh as chief financial officer of packaging group DS Smith. The former head of tax at Tesco has had to significantly build up the DS Smith finance function as well as finance a fast-growth agenda at the FTSE 250 business.
Since 2010 it has ballooned from a fairly small Anglo-French consumer goods packaging company with a share price of 100 pence to a fast-growing group with a £2.7bn market capitalisation.
In its latest six-monthly results to October 2014, DS Smith reported that its pretax profits had leapt 45% to £123m on revenue of £1.97bn. Although revenue was down slightly, the share price rose more than 4% following the announcement in early December. At the time of writing, the share price was up 1.44% to 309 pence.
Marsh’s first-year contribution to the company’s successful set of results can be found in the group’s strong cash position, with £159m on the balance sheet at the end of October, up from £116m six months earlier. He has also cut net debt by £133m to £694m.
CEO Miles Roberts noted his CFO’s efforts in his results statement in December: ‘We have continued to make good progress. This has translated into strong financial performance, with a particularly good progression on margins and returns as well as excellent cashflow generation.’
DS Smith, whose clients include fast-moving consumer goods companies such as Nestlé, Unilever and Reckitt Benckiser, has been on the M&A trail since 2010 (see box). Its recent purchase of Spanish corrugated-board producer Andopack last October gave it a direct market position in Spain, which allows it to continue to grow and leverage its scale. And this is Marsh’s primary focus for the year ahead.

‘We want to create a business that can genuinely compete globally. It starts with Europe and we need to consolidate that first. There’s a big M&A and growth agenda for the next year or so,’ he explains.
In order to grow, Marsh has to make sure the company is generating cash to invest as well as return to shareholders. ‘My burning priority is putting in place the capability for growth. We have to show how we can grow fast again,’ he says. He is on course to achieve his goals if the latest results are anything to go by.
Marsh has also shown how seamlessly finance executives can move between industries and positions, and not just prosper but also make a huge impact. Despite moving from being head of tax at a fast-moving, high-margin FTSE 100 supermarket like Tesco to the finance head of a low-margin FTSE 250 manufacturing company, Marsh has embraced the change.
He says that in finance you have the benefit of being ‘industry agnostic’, although it is, of course, critical that you’re interested in the sector, which he very much is.
‘It’s a very interesting industry. It’s more than I could have imagined. For me it had the level of complexity needed and it’s growing and there is a growth agenda. There’s a lot of change.
‘I know from a competence level that there will be nothing that I can’t do, but the change to CFO level is very significant – things like how to interact with the board, shareholders, investors and communicating financial news. At Tesco, I was dealing with more money but it was part of a finance structure already in place.’
He adds that ‘in low-margin manufacturing, finance can do a lot’ – as he is currently demonstrating.
Marsh puts some of his successes down to his ACCA Qualification. ‘ACCA was invaluable in giving me a firm foundation in all aspects of finance and being a member was extremely important in my early career, giving me the confidence to move into different finance roles.’
In the past, packaging was as much about selling the paper as it was about creating the package, which is why some European packaging companies like Mardi and Smurfit Kappa still have ‘struggling’ mills attached to them.

But today, fast-growing consumer goods companies – the main clients of packaging companies – are driving the change in the industry because they want to cut costs and complexity, and drive out waste from their supply chain. Recycled retail-ready packaging is where the future lies, Marsh says.
He adds: ‘Historically, boxes were sold by weight. But now we try to work with companies to use packaging to reduce environmental footprint and enhance sales in stores.’
For this reason, DS Smith has a recycling business that collects used paper and corrugated cardboard, which its paper manufacturing facilities turn into corrugated packaging. It is also why the announcement in December of the completion of the company’s design and manufacture division – which develops certain types of plastic packaging tailored to clients’ needs – is so vital to future growth and success.
Although DS Smith has its sights set on Turkey, North Africa and the Middle East for future growth, Europe is the company’s most important market. Talk of a possible UK departure from the European Union understandably makes him nervous.
‘Yes, we want to remain in the EU. The EU offers the UK economies of scale, ability to transfer knowledge and so on. It’s the only way the UK can compete on a global stage. Exiting the EU would be the worst possible outcome for the UK to pursue.’
He argues that the negative impact that a UK exit from the EU would have on DS Smith’s outlook would be ‘the same for a lot of companies. It’s a very political agenda. But from a business agenda, Europe is very important to us.’
With industry forecasts putting growth in the European cardboard sector at just 1% a year up to 2016, and with uncertainty around a growing number of political and economic developments, DS Smith is nonetheless looking to widen its client offering and build up its cash pile.
But with Marsh’s strict financial discipline, savvy finance-raising skills and cautious debt outlook, the company has in place a strong top team to weather the economic headwinds.


Marsh has three tips for finance professionals: ‘When I was taking this job, the best advice I was given was to be absolutely certain that I would get on with the CEO and the board. If you don’t, then it’ll be a difficult job and you’ll be ineffective.
‘My second tip is you only ever have one reputation and once it’s lost it’s irrecoverable. Be careful what you stand for. It’s the only thing you can never recover.
‘And finally, coaching has been a great help to me. The transition to becoming a group CFO is not just about the professional, it’s about the personal as well. It’s a bit of a cliché but the past year has been a whole personal development journey for me.’


€1.6bn (£1.2bn) tie-up with Sweden’s SCA Group’s packaging operations brings together the second and third-largest packaging businesses in Europe’s €30bn market for cardboard packaging. DS Smith’s aim is to position itself as Europe’s leading supplier of recycled packaging for consumer goods.

July 2014
The company acquires the 50% of recycling business Italmaceri that it didn’t already own. Italmaceri operates in northern Italy, with annual volumes of around 500,000 tonnes.

September 2014
Kaplast, an injection-moulding business in Croatia, is acquired to expand the returnable transit packaging element of DS Smith’s plastics business.

November 2014
DS Smith purchases Andopack, a corrugated board manufacturer in Spain, for £35m. The business operates from a site with substantial opportunity to grow the business by serving pan-European customers based in the region.

December 2014
DS Smith (via Kaplamin Ambalaj, in which it has a minority interest) signs exclusive letter of intent to buy Cukurova’s majority shareholding in Kaplamin Ambalaj and other packaging assets in Turkey and Greece. The businesses have an annual turnover of around €160m. Discussions are at a preliminary stage and any acquisition remains subject to due diligence.

Michelle Perry, journalist


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s