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


Valuing the difference at Sainsbury’s

John Rogers, chief financial officer of J Sainsbury

By Michelle Perry | CFO UK | Published 14:54, 13 July 11

SainsburyDespite having come to finance by a rather unusual route – his career began as a missile engineer for British Aerospace – it has taken John Rogers little over five years to rise to chief financial officer of J Sainsbury, the UK’s second-largest supermarket chain and a FTSE 100 business.

“I remember having a conversation with [former CFO] Darren Shapland four years ago and I was saying ‘I don’t envy you in your job. It’s a tough job, isn’t it?’ and he turned round to me and said: ‘I see you as being my successor in the business.’ So that came as a bit of a shock to me,” Rogers explains in his first interview since taking up the CFO post in July 2010.

At that point he indulged himself in the possibility, concluding that he would indeed cherish the opportunity to become CFO. In terms of attaining the position Rogers was well placed. At the time he was in charge of property – no small responsibility for today’s supermarket – having moved across from finance so his knowledge of the business was broad and deep.

Moreover clearly Sainsbury’s is persuaded by the current trend to nurture talent from within the business, and in Rogers the board found the perfect fit. Prior to his arrival at Sainsbury’s in 2005, Rogers had been group finance director at Hanover Acceptances, a holding company for four operating companies in the real estate, manufacturing, agribusiness, and venture capital. His years as a consultant at Monitor Group and Accenture had also exposed him to different sized businesses across industry sectors with their myriad challenges to overcome.

John Rogers, CFO of Sainsbury’s“I didn’t come at it [finance profession] from a finance perspective. It was about business,” he explains.

Under Rogers’ wing as finance chief, not only has Sainsbury’s recently outperformed market expectations but the supermarket has also crushed previous forecasts that brands such as Sainsbury’s and Waitrose would suffer more than lower-cost rivals such as Tesco or Somerfield.

Sainsbury’s has reported sales figures for the three months to June 2011 that comfortably beat those of Tesco. In June, like-for-like sales across the Sainsbury group, excluding fuel, rose by 1.9 percent in the 12 weeks to 11 June, beating Tesco’s 1 percent rise. Underlying sales, excluding VAT and fuel, were also around 1 percent higher while Tesco reported lower underlying sales at 0.1 percent.

Despite these clear successes, Rogers – who is relatively young for a FTSE 100 CFO at 43 years old – shows no trace of smugness. On the contrary he is cautious about the supermarket’s immediate prospects. Like his boss, CEO Justin King, he refers to recent sales figures as merely a “bounce” in what is “a tough environment”.

“The priorities always remain the same. We’ve been managing costs and tightening the business as we go. I guess it’s been a theme of the market over the past two to three years. And that theme has been reinforced with the challenging times and re-emphasised the need to continue with those cost savings in the business,” he says.

Rogers is committed to delivering cost savings annually to the tune of between £70 and £100 million to offset inflation rises. Without these savings the CFO says Sainsbury’s wouldn’t be able to compete in the highly competitive marketplace.

The strategy isn’t in danger of changing in the near future either. Rogers says he doesn’t expect to see a “marked improvement in the next 12 months” in the economy and so the group is “preparing to batten down the hatches over the next 12 months and manage costs carefully”.

Rogers says that it is almost harder now, given the lack of “visibility of the market” over the past few months, to offer up a considered guess as to when the economy and consumer confidence will improve. “If you look at the market confidence data it’s probably in the worst position we’ve been in for 15 years or so,” he says.

Despite the success of the group’s cost-cutting measures, he wants his finance team to be remembered as much for adding real value and for having “a real input to play in commercial decision-making”. That already happens at board level but the CFO wants to ensure the aim across the finance function and is currently working towards that goal.

“We have been doing a lot of work in our training and commercial areas where we are looking at our entire end-to-end processes with our suppliers to help deliver cost savings across the board. Finance has played a broader role in facilitating those savings and that’s the kind of role that I think finance should play a role in,” says Rogers.

The actual adding up of the numbers and preparation should become a simpler exercise, he says, and one that is largely governed and driven by technology. “It should almost add itself up and finance should play a broad role in the business.”

That is “a nice-to-have” he says, admitting that finance is not there yet, but in five years’ time it is where the CFO hopes to position his finance function, which currently numbers 400 members of staff.

The other area of opportunity for finance is in terms of management information. Like many businesses Sainsbury’s suffers from “far too much data”.

“The challenge is how to cut and slice that data. We’d like to be in a place where that data is churned out by the system. But that relies on systems change. That’s something we will try to effect over the next three to five years,” he explains.

One year on

Rogers completes his first year as Sainsbury’s CFO on 18 July 2011 and despite taking up the position at a time of great economic uncertainty, he appears comfortable in the very public role. Indeed, he says he relishes the chance to take on a few analysts.

“As a new CFO the big events are the presentations to the City and it was a great experience to go through. I’ve done interims and a set of prelims. The build-up to those you spend a lot of time preparing, and going through those events I find a fun experience,” he enthuses.

“I like the challenge that analysts often present. There are a few analysts that have a particular perspective on things so it’s good to get that challenge. They present certain cases and it’s good to challenge that.”

Rogers has continued to deliver top-line growth roughly in line with the past four years of around 7 to 8 percent, although he says it’ll be more of a challenge to reach the goal this year. The group posted sales of £21.1 billion for the year to 19 March, up 6 percent on the previous year.

“The market will grow slower, but one hopes that that growth will return in the future,” he says.

Despite a potentially wobbly 12 months ahead, the supermarket’s prospects don’t keep Rogers awake. In fact, there is little that disturbs his rest, he says, because while the business is in a difficult trading environment, it “is in really good shape now”.

When you are working a 14-hour day five days a week, sleep should be the one aspect of private life that remains worry-free. Rogers is unfazed by the long hours.

“We talk a lot about work/life balance and that’s important, but I wouldn’t do the job I do unless I loved it so there wouldn’t be any point spending my entire waking week involved in the job if I didn’t enjoy it. It sounds clichéd but I genuinely think it’s a privilege to come to a job in the morning and you absolutely love what you do. Of course there will always be days that don’t go according to plan,” he chuckles.

Even the youngest of Rogers’ three children are accustomed to his midweek absence. “The other day my youngest son, who’s nine, said on Sunday evening ‘ok I’ll see you next Friday’. I think he was trying to be funny!”

For now Rogers is focused on growth and expansion. In fact if anything were to keep him awake at night it would be this: “The biggest concern that I would have is that we don’t capitalise on that opportunity”.

While many businesses are looking overseas for growth opportunities Rogers says Sainsbury’s focus, for now, is firmly on the UK. “We can see good growth in the UK over the next five years and that’s where our priorities are. There may well come a point where growth opportunities internationally look more appealing but that may be in a 10-year horizon.”

The strategy here is two-pronged and on two levels: food and non-food sales both online and in stores. A significant £600 million of sales is online, growing at a rate of over 20 percent per annum.

“We’re always looking at opportunities that would help accelerate our plans but we’re not dependent on acquisitions to deliver our existing plans,” he says, not ruling out the possibility of a future acquisition to speed up growth.

With the group’s focus firmly on the UK it’s not to say the group is missing a trick overseas as Tesco carves up China for itself. Sainsbury’s has a small team on the ground in China which is looking for opportunities.

“It’s very much at the stage of dipping our toe in the water. I don’t see us making a decision in that respect soon. It takes time to understand a market. There are other areas of the world that interest us,” he adds rather cryptically.

CV: John Rogers

1997–1999: Strategy Consultant, Monitor Group
1999–2005: Group Finance Director, Hanover Acceptances
2005–2007: Director of Corporate Finance, J Sainsbury
2007–2008: Director of Group Finance, J Sainsbury
2008–2010: Property Director, J Sainsbury
2010–present: Chief Financial Officer and board member, J Sainsbury
Click and Collect

Sainsbury’s non-food online offering is a division the company wants to grow aggressively, according to CFO John Rogers. In May Sainsbury’s announced a rapid expansion of its Click and Collect service, designed to boost sales of non-food items such as homeware and electrical goods via its website.

The service, launched in July 2009, was to be expanded to 400 stores by June, and more than 800 by Christmas. Available at local convenience stores and large supermarkets, the aim is to achieve 45 percent of total sales for the non-food division by 2020, up from about the current 25 percent.

“If you believe that people will always go to a store and do a food shop – I believe that’s the case – what a great synergistic model because at the same time as doing that shop they can pick up their non-food items,” the CFO says.

The biggest obstacle to non-food online shopping, says Rogers, is always the last mile in terms of making sure the customer is at home or if they don’t like the purchase and want to return it. “This is often the most expensive part of managing that process,” he explains.

“If you can cut out that last mile by fulfilling it through your store, which customers seem to really engage with – hence the 30-40 percent of customers picking up items in store – that’s subtly different from a lot of other stores’ online click and collect, offering where you have to make a separate trip somewhere that doesn’t have a big car park,” he argues.

Gocompare CFO on how early boardroom experience put him in the fast lane

CFO Interview: Kevin Hughes, CFO of

By Michelle Perry | CFO UK | Published 11:43, 25 July 11

Gaining boardroom experience early in his career is the one skill that Kevin Hughes reckons helped catapult him – aged 30 – into the role of chief financial officer. That, and getting on with people, says the CFO of comparison website

Hughes, who has spent the best part of his career in the insurance industry, became CFO of Gocompare in 2007, shortly after the website’s launch by founder and CEO Hayley Parsons – a former work colleague of Hughes’.

The two qualities together with a strong focus on marketing helped Hughes develop the business alongside Parsons from a start up business with a large loan from esure into a 96-strong workforce with a turnover of £101.6 million – a rise of 35 percent on 2009 – in five short years.

Kevin Hughes, CFO of Gocompare“It’s been tough for wider economy but Gocompare managed to sustain significant growth in a tough economy. Our product is a grudge purchase so we have been able to save money for customers.

Recently we had an email from someone who said we had saved them £1000 on car insurance! It’s a recession-proof business. The last year and a half and for the next year it’s all about building the business and investing,” Hughes says.

His enthusiasm for the job is palpable, but then he is still 35 years old. “My career couldn’t be any better than it is at the moment. I’m at the pinnacle of what I wanted to achieve,” the Pontypridd-born CFO says.

Brand awareness has escalated since the company launched its infamous advertising campaign fronted by Welsh opera singer Wynne Evans, better known as his alter ego GioCompario with over-sized moustache. It might be one of the most annoying campaigns to be launched on to British TV screens but it boosted brand awareness by 450 percent a year after its launch.

It was a necessary evil in a tough and highly competitive insurance comparison market after the runaway success of Comparethemarket’s equally annoying meerkat ad campaign. A big marketing campaign was also interestingly championed by the CFO who oversees marketing.

“We started off with more educational ads with a great response rate but we got to a point where there was little differentiation between all the competitors. So we decided to come up with something new. We felt it was time when we needed to differentiate ourselves very strongly. Hence the opera singer was born,” says Hughes, an ACCA-qualified accountant and enthusiastic sportsman.

It wasn’t just brand awareness that GioCompario helped with however. Thanks to the ad campaign’s success the company was able to repay early a £30 million loan facility secured from esure, says Hughes. In April Gocompare posted a 2010 full year pre-tax profit rise of 84 percent to £29.9 million.

Hughes is confident that there remains a lot more room for growth despite the crowded marketplace. “Over 25 percent of consumers have not yet used a comparison website so there’s still so much room for growth.”

Aim high

Hughes’ began his career as an accounts clerk at Admiral in Cardiff, after eight months and a hunger for greater things once he’d learned the basics of business, he moved to Cardiff-based Avana Bakeries as a trainee accountant where he began his accountancy training. But 18 months later Hughes got itchy feet again and began searching for another post.
“Set yourself five year plans in which you outline key goals for your career. Five years is a sensible time frame to achieve big objectives but if you don’t meet your goals, be patient and persevere.

“Know that if you want to achieve ambitious goals, you’ll need to put in the hours. That said, working smarter is the way forward; why spend hours on basic tasks when a simple process can be put in place, freeing up time to focus on bigger projects,” he says.

Again his sociability and penchant for sports – he had previously played football on Admiral’s football team – secured him a role back at Admiral in the finance department.

“I got the interview and the guy who interviewed me was the goalie on [Admiral’s] football team. I got the job. The key thing in working life is to make friends and get on with people,” he says.

At Admiral, under the guidance of former company accountant Adrian Hamilton, Hughes’ commercial knowledge grew swiftly. “He was an amazing mentor. The principles he taught me back then we still hold true in my finance function today,” Hughes explains.

Hughes quickly became financial controller for Admiral’s Gladiator Commercial and went on to form part of the launch team, together with Parsons, responsible for the launch of in 2000.

“There I dealt with all the senior management including the finance director. There was no one else in the organisation that had access in that kind of way. I learnt the board skills while working on the subsidiaries looking at how board members made decisions and worked together, which was so beneficial to me at that age.”

Go larger

Hughes’ biggest challenge ahead is ensuring growth. “We have cash in the business for investment opportunities. We are very healthy. If anything, we have banks chasing us. And we have a good bank balance at a time when rates aren’t great to invest,” he adds.

For now it’s all about building the business and although there is no defined exit strategy, he’s not ruling out a possible initial public offering or trade sale but for now he’s enjoying being out of the goldfish bowl.

“Being private gives us so much more strengths. Now having private investors to look after has allowed us to grow faster. [Investors] wouldn’t have stomached our growth plans.

“We have no IPO planned but we wouldn’t discount it in the future,” he adds.

Despite Hughes strong work ethic, he’s no early riser for several reasons, he explains. Firstly he’s a night owl so he receives the previous day’s figures at 12.45am before going to bed, so he doesn’t have to rise early – as is the habit of many CFOs – to ensure that all is well for the day ahead.

Equally importantly for Hughes however is that he gets to take his daughter to school in the mornings every day meaning that he gets into work at around 9.30 am and spend his free time rock climbing, which sometimes involves night rock climbing – perfect for a night owl.
CV – Kevin Hughes

1996 – 1997 Accounts clerk, Admiral
1997 – 1998 Trainee Accountant, Avana Bakeries
1998 – 2007 Financial Controller, & Gladiator Commercial, Admiral
2007 – to date Chief Financial Officer and Marketing Director,

ITV’s CFO reveals the role of finance in the company’s transformation

CFO Interview: ITV chief financial officer Ian Griffiths

By Michelle Perry | CFO UK | Published 14:33, 01 December 11

ITVAfter almost three years overhauling ITV’s finances, CFO Ian Griffiths is starting to reap the fruits of his labours at the resurgent commercial broadcaster.

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.

Capital cuts

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.

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.

One version

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.

Aer Lingus CFO on helping to turn around the airline’s fortunes

Andrew Macfarlane, CFO of Aer Lingus

By Michelle Perry | CFO UK | Published 14:33, 27 February 12

Aer LingusIt’s not an easy time to be a chief financial officer of an airline business. Increased incidence of natural disasters, volatile fuel prices, a possible double-dip recession and falling passenger numbers have all combined to severely dent most airlines’ profits and prospects, so to join the board of an airline at the time of one of its worst financial years is a job only for the very experienced.

But then Andrew Macfarlane, CFO of Aer Lingus, has solved messier financial dilemmas before now. And it’s a good job he has because when he joined Ireland’s flag carrier in 2009 as interim finance chief, the business was facing an operating loss of nearly €90 million on revenues of around €1.2 billion, and passenger numbers were falling fast.

With a new management team on board (of which Macfarlane was a member) the executives tore up the old strategy of competing with its main domestic rival – the much younger and cheaper upstart Ryanair – and started work on a new three year transformation programme dubbed Greenfield.

The strategy involves overhauling the airline’s commercial model and cutting €97 million out of the cost base. So far the CFO has removed around €80 million and he’s “confident we’ll get the balance of it this year”.

The board is repositioning Aer Lingus somewhere between the low-cost, no-frills airlines and the higher end carriers. ‘Value carrier’ is a term Macfarlane doesn’t particularly like, but it is a philosophy the company is pursuing with determination.

To underpin the repositioning of Aer Lingus as a value carrier, the company is also ditching its former marketing plan of pushing Aer Lingus as a point-to-point carrier and have been marketing the airline’s attributes as a ‘connected’ airline.

“One of the changes made to strategy was to emphasise our connectedness. Now we say our mission is to connect Ireland to the world and the world to Ireland,” Macfarlane explains.

A gentle lift-off

The strategy appears to be working. Passenger number rose by 2.1 percent in the third quarter last year with full year volumes rising 0.2 percent on the previous year. Retail revenue per passenger also increased by 6.1 percent in the third quarter. Admittedly, traffic still isn’t anywhere near the highs Aer Lingus achieved before the company got into financial difficultly and the global recession, but this is in the context of a fall in air travel both around the world and at the airline’s hub in Dublin. In 2010, for example, Dublin Airport handled over 18.4 million passengers, a 10 percent decrease on 2009 levels.

Macfarlane admits that the growth is “very small” but he is upbeat on yield. “Yield has been tracking ahead of previous years and that theme has continued. What we have said is that we’ll be demand-led and we’ll not go chasing volume,” he says.

“We’ll match supply to demand and if demand is flat, we’ll keep our capacity flat and we’ll get smarter in the way in which we manage yield,” he says.

One of the first places Macfarlane had to start with when cutting costs was in remuneration and staff benefits. Most of the workforce took a 10 percent pay cut and salaries have been frozen for three years. It’s worth noting that it wasn’t only the workers who took a pay cut. The CFO took a larger than 10 percent cut in salary; something he had never done in his career.

“It’s very important that we take the same medicine. Otherwise you don’t have the moral authority, do you?” he asks rhetorically.

Whether the move represents a sea change among finance chiefs or is simply an isolated case in response to a business need will be interesting to watch. On the burning issue of executive pay and government moves to crack down on it, however, Macfarlane doesn’t think that legislation is the right answer.

“If shareholders don’t like what’s happening they already have the levers. There’s nothing to stop three or four of the biggest shareholders in any plc calling in the chairman of the remuneration committee and saying ‘we don’t like what’s happening’.

Andrew Macfarlane, Aer Lingus CFO”The tools are there and things would get sorted best using the existing levers.”

Macfarlane, for one, would like to see greater shareholder engagement. And you can’t blame him. Despite all the work he and his fellow board members have done in replotting the company’s flight path, its share price has not responded positively.

Share issues

It’s a dilemma that concerns him, but one of the reasons for the poor response may be the identity of two of Aer Lingus’s major shareholders. The Irish government retains a 25 percent stake in the former state-owned business, while arch rival Ryanair holds a 29.8 percent stake. Investors are clearly cautious about what these shareholders’ plans are for the business.

Irish ministers, of course, have had a few other preoccupations of late, and despite the Irish economy returning to modest growth last year following the banking crisis and a multi-million-euro bailout, the economic recovery is fragile and growth forecasts have been downgraded for 2012.

CEO Christoph Mueller has said he wants the two parties to sell their combined 55 percent shareholding as a single package because it would help Aer Lingus boost its share price by reducing analyst uncertainty. His CFO shares the sentiment.

“We hope and believe that they [the Irish government] will want to sell that [stake] and we hope we can influence the disposition of that stake in the way that will be supportive of the future development of the business. The Irish government needs to raise money so we have challenges at that level,” Macfarlane explains.

Given the harsh economic backdrop against which Aer Lingus has been trading, its performance has been robust. In its third-quarter statement in November, the airline reported a 19.4 percent rise in operating profit to €94.6 million, up from €79.2 million the previous year.

The board said it was on schedule to report full-year 2011 operating profit at the upper end of market forecasts. Analysts expect Aer Lingus to report full-year, pre?tax profits of around €40 million when the airline reports at the end of February.

Macfarlane’s role in the company’s rebound should not be underestimated. His record as a finance chief at previous employers is testament to his keen understanding of how to not only return a business to profit, but also how to reinstate trust and respect in a company.

At business services group Rentokil Initial, the chief executive Alan Brown credited then CFO Macfarlane for his work in securing robust credit facilities after a few rocky years.

But it was at Land Securities where Macfarlane really made his mark, modernising the property giant into a more dynamic and respected business. He implemented a £3.2 billion debt restructuring programme, which saved the company around £25 million in annual interest costs and provided the business with increased flexibility to take advantage of its £6.2 billion asset base.

He left Land Securities with an improved financing future thanks to the upgrading of the company’s credit rating to AA. The company’s report and accounts won awards, as did Macfarlane, who was praised for a newfound openness and disclosure which impressed investors.

Macfarlane is hoping some of that magic will rub off on Aer Lingus’s share price but he has a few challenges to deal with first.

Despite the uncertain macro-economic outlook affecting Ireland and its customer base there, there’s little room for manoeuvre within the organisation once Macfarlane has cut the remainder of his targeted costs. With margins typically low in the airline business – around five percent on average – Aer Lingus has to work hard to attain its four percent margins.

The airline’s cost base breaks down into roughly four equal chunks: a quarter fuel (“and there’s very little we can do about the price of fuel”); a quarter airport charges – again mostly regulated and “very little up for negotiation”; a quarter staff, and the final quarter – “everything else”.

It’s on the “everything else” that the finance chief is focusing, because an extra two miles per gallon is “worth about €6 million a year to us”, he explains.

Where the CFO is also hoping to make savings is in more efficiency. The company has set up a programme to improve aircraft fuel efficiency, addressing things like on?board weight by changing the carts and trolleys for ones made out of lighter metal, among other initiatives such as optimising flight settings for take-off and taxi-ing on single engines.

Macfarlane also uses a fuel hedging programme designed not so much “to beat the market but to give price predictability to our commercial team”. He will continue to challenge headcount and productivity measures to ensure the airline’s costs are as light as possible in the hope that while the internal battle goes on, external pressures will lighten and help push up the company’s share price to what Macfarlane and his board members believe shows the true value of a transformed airline.

CV: Andrew Macfarlane

2009-present: CFO, Aer Lingus Group
2005-2009: Group CFO, Rentokil Initial
2003-2006: Non-executive director, audit committee chair, Invensys
2001-2005: Group Finance Director, Land Securities Group
1997-2001: CFO Bass Hotels & Resorts (Holiday Inn, Intercontinental etc) Bass
1987-1997: Partner, Corporate Advisory, Ernst & Young

Why cash matters

The nature of the airline business means that finance chiefs try to ensure their company has a strong cash reserve to tap into should natural disasters or political upheaval like the Arab Spring protests of 2011 restrict air travel.

Its third-quarter trading update showed that Aer Lingus was in a strong cash position, with net cash of €354.6 million once debt of €572.7 million is taken away from the €927.3 million cash reserves.
Aer Lingus CFO Andrew Macfarlane says that as an airline you’d typically want at least 25 percent of revenue in cash available. It’s not an easy task to juggle either as airlines are prone to peaks and troughs.

“The problem that we have between peak and trough in the year is that our working cash is something like €150 million,” Macfarlane explains.

With the industry prone to shocks, “you need a good cash buffer against something happening – weather delays, fuel price spikes that sort of stuff”, Macfarlane explains.

Stockpiling cash is an increasing focus for airlines too. From the 1970s to around 2008, peaks and troughs in the industry were very regular – five years of profits, five years of losses – but nowadays change is sudden. “The amplitude is increasing. When the business turns, it can turn very fast,” he says.

It is at the point when the business turns that the board has to act quickly and implement a clear restructuring strategy.

“You’re turning from profits into loss then you have to incur a big restructuring cost. Then potentially you have two or three years of losses and that’s the time when the banks aren’t going to extend new facilities to you because you’re loss-making so you have to fund the losses out of the cash you had when you went into the downturn,” Macfarlane explains.

What further complicates matters in the airline industry is the huge aircraft order books for replacing and rolling over the fleet to make sure the company has modern, fuel-efficient aircraft.
“We have something like €900 million worth of aircraft on order at various times in the decade. Where you could get into serious problems if the business turns down and you’ve misjudged your order book but you still have to write out a cheque to Airbus,” says Macfarlane.

Atkins CFO drafts a plan for action

CFO Interview: Heath Drewett, group finance director of Atkins

By Michelle Perry | CFO UK | Published 14:15, 01 March 12

AtkinsAs a finance chief it must be a warm feeling watching your company’s share price edging up post-results presentation. It’s what Heath Drewett, group finance director of design and engineering business Atkins plc, has been doing since the early February when Atkins reported robust half-year earnings and profits.

But Drewett wasn’t watching the rising share price for the warm glow it offers, but more as an exercise in investor psychology. “I wondered to what extent … shareholders that have been watching and waiting for this inflection point are now deciding ‘OK, this is the time to move in’,” Drewett says in an exclusive interview with CFO World.

Despite tough markets in the UK over the past two to three years, Atkins has grown top and bottom line at between 5 and 7 percent while repositioning the company in other regions ready for an upturn in growth. Forecasts suggest that operating profits will be about £100 million this year on revenues of over £1.6 billion.

“The market itself is now recognising that there are growth opportunities,” he says.

The finance chief has been helping to drive the business to boost sales without much top line growth over the past few years, but now he feels that they are reaching that “inflection point” where both revenue and profits grow together. It’s the point that investors have been waiting for, too.

He likens investors to surfers waiting on a beach, when they should, he argues, be in the water ready to catch the wave. “If you get out in the water then you’ll catch the wave when it comes, but if you’re standing on the beach asking me to tell you when the big wave’s coming then, you know … ‘Get in there, get yourself a holding’,” he says, noting that he has little sympathy for investors who miss an opportunity.

Shareholder stability

That said, Atkins – which is also the London Olympics 2012 official engineering design services provider – has a pretty stable, loyal shareholder register which Drewett says has supported the business during the recent economic turmoil and uncertainty. A stable shareholder register can, however, pose challenges when a business is on the up. “The problem with a stable one is that it’s difficult to attract new shareholders in terms of liquidity of the stock.”

But it is not an issue that is bothering him at present. “Our top 10 investors have been with the company for a long time and are supportive and encouraged by the recent momentum behind the share price.”

Shareholder engagement is a pertinent issue with the growing outcry over executive pay and the government’s plans to bequeath greater powers to shareholders in terms of a binding vote on remuneration.

Drewett considers this last point to be a moot one as he labours under no illusion with whom his responsibilities lie. “Whether they’ve got that [extra power] or not, the shareholder will one way or another respond if I don’t do a good job, either through pay or they’ll find someone else to do the job.

“If I’m underperforming, the shareholder isn’t going to wait 365 days to exercise his vote at the annual general meeting. The shareholder will bring to bear its views on the business through the board and the governance structure. Whether you enshrined those powers in law, well it’s still clear to me that I’m accountable to the shareholder to reinvest and return a value.”

And that is what Drewett has been busy doing. Like many companies, Atkins’ board took an executive decision to reposition the business ahead of what they considered to be a long and painful recession.
Prior to the credit crunch Atkins was around 70 percent UK-focused with its second biggest market in the Middle East. With both regions facing economically challenging times – the Middle East saw a liquidity rather than recessionary crisis – the board decided to reduce its reliance on the UK and build up offerings in other markets.

Currently, Britain makes up just under 50 percent of Atkins’ business, but management’s mid- to long-term goal is to reduce that to below 25 percent with a further internationalisation of the business. The UK will of course remain a strong focus for the business, especially since it has helped transform the Olympic Park site from derelict industrial land into a world-class sporting venue and asset for East London.

Cash-rich and confident

Thanks to its strong balance sheet, Atkins was in a position to spend cash without borrowing to develop existing markets or enter new ones. It was during this period that Drewett joined the board. One of his prerequisites in looking for his first CFO role was that he wanted to join a company where finance had a position “round the top table” and was considered a “business partner”.

Heath Drewett, group FD of Atkins: “I had worked in British Airways where the events of 11 September 2001 had thrown finance into the driving seat alongside the top team and I had been part of a finance team which had enjoyed that relationship and the privilege that that brings. I was clear that I wanted to join an organisation that reflected that change,” he says.

Drewett found the criteria he wanted in the job at Atkins when he joined the board in June 2009. Just over a year later Atkins had completed the acquisition of US design and engineering business PBSJ in a deal worth $280 million (£178 million). By buying PBSJ, Atkins’ US presence went from a few hundred staff to a multi-skilled, multi-disciplinary workforce of over 3000.

Despite the US also facing a recession at the time it remained for Atkins “the biggest global infrastructure market in terms of design and consultancy spend”. The calculated gamble paid off as it is the US economy that is showing signs of consistent growth as unemployment falls and the housing market stabilises while the UK and eurozone recovery continues to falter.

Extended facility

Despite Atkins having nearly £300m in cash on its balance sheet at the time, Drewett wasn’t taking any chances and renegotiated the group’s facility – which was due to expire in 2011 – for another four-year term to 2014, bringing in another bank “to provide us with additional liquidity”.

Wisely, Atkins didn’t only count on the US for growth. The increasingly international business also repositioned its business in the Middle East, moving out of property-heavy Dubai and into Qatar where a huge amount of infrastructure spending is going on ahead of the 2022 Football World Cup. Saudi Arabian authorities are also spending significantly on public works somewhat in response, says Drewett, to the Arab Spring protests in neighbouring countries. Hong Kong is also providing good income in terms of Atkins’ rail business and there are solid growth opportunities in Scandinavia, too.

“We’ve now got our resources marshalled in the right places in terms of where the growth will come. We’re a market taker, rather than a market maker, therefore we need to make sure we understand the future investment; where the infrastructure will happen and that we’ve got the right resources, right relationships with clients and public bodies and private clients that’ll be the source of our income,” he says.

Drewett says Atkins’ main aim is to grow organically because of lower risks and higher returns, but he says it’s likely the business will continue to look for bolt-on acquisitions where they buy in skills and resources to boost their offering, rather than buying entire businesses as they did in the US. Bolt?ons can be funded through cash generated out of the business without even touching cash on the balance sheet. That said, he isn’t ruling out large-scale acquisitions.

“We’ll never rule out the game-changer. In business, never say ‘never’. It’s difficult to plan for those things but if opportunities come along…” he says rhetorically.

In regards to the mounting anti-business sentiment Drewett says: “There’s another side to the value of British business and people are trying to do a good job and employ people. Nobody likes to let people go. It’s a painful conversation. [Managers] do everything they can to avoid that.”
The critical focus should be on getting the right leaders to drive growth and start re-employing. “Many of the [anti-business] issues of today will disappear,” he says.

As those concerns disappear more CFOs, like Drewett, can return to reaping the rewards in share price rises and with it investor returns and more jobs.


CV: Heath Drewett

2009-present: Group finance director, Atkins
1996-2009: Head of business performance; Group financial controller; Head of corporate finance; Financial controller – commercial; and Head of investments and joint ventures, British Airways
1993-1996: Senior financial analyst, The Morgan Crucible Company
1989-1993: Assistant manager, audit & business services, Price Waterhouse

Diversifying leadership

Atkins stands out as leader among laggards in the diversity stakes with just over 20 percent of its board made up of women. And its strong female board representation is not a reaction to Lord Davies’s call to arms in February 2011. Fiona Clutterbuck was appointed a non-executive director in March 2007 and Joanne Curin has been a non-exec since February 2009.

Indeed The Times named Atkins among its Top 50 Employers for Women in 2011. Group finance director Heath Drewett says the company was “early to recognise the merits of a diverse workforce” and has “tried to lead with the board and to set the right tone and change the behaviours”.

Perhaps the company’s progress explains the board’s stance on quotas: neither Drewett, nor his fellow board members want them. He argues that behaviours and consciousness is adapted over time and worries that quotas would not achieve the desired aim.

“[Women] want to be treated equitable and that’s it. Once they’re on the level playing field they’ll fight for themselves and will find themselves in senior management positions and on boards. It’s slight changes, not some radical edict,” he says.

“We’ve got some way to go but we take it seriously. We think there are benefits to a more diverse workforce, and that’s not just women, ethnicities, backgrounds, skills, to bring to bear a much richer set of people to the issues and business challenges of the day,” he adds.

Atkins’ projects:

London 2012 – Official engineering design services provider.
Crossrail – Architectural and engineering design services including design of the central London tunnels and station design at Tottenham Court Road and Custom House.
Oxford Circus – Design of diagonal crossing to tackle pedestrian crowding.
North America
Statue of Liberty – Construction management for restoration and life safety improvements.

Middle East
Dubai Metro – Design and programme management of civil works for red and green lines
Qatar – Recently awarded major contracts with Qatar Ministry of Municipality and Urban Planning for transport & infrastructure programme running up to 2030 and encompassing the 2022 FIFA World Cup, and Ashghal Public Works Authority for roads & drainage infrastructure.

European Rail Traffic Management System (ERTMS) – Designing the first country-wide rollout of an ERTMS system which increases train frequencies, speeds and safety.

Standard Life CFO on how she made it to top finance role

CFO Interview: Jackie Hunt, chief financial officer of Standard Life

By Michelle Perry | CFO UK | Published 16:54, 05 March 12

StanLifeFew people will tell you frankly – and many would struggle to even acknowledge – their regrets, weaknesses or strengths, especially those sitting on the executive boards of the UK’s top companies. But then Jackie Hunt, chief financial officer of FTSE 100 insurer Standard Life, is an exception in many senses.

One of her professional regrets she candidly tells CFO World is that she never gained experience outside the finance function. For a women who is one of only nine female CFOs in the FTSE 100 it’s hard to reconcile that a lack of a stint in operations or marketing has held her back, but she so firmly believes in the experience that it forms a critical part of the company’s talent development programme for finance staff launched 18 months ago.

“I didn’t do it and regret it. I actively transfer people out of finance and second them,” Hunt says.

Her resolve on this point is explicit. One of the failings she recognises in those in finance is their distance from customers. As a business that prides itself on customer service and staff development Hunt says it’s vital for Standard Life to ensure finance teams gain some experience in customer-facing functions.

“It’s so easy for the finance function to never come into contact with customers,” she says.

Another reason for encouraging secondments outside of the finance department is to broaden individual’s horizons not just professionally but personally as well. “Finance people are genuinely nice people but the flip side of that is that they don’t like confrontation.” Again, Hunt doesn’t strike you as someone who’s afraid of confrontation.

As a foreigner on these shores – she’s South African – the finance chief also promotes the benefits of overseas experience and actively encourages a foreign secondment among her 1,300-strong global finance team. And the earlier the better she says.

“We encourage people to get experiences in new markets and new geographies early in their career. It’s important to learn cultural sensitivities and self-awareness. And an ability to realise that there are other points of view.

“We say early for pragmatic reasons because as people get older their work life balance is more difficult and they have more commitments,” she adds.

As for her strengths, she is happy to promote them and urges women to do the same. Explaining the lack of female CFOs among FTSE companies, Hunt says it’s down to her willingness to take risks where others may have been more cautious. And her decision to highlight her strengths – something she learnt the value of early in her career.

“What I’ve tended to do is be braver about choices. I have taken moves that I’ve had people that knew me call up and say ‘why are you doing that?’ There’s risk associated with it. But I do think you need to take chances in your career. That’s maybe one of the differentiators,” she says.

Hunt points to a growing body of research that suggests “if you ask a man to do a job and he can do 80 percent of it and he’ll say ‘yes I can do it’, but if you ask a woman the same thing and she can do 80 percent, she’ll talk about the 20 percent she can’t do. And it’s culturally consistent. It’s a female issue.”

Aware of this failing in women in general, she has always been conscious to focus on her abilities rather than her failings. That said, she’s keenly away of her limitations. “It’s not that I’m not thinking about the things I can’t do, but I’m focusing on my strengths rather than my weaknesses.”

She also put her success down to people taking a gamble on her. “There’s no question that some people have taken chances on me and there’s no question that if it hadn’t worked they would have come up for criticism that they probably wouldn’t have come under had I frankly been male.”

Of the current push to hire more women to British boardroom, she is highly supportive but she is fervently against quotas. What does however worry Hunt is that the current debate has been “skewed too much” to getting more women on boards, when the “real issue” is the lack of pipeline of women coming through.

“I worry that we’ll win the battle and frankly lose the war. And what we’ll see is diverse boards but an increasing lack of diversity at the executive and senior management levels of corporates,” she says.

These issues, although a concern for her, are less pressing than Hunt’s central focus over the past few years – the stewardship of Standard Life. As CFO, Hunt has had to not only manage the legacy of her boss – Hunt is CEO David Nish’s successor – but help implement far-reaching changes at a time of great economic upheaval and uncertainty.

Hunt joined Standard Life in 2009. By the following year the board agreed a three-year transformation programme which involved her taking a pivotal role in helping design the strategy and “taking along” all stakeholders with that change of direction. As chairman of the company’s strategic investment committee it falls to Hunt to make sure investments are consistent with the strategy and that they meet the financial goals.

“I’m involved in all investor relations. I front that alongside the CEO and I don’t think you can differentiate the role that I and finance play from the role that business play more generally, because we are more integrated.”

Prior to Hunt’s arrival the FTSE 100 life insurer had been “derisking” the business and it is a policy which has picked up momentum under Hunt. The company has moved away from capital-heavy products where Standard Life’s balance sheet is “put on the line” to what she calls “capital-lite” products like unit-linked contracts – “the sort of products that have little risk to us”, she explains.

In fact, apart from the Canadian arm of the business, Hunt says “we are no longer a risk business”.

“We’ve always been quite clear in terms of shareholders assets that we don’t have a very aggressive risk appetite at all,” she clarifies.

Back in 2009 Standard Life sold off its bank to Barclays for £226 million. Although profitable the 10-year-old bank was wholesale funded by about 70 percent and so when the credit crisis started in 2008 the insurer had to keep so much liquid asset to support potentially adverse impacts on the bank that it was managing a business that “was more like something you see on the high street. And that doesn’t play to our skillset”, she says.

The following year the insurer also sold its healthcare business for £138 million to the South African group Discovery Holdings. “Great business, but it’s a market where you need the scale to negotiate with private healthcare providers. We either had to double up the stake in that or accept that it was a consolidating market and for the economics we needed to sell out.”

As for the euro crisis, Hunt says the business didn’t waste any time in acting to minimise exposure to the euro. “From a primary perspective there’s no real exposure. None of our other businesses operate in any exposed areas other than a small Irish business which is well funded.”

Apart from making sure that the assets that back various pools of liabilities aren’t exposed into the euro zone, the CFO has also put caps on some of the geographic areas “where we’ve said we don’t want exposure, and we’ve also put caps on certain institutions where we have a view about their credibility”.

“We’ve done a lot to make sure we are well protected against what can happen in the euro zone,” she reiterates.

Despite the economic uncertainty, Standard Life’s performance in the first nine months of the year has been robust and at the last trading update in November Nish said the company remained “on track to transform the operational and financial performance of the group”.

In its third quarter trading statement the company reported group assets under administration of £191.1 billion, down 2.9 percent. But long-term savings new business sales were up 10 percent to £15.5 billion “after broadly maintained sales in the quarter”.

“If you look at the numbers we last published … We had very strong growth in the first half of the year and a little more muted in the third quarter, but when you look at our relative performance versus markets that had slowed down significantly then we are performing strongly,” says Hunt.

In its full year trading statement published on 13 March the insurer reported a 28 percent rise in annual operating profit of £544 million, well ahead of forecasts of £476 million. The performance was driven by strong growth in its Canadian business, where profit rose 70 percent. Its shares rose 2.7 percent to 243.9p, spreading a rally of about 16 percent since the beginning of the year.

To counter market conditions and low consumer confidence without cutting prices to secure new contracts what Standard Life has chosen to do is focus on existing customers. “The majority of flows we get will come off existing schemes where you have people who’ll contribute more and that’s where we’ve turned our focus. As long as new business is a bit slower because of the economic conditions we’ll focus on existing business and … make return off the back of that.”

Hunt and her fellow board members are making sure the 188-year old business doesn’t go the way of other venerated and well-established financial institutions in this prolonged financial crisis. And it is this point she wishes to emphasis, that business leaders are about building and nurturing sustainable companies that last hundreds of years despite the current public perception that business is about a fast buck.

The current anti-business sentiment spreading from politicians and the public “troubles” her. “It started as a lack of trust from the banking crisis and it does seem to have spread beyond that. I absolutely fundamentally believe that there’s been no other thing that has created greater social good than the whole concept of enterprise. It’s vital that we do amend this perception and turn around this sense.

She’s clear that Standard Life embeds strong values into its business “more than anywhere I’ve work”, but whether others will follow the strict governance and transparent pay structures the business applies “remains to be seen”.

For now however Hunt can only influence the business she helps run, but if her boldness is a sign of the times and her advice heeded by women then we can only hope to see more women heading to the executive board as well as filling non-executive roles.

National Express CFO on his road to recovery

CFO IntJez Maiden, group FD of National Express Group

By Michelle Perry | CFO UK | Published 11:11, 12 June 12

NatExpSo much can change in four months, especially in the world of finance. Jez Maiden, group finance director of National Express, understands this. But he could never have anticipated that the capital markets would turn upside down in two short seasons. But change they did to the extent that a job offer in June 2008 may have been viewed somewhat differently had it been proposed in December 2008.

Nonetheless, that June Maiden had handed in his resignation as FD at Northern Foods and had accepted the group FD role at National Express, which was a profitable but highly geared company – but then so were many others at that time. When he came to take up his new post in November 2008, however, the world was a different, more complicated place.

Although National Express’s debt levels weren’t dissimilar to many public companies at the time (it had debt levels of around 3 to 3.5 times EBITDA in the summer of 2008) the market view of debt had radically altered. As everyone now knows, “Lehman’s happened”, causing banks to stop lending to companies and to each other, resulting in the first credit crunch in almost 100 years.

“The world changed significantly from a situation where having a company with strong profitability but relatively high debt was fine to where that was problematic. The company was the same. The macroeconomic environment changed,” Maiden says.

A week before he was about to start his CEO called him to say the business was fully drawn on its bank facilities. “We suffered enormously by having big exposure, in debt terms, to the euro and the dollar at a time when sterling was dropping very rapidly. That had put the company under tremendous strain. So when I joined we went through five or six steps in a long process of survival.”

Running on empty

Fortunately Maiden, aged 51, is a seasoned FD having been finance chief at Northern Foods, British Vita and Britannia Building Society before disembarking at National Express. Still, he says no one was prepared for the block on liquidity.

“That was the first time in my career that I could remember liquidity being so difficult to come by, and while you’ve got committed facilities. You’ve got to think about that refinance in 18 months’ time.”

In the past, he says, CFOs would have negotiated another facility or extended their existing one but that option was no longer possible. “Lehman destroyed liquidity and you had to work with the resources your banks were committed to,” he says.

Knowing this, the first thing he and the CEO did was to get a handle on cash and debt and cut back on spending. To manage this he put in place a process around weekly cash management and cash generation. They also began selling off “surplus” assets including a London bus business “which wasn’t core” and tackled the issue of getting out of a “very unprofitable rail contract” – the East Coast Rail franchise, which not only annoyed the Labour government at the time but also cost the company almost £100 million and damaged its reputation.

As if that wasn’t enough to contend with Maiden was achieving this against a backdrop of “quite a lot of management change”. Three weeks after the finance chief joined there was a change of chairman and within six months Richard Bowker has quit as chief executive. New boss Dean Finch joined in February 2010. Finch however had a background in public transport and so brought with him deep expertise and knowledge about the industry.

A hostile reception

The upheavals didn’t end there. Within a year, Maiden was faced with three hostile bids for the business. “We were in a weak position but it was a fundamentally strong business and people saw an opportunity.”

The CFO was no stranger to hostile bids, having been in the position twice before in previous roles, and his experience helped National Express repel the bidders.

“I’m pleased to say that given that was my third experience of being bid for, we were successful and managed to stay independent,” he says.

Around the same time Maiden completed a rights issue and because they already had a prospectus ready and had spotted a huge amount of credit in the bond market the board decided to do a bond issue as well. Anyone who has done either of these will understand the amount of work involved in doing both in such a short space of time.

The company set up a bond issue of £250 million in December 2009 and within 31 minutes of it opening National Express had an order book of £1.9 million so the issue was increased to £350 million. But as the company had lost its credit rating because of the trouble it had got into before the new management team came on board, the CFO made an agreement with investors that they would go and get their investment grade credit rating from the ratings agencies in the new year. If the agencies didn’t award them investment grade, National Express would pay a higher coupon for the bond issue. In March, the agencies duly gave the company its investment grade rating.

“We did it the wrong way round. But you have to be agile and proactive and take the opportunities as they come along,” he says.

There’s an expression Maiden says he remembers an investor quoting that he feels sums up National Express’s situation.

“‘Good management, bad business – the business will always win through’. In the case of National Express it’s a really good business and what we really needed to do was get the right management in place to make a success of it,” he explains, and it’s a mantra that has proved true at National Express. In February the group reported full year results to 31 December 2011, posting record pre?tax profits of £180.2 million on revenues of £2.2 billion, up 5.3 percent on 2010.

Today, the company boasts a strong balance sheet with long-term funding maturity and an improved gearing ratio of 1.9 x EBITDA. Final dividend rose 8.3 percent to 6.5 pence. “In just two years National Express has moved from reporting losses to the record profits we have announced today,” CEO Finch said in a statement at the time.

Over the past two years Maiden says he and Finch worked on a plan that has been “first and foremost” margin improvement. He lists their achievements contentedly: “A number of these businesses were undermanaged so we’ve increased our UK bus margin from 7.6 percent to over 12 percent over the two years. Our North America business was achieving 5.7 percent margin. We achieved 10 percent last year.”

But the icing on the cake, he says, was when the Department of Transport announced in March that National Express had pre?qualified to bid for both the Great Western and its existing Essex Thameside (c2c) rail operating franchises.

A moveable feast

With the power tilt from West to East these days you regularly hear CFOs talking about seeking out new growth opportunities in emerging markets, but despite a successful venture in Morocco (see International express, opposite), Maiden says that for now National Express is focused closer to home.
Most countries’ bus and rail operations are either state-owned or heavily subsidised, but the need to reduce government spending is convincing countries to liberalise public transport systems.

Indeed, the European Union has mandated that all member states liberalise their approach to public transport by 2018, legislation that offers National Express the chance to expand further into continental Europe. And the beauty of coaches, Maiden says, is that they are on wheels and therefore easily transportable.

The problem Maiden faces is not so much where to look for growth but how to narrow down the options in order to maximise growth potential in the least amount of time.

“The challenge for us actually is that two successful countries would soak up all our capital and management capacity for the next three years,” he explains. “The challenge is to find the countries you can be a winner in. You have to be very selective about where you want to be successful.”

This is not the first time Maiden has faced intense challenges. At Northern Foods he faced two profit warnings and together with the then CEO began an overhaul of the business, implementing a programme of asset disposal to save the core business before the company was eventually taken private.

Having come through two tumultuous years Maiden is looking forward to the growth phase. Despite not knowing the extent of the challenges that he faced when he joined National Express you get the feeling he may well have enjoyed the ride anyway.

His skills, experience and knowledge gained across a number of different industries have surely armed him well for the job, but Maiden understands that unexpected issues will always crop up. And the secret to dealing with these proficiently is by not getting bogged down but by “keeping your head” and recognising that “you’re going to work your way through 99 percent of them”.

His philosophy fits well with a transport company: you may not always take what seems to be the most direct route, but if you stay calm you’ll get there in the end. And it may turn out to be the best route after all.

International express

Despite the tough economic times, or rather because of austerity, the CFO is confident about the future outlook. And it’s not just in the UK that the company is faring well either. National Express operates Alsa, Spain’s number-one coach operator, which recorded a rise in revenues in its urban bus operation of 4 percent in the first quarter of 2012.

National Express also recently dipped its toe in its first emerging market when it launched in Morocco, where revenue grew 9 percent in the first three months of this year, the company reported on 1 May.

Although we regularly hear about foreign businesses acquiring British companies, we hear less frequently about the successes of British companies overseas. National Express is quietly conquering one of America’s most iconic symbols – the yellow school bus – and it is now the second largest school bus operator in the US with almost 20,000 vehicles.

With around 550,000 school buses operating across North America, around a third of the market has been outsourced because of local authorities’ needs to cut costs, so Maiden sees great potential for further growth too. “That’s a tremendous market opportunity to have,” he says.

The company has just completed the acquisition of Petermann, which was the fifth largest player in the US, “so we’ve been able to bring that business on board and add a couple of new states, Ohio in particular”, says Maiden.

They have also entered an adjacent market – the para-transit market which transports disabled and senior citizens – a market that is calculated to grow from 40 million to 80 million eligible people over the next 25 years.

Besides organic growth it is through bolt-on acquisitions, rather than large-scale corporate takeovers, that Maiden sees National Express’s future growth.

CV: Jez Maiden

Nov 2008-present: Group Finance Director, National Express Group
Sept 2005-Nov 2008: CFO, Northern Foods plc
April 2002-Aug 2005: Group FD, British Vita plc
Oct 2001-Mar 2002: Director of Finance, Britannia Building Society
Jul 1999-Sep 2001: Group Finance Director, Hickson International plc

photo credit: Heidi Williams,

A new CFO boards TripAdvisor for a journey into the public domain

CFO Interview: Julie Bradley, chief financial officer of TripAdvisor

By Michelle Perry | CFO UK | Published 15:57, 27 June 12

TripAdvisorLast year Julie Bradley’s summer didn’t last quite as long as she had intended but then great opportunities rarely fit in with one’s life plans.

The Boston-based finance chief had promised her family she would take some time off work. She had spent the previous year working intensively as chief financial officer of Art Technology Group when Oracle acquired the company. She oversaw the acquisition and then left. And she wanted a break.

But a headhunter had other plans for her, contacting Bradley to tell her about a new opening that was coming up that perfectly fitted her prerequisites for her next role.

“I wanted something in the Boston area. That was internet or technology related so that I could use my background in the tech space. Something of size – either public or going public, because I really love that aspect of the job, working with investors and telling the story. I really wanted the opportunity to work with the founder again,” Bradley explains.

The irony is that the job turned out to be chief financial officer of the world’s largest online travel site, TripAdvisor. She had found her match. After meeting TripAdvisor’s founder and chief executive Stephen Kaufer she decided it was indeed a role she couldn’t turn down. Bradley accepted heartily but with the proviso that she could spend the summer with her family. Kaufer duly agreed, and Bradley ventured on the journey with the newly public company in October 2011; thoroughly refreshed.

With topped-up energy levels Bradley could begin to work on building the financial structure of a public company because Expedia, the former parent company, had handled all the legal and regulatory activities. TripAdvisor, which offers users peer reviews of hotels and restaurants, was spun off from Expedia in mid-2011 “to unlock shareholder value”, because the two companies’ business models were becoming increasingly divergent, she explains.

“Expedia is TripAdvisor’s number one customer, which was probably great in the early days but as it started to get more traction with online travel agencies and hoteliers it was perceived as competition.”

She says a perception was growing that advertisers wouldn’t want to spend too much on TripAdvisor “even though you were getting great value because it would ultimately benefit their number one competitor”. Investors also prefer a simpler story, the CFO adds.

Sailing into headwinds

In its first quarter trading statement for 2012 published on 1 May, TripAdvisor reported pre-tax income of $48.2 million, a slight rise on the same period the previous year ($47.4 million). Revenue for the first three months increased to $183.7 million, up 33 percent on the previous quarter, and up 23 percent on the same period in 2011.

“We have said that we expect profits to be relatively low or flat in 2012 because we have two revenue headwinds,” Bradley says.

The first of those two headwinds relates to the spin out from Expedia, which lowered the prices its pays to TripAdvisor for leads by between 10 and 15 percent, because Expedia had been paying a premium. The benefits of this had cut both ways. Whenever Expedia wanted to trial a particular location or run a marketing campaign the online travel agent would do it on TripAdvisor.

“They could guarantee they’d always be in the top placements. But now we’re not part of the family they are treating us like any other vendor.”

There is a commercial agreement in place between Expedia and TripAdvisor for a 12 month period but then prices will drop, which Bradley calculates will be “about a 5 percent hit on our revenue side”.
The second headwind Bradley refers to that impacted revenues was a major site redesign. And like it or loath it, with more than 50 million unique monthly visitors across 30 countries, it’s likely you or someone in your immediate family will have visited the site at least once in the past few years.

The board found that catering to two very different customers – users and the travel agents who pay for the leads – have competing and often clashing wishes. Previously when users searched for a flight, holiday or hotel eight windows would pop open “which was great because we’d get paid eight times”. But Bradley concedes the company couldn’t really find one user who enjoyed the experience.

So “knowing that there would be a sizeable revenue hit”, TripAdvisor has reduced the number of windows that pop open when you search to a maximum of three to improve the user experience. “Our community is everything to us,” Bradley says, and to prove this the company has taken the revenue hit.

“We estimated at the time it would be a 2 to 3 percent hit but in the fourth quarter we are seeing it at higher levels. So if you just take our constant expense base we’re down around 8 percent year-on-year on revenue growth. That explains part of the flat-ish net income,” she explains.

A further hit to profit came in the form of public company costs, which were estimated to reach as much as $17 million. Expedia used to take care of those costs when TripAdvisor was part of its group.

On the road to growth

The reason Bradley is comfortable with layering on so many costs during the first year as a public company is because the strategy is for long-term growth.

“We’re putting some good bets on – internationalisation, social, traffic diversification, vacation rentals, business listings etc – so we’re building out a global sales force to go after that,” she says.

“We don’t expect to see any leverage in that for the short-term because we’re really investing for the long-term.”
Bradley says that even as the “world’s largest travel website” traffic, which she reckons is at 10 percent of total unique travel users, has a lot of room to grow. While the Nasdaq-listed company is focused primarily on hotels and travel today, there are other adjacent markets where she says the site’s “user-generated content can benefit and strengthen the community”.

“Hotels are definitely TripAdvisor’s bread and butter,” she says, explaining that 80 percent of its revenue is derived from passing on leads to customers, such as online travel agencies. But she says “our largest asset is the community that we’ve built and that sense of sharing. We get a lot of traffic because of that. It’s a destination point”. And it’s here that the company wants to really focus in.

In terms of how the board plans to grow the company, Bradley says they have ruled out nothing – large scale acquisitions, bolt-ons or a combination of both as well of course as organic growth.

“The tuck-ins are great. They’re easier and safer but it probably doesn’t get you as far. We have a history of growing organically and through acquisition,” Bradley refers to two small recent acquisitions made – one in the UK and on in the US – as example of this strategy.

Crucially, the company is “fairly well funded” with over $400 million in cash and a $200 million credit revolver “so we can do some pretty good M&A activities with what we have on the balance sheet”.

However Bradley says the business isn’t averse to asking the markets for money to make “the right acquisition”, whether that’s a series of smaller acquisitions or “something more in the game-changing field”.

Bradley’s rise to become CFO of the most well-known travel site in the world is an unlikely journey, she admits. Having trained as an accountant with Deloitte she subconsciously mapped out a career as a partner with the firm for life. But she soon realised that she wanted a piece of the action.

“What I realised over time working with CFOs and management is that they really got to operationalise the projects. And at the end of the projects I’d always feel like the outsider and wanted to be more operational,” she says.
Since she secured her first senior finance role in business she hasn’t looked back. As for being a woman in a highly competitive industry she wasn’t afraid to define her boundaries and work differently (at home at night), so that she could have children and spend time with them as well as achieve her career goals.

She praises Deloitte for having cottoned on to the realisation that by implementing flexible working and other work/life balance arrangements they helped stemmed the outflow of women from the finance industry. Nonetheless she’s still surprised that there aren’t more female CFOs.

“It’s important to set those boundaries of how and when you’re going to get your work done instead of being tied to your office. I think that’s evolving though. So hopefully there’ll be more dresses at the party soon.”
Bradley will need to muster all her experience, listening skills and business nous to help corner the highly competitive travel market for TripAdvisor in what is a world of greater austerity, tighter budgets and even tighter margins. But with a keen eye on the non-traditional markets as well as Europe and the US, she assures there still much room for growth for the fledgling public company.

CV – Julie Bradley

Oct 2011 – Present CFO, TripAdvisor

July 2005 – May 2011 CFO, ATG (bought by Oracle)

2000 – 2005 VP Finance, Akamai Technologies

1993 – 2000 Manager, Deloitte

British Land FD Lucinda Bell on constructing a future

CFO Interview: Lucinda Bell, group finance director of FTSE 100 company British Land

By Michelle Perry | CFO UK | Published 15:29, 01 October 12

BritiLandAs one of the few female finance chiefs among Britain’s top public companies the inevitable question of why there aren’t more women in executive positions is often asked of Lucinda Bell, chief financial officer of FTSE 100 company British Land.

She has clearly learned to rise above such clichéd questions with the response: “I’m quite gender-blind”, which is probably for the best given that she works in the mostly male-dominated construction industry.

Bell is however an even rarer kind of finance chief because she, unlike most CFOs in the FTSE 100, has worked her way up the ranks of British Land since joining the company in 1991. She had held a wide range of roles in finance, including the roles of director of tax and financial planning, before replacing Graham Roberts as group finance director in May 2011.

As well as being singled out as a female finance chief in a male-dominated industry, Bell has also had to contend with claims of nepotism. British Land has, in the past, been criticised for being run like a private business with family relations working as long-standing company advisers before later joining the company. Bell, whose father was former British Land director John Weston Smith, had herself previously worked at company auditors Binder Hamlyn (which was later bought by Andersen).

Whether or not Bell joined the company because of family connections is now a moot point, because she has more than earned her spurs during her first year as group FD, proving to the City that she is more than capable of filling her predecessor’s boots.

Last year she raised £2 billion – the largest amount raised by any real estate investment trust (REIT) in 2011. This compares to just £0.5 billion raised over the previous two years. Moreover she secured an average cost of debt of 4.6 percent, offering the property company a major “competitive advantage” in an uncertain economy.

The financing was raised through a variety of sources in a bid to spread the refinancing risk: such caution and the balancing of risk is perhaps another trait you could arguably attribute to women, but again she disputes any gender link, positive or otherwise.

Some of the financing was with banks – secured and unsecured – but perhaps more challenging given the constrained debt markets, Bell raised around $500 million in the US private placement market in her first foray there.

Last year she went to the US to do a private placement with the intention of raising about $200 million. She ended up taking over $480 million with an average life over 11.2 years and cost of funding under 1.5 percent over Libor, the inter-bank lending rate now engulfed in a transatlantic scandal. She says the attraction for US investors was that real estate is a long-term business.

From a CFO’s point of view what is attractive about the US private placement market is that if investors want to invest for different periods, they can each bid on what suits them and then the CFO can effectively pick and choose which bits to take, or as Bell says, “you can choose your sweet spots”.

“One of the trends in real estate finance is that some of the insurers are coming into the market. Our most recent financing had a US insurer coming in alongside a UK bank and that’s a trend you’ll see more of,” she says.

Anticipating trends

British Land is primarily focused on high-end in-town and out-of-town retail locations and on central London offices. Bell gets to see first-hand her business at work as she passes one of the developments near her offices in Marble Arch every day. Another key project is the so-called cheese grater, or Leadenhall Building, which is set to become one of the most iconic buildings in London’s Square Mile when it’s completed in 2014.

British Land’s stated aim is “to build the best real estate investment trust in Europe”, and the company has assets across the Channel, principally in Spain, where it is currently developing a retail park in Zaragoza. Bell rejects concerns about Spain’s spiralling economic outlook, the continuing eurozone debt crisis and British Land’s investment there, because “it’s a very small part of our business”.

Lucinda Bell“I wouldn’t say it’s time to downscale there [Europe] but we’re very much focused on the UK,” she says.

Despite the double dip, British Land continues to report robust results. Pre?tax profits were up a solid 5.1 percent to £269 million in the year to March. Against a backdrop of struggling retailers, British Land has fared well given that 61 percent of its portfolio is invested in retail (with 35 percent in offices) and the retail property market has been hit hard this year by collapses including Peacocks, Game Group and Clinton Cards.

“We delivered some very good results in a demanding environment. We feel positive about the outlook but in the medium term,” Bell says. “In the short term we can see that for real estate the important things are what happens to your values as well as the income you generate, and in the medium term there may be a bit of variability in values but we look at the long term.”

Because of the “polarisation” going on in the retail sector – “the good retail is getting better and the poor retail is getting worse” – British Land hasn’t been as affected as some of its rivals as its retail portfolio is so high-end. The reality is that high-end retailers attract shoppers who come from the more affluent classes who have been less affected by the double dip.

Bell says the company anticipated this change in retail over a number of years “and so adjusted our portfolio”.

“It’s about selecting the right assets and then ensuring we can future-proof them. If you look nationally at footfall last year it was down, but on our portfolio it was up and that reinforces the message about polarisation,” she explains.

By future-proofing she means understanding the changing nature of consumers and planning to suit those changes. With these criteria British Land has focused on the location as well as configuration of real estate spaces.

To further maximise assets, Bell says changes such as putting in mezzanine floors, so “you can drive the rent on the ground floor by putting in extra space”, have been critical, especially for some of the company’s main clients like Sainsbury’s and Tesco.

There is also the ruthless-sounding “cut and carve” in which you take a larger unit and cut it into two smaller units, resulting in a higher rent per square foot on each unit.

“That’s what it’s all about – growing the income,” Bell says.

Sainsbury’s, the UK’s third largest supermarket, has fared better during the double dip than rival Tesco, which has seen falling sales and has had to pull several investment projects. Tesco was forced to implement a recovery plan after issuing a profit warning in January, but if the struggles of key clients and changing shopping patterns worry Bell, she doesn’t show it.

“What you also see is that Tesco is now investing in its existing stores and many of them are those that we let to them. And that’s good for our business,” says Bell.

Bell also stands out in construction because on her way to the top she took the risky decision to work part-time to have a family. The decision was fully supported by British Land, which continued to nurture her career all the way to the top table.

“For those that chose to work part-time, we work hard to make it work. It’s not always about going up; it’s about going in other directions too,” she says.

The best bit of advice she can offer those wishing to make it to the coveted role of chief financial officer of a public company is to “follow your instincts”.

“I say that because in going part-time I wasn’t sure it was the right thing to do because I was at a senior level, but I felt it was the right thing to do,” she cautions.

“You could say it’s about taking risks. I’d say it’s more ‘follow your instincts’. It’s about judgements,” she says.

And judgements and the balancing of risk are two key skills in ever-greater demand of the modern finance chief – male or female – as an improvement in the global economic outlook continues to elude even the most respected of public companies.


CV: Lucinda Bell

May 2011-present: Finance Director, British Land plc

2001-2010: Head of Tax, British Land plc

1991-2001: Corporate Finance Executive, British Land plc

1986-1991: Audit Manager, Arthur Andersen

Moving with the times

British Land has, like its competitors, invested heavily in out-of-town retail parks. These were seen as a great solution to overcrowded town centres and escalating business rents. With the rise in car ownership and a growing affluent middle class with greater spending power, real estate companies saw a great opportunity and grasped it with both hands.

The success of the out-of-town retail parks was so great that arguably the shopping mall was killing rather than complementing the high street, and there is now a move to regenerate the high streets of Britain’s towns and cities.

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In the intervening years another phenomenon has grown to challenge retail parks and the high street – e-commerce. British Land FD Lucinda Bell, however, isn’t afraid of the impact the growth in online shopping and the regeneration of city centres may have on British Land’s out-of-town assets.

“If and when you do go shopping invariably it’s for a social experience as well. You might buy things online but people are still going to the shops to try things on, so the physical stores are an important part of the retailer’s overall offer,” she argues.

“It’s less important about whether they are in town or out of town, it’s about having a certain criteria. What we are seeing is a morphing of the out-of-town model with in-town shopping.”

It’s just this kind of hybrid retail centre that British Land is developing at Whiteley near the M27 in Hampshire, where, Bell says, you can expect to find the “sort of units you’d get on a retail park with more of a high street feel”.