I spent more than 25 years of my career in treasury and it provided me with a wealth of experiences and skills I had not expected.
Having qualified as a chartered accountant, my first job outside the profession was at ICI in the 1980s as an accountant in its treasury function. I was fortunate to be supported and promoted by some of the ACT’s founding fathers, such as Archie Donaldson and Trevor Harrison.
Moving into a treasury role I benefitted hugely from working for this global industrial giant, as it required and used virtually every aspect of the treasury discipline, not least its very large and complex FX exposures.
The threat of not being able to pay the wages at the end of the month certainly focuses the mind
At ICI I had caught the treasury bug, so I decided I would move into treasury as a career. To start with I had a brief spell in management consultancy and then, having gained experience, I became the treasurer of a UK conglomerate.
During my time there in the 1990s, it was very acquisitive in both the UK and overseas, which gave me valuable M&A experience. After eight years I left to become treasurer of one of the UK’s largest insurance companies before moving to John Laing in 2000.
At the time, John Laing was a household name in the construction industry, having built many flagship projects both in the UK and overseas, including both Severn bridges. There was also a smaller housing business and a fledgling infrastructure investment business.
My initial thoughts on arriving were that I could use my broad treasury skills gained from larger companies to provide more efficient financing, shave a few basis points off the cost of debt, provide better risk management and introduce new reporting procedures for FX.
Also, I looked forward to using my M&A skills as the company grew. However, six months later, everything changed.
The construction arm of John Laing had built the spectacular Millennium Stadium in Cardiff – but at a cost.
The problems with the build are well documented, and with the Rugby World Cup as an absolute deadline, the company ended up losing a substantial amount on that project. At the same time, a handful of other major construction contracts turned sour.
It became clear that covenants would soon be breached, cash flow became very tight and liabilities both real and contingent were rapidly increasing.
At this point as treasurer, it is time to forget the complex theories that you have learnt in the classroom, and roll up your sleeves and concentrate on some good old-fashioned cash management.
The threat of not being able to pay the wages at the end of the month certainly focuses the mind.
Going forward, we actively managed this difficult position – we contacted the banks and bond holders immediately and laid out a plan of action that would provide liquidity to cover the debts.
Banks and lenders act very differently in this situation. Your friendly relationship manager disappears to be replaced by the hard-nosed recovery team.
A temporary financing package was negotiated (although it was a very one-sided negotiation) along with a rescue rights issue, and concurrently the construction business was sold for £1.
The terms of the financing were very restrictive, so 12 months later we sold the housing business, which enabled loans to be paid off, new financing to be negotiated and funds raised through a positive rights issue.
This enabled John Laing to grow into a very successful infrastructure company.
The role of the treasurer is very flexible and can take many an unexpected turn. You need to have broad knowledge that covers all aspects of the role.
You may think that saving a few basis points on the latest debt offering, or evaluating the latest complex derivative product, is your key role.
However, my experience is that, while these are important, the number one role of the treasurer that employees, directors and shareholders look to you for is to ensure there is enough cash and working capital to keep the company as a going concern.
John Laing came through its difficult period and ultimately became a success story. But lessons are not always learned, and other similar companies have gone to the wall (such as Carillion recently).
Communication and openness are key. Manage your banking relationships actively – keep them well informed.
There is the old adage that banks will lend you an umbrella when sunny and ask for it back when it’s raining. They are unlikely to do so if you have warned them rain is on the way.
Treasurers are rarely main board directors.
However, they often get involved in key projects such as M&A proposals, potential equity raisings and major overseas projects, which can be exciting and interesting.
Make sure your finance director keeps you up to date on what the board is considering, and also that they are well aware of your skills and abilities that can be called upon, and that will raise your profile with the board.
Acquisition opportunities arise when you least expect them, and often need to be transacted very quickly. So be ready and have your funding plans for all sizes of acquisition ready to be called on at short notice.
Treasury information is needed quickly in real time.
You can’t rely on the accounting process for your information to make decisions – this is done quarterly and results take weeks to appear after the date. It is important to have daily cash, debt and FX information on hand.
In 2001, when John Laing was close to bankruptcy and we were working every hour available to save the company, the events of 9/11 unfolded.
That caused us all to pause and reflect on the true perspective of life.
David Marshall FCT has enjoyed a broad treasury career. These days he is retired and active as an angel investor and mentor
This article was taken from the 40 Years Edition 2019 issue of The Treasurer magazine. For more great insights, log in to view the full issue or sign up for eAffiliate membership