How Renewi's Adam Richford is greening the treasury function
18 Jul 18
Renewi’s group treasurer tells Ben Poole how his treasury team tackled a set of tricky logistical challenges while going completely green
The path to a career in treasury for Adam Richford, group treasurer at Renewi, began at his time with EY, where he helped build the turnaround and working capital management practice.
“Turnarounds often have a focus on cash, funding and finance and, necessary in a crisis, treasury teams in large corporates need supplementing and supporting,” he explains. “I followed the turnaround path to Energis, a fallen-angel telco, where I had my first line-responsibility for treasury.”
Richford went on to join GE as treasurer for the UK real estate business, his first role as a dedicated treasury professional.
Over the following 10 years at GE, he provided treasury support for more than $20 billion of acquisition, disposals, and integration of assets, portfolios and loan books, leading the European treasury function.
We are doing something slightly unusual and saying that we are entirely green
“When GE resized the capital business, I joined Gala Coral Group, which was a high-leveraged private equity [PE] business,” says Richford. “This was my first group treasurer position, supporting the resolution of a defaulted propco structure, the disposal of the Gala Bingo business and PE exit scenarios, including the eventual reverse takeover of Ladbrokes.”
The reverse-takeover experience proved invaluable when, following Ladbrokes, Richford joined Renewi (Shanks Group as it was at the time) as group treasurer, working towards the reverse takeover of its closest competitor, Van Gansewinkel Groep.
“I arranged the funding and hedging for the transaction in mid-2016, which then completed in February 2017, and we have been working on the post-merger integration of the businesses since,” says Richford.
Throughout, Richford has shown a commitment to gaining the qualifications necessary to support his growing career.
“Every time I’ve said I will never do another exam again, I have been proven incorrect,” he laughs. “From university to ACA to AMCT, followed by a pause as the family arrived, and then eventually completing MCT Advanced Diploma with distinctions while at Gala Coral Group.”
Richford explains how being both FCA and FCT are fundamental to his current role, allowing him to be able to talk debits and credits with the Renewi accounting teams. “But it is the treasury qualifications that support me every day,” he notes.
“As the roles have become more strategic, I rely more on the MCT Advanced Diploma skill set, which complements the in situ activity.”
Richford also sees the value in treasury certification for the teams that he builds: “My senior teams always have treasury qualifications. This is a prerequisite for most positions I’ve hired over the past 10 years.”
He notes: “It is not just the qualification itself, but the commitment to continued professional development and learning that this signals, which is extremely relevant. In all roles, the capacity to learn and develop is fundamentally important and qualifications are a component of that.”
Managing the merger
The merger between Shanks Group and Van Gansewinkel that created Renewi brought together the number one and number three recycling and recovery players in the Benelux market – the most advanced recycling market in Europe.
The merger was an opportunity to gain some scale and efficiencies by having a much larger operation in that geography.
The reverse takeover created complexity from an M&A and listing perspective. “It required us to issue the prospectus when we agreed the merger, but then we had to essentially delist and relist with a second prospectus when the transaction completed,” says Richford.
He points out: “Being large competitors, there was obviously a competition authority process as well. That went through a Phase 1 CMA process [a local regional-based decision] that was successful and the transaction completed early last year.”
From a treasury perspective, there were a few different things to do around the M&A transaction. A case in point was the deal funding – Renewi upsized its debt facilities from €180m to €600m to finance the transaction, working with a number of its existing relationship banks, as well as introducing some new relationship banks.
The transaction was highly commended in The Treasurer’s Deals of the Year Awards 2016.
“There is quite often a risk around the FX of these transactions, which comes from the fact that we are raising equity in sterling to make a euro transaction acquisition,” says Richford.
“Obviously,” he explains, “if the relative value of sterling and the euro changes between the point that you commit to raise the sterling and spend the euros, there is a risk associated. That involved us putting in place a deal contingent forward.
“This is basically a forward transaction where the banks agree with you that if the transaction does not occur, then it expires worthless, but if the transaction goes through, then you get a specific FX rate.”
Often, this type of deal is done from the point of agreeing the transaction until the point the transaction completes, but Renewi did this slightly differently.
It did it until the point that the equity had been raised, allowing it to convert the equity into euros in anticipation of the transaction.
“Doing it this way meant that the deal contingent forward was only outstanding between September and October 2016, rather than extending to the following February when the deal completed,” says Richford. “This reduced our costs.”
A commitment to green
Renewi’s focus on recycling and recovery places it firmly in the business of being green, a philosophy that also applies to the treasury group. Richford says that, in the near term, the company is looking to convert all of its facilities into green finance.
“We are doing something slightly unusual and saying that we are entirely green,” Richford notes.
“There are not many companies in the world that can put that endorsement around all of their operations,” he stresses. “The category in which we describe ourselves as green, within the taxonomy of the Green Loan and Green Bond Principles, is that we are focused entirely on ‘pollution prevention and control’.
“This is our purpose in the framework. We have then taken out some assets that are less green in order to give some clarification around the remaining assets.”
On the other side of the equation are the company liabilities. Renewi has debt facilities from its banks, and its bonds, which together add up to several hundred million pounds, most of which are in green format.
“The difference between our green asset level and our green debt is very substantial,” says Richford. “We describe this as our green buffer and it is about £1bn. This gives us a lot of comfort that whatever we do on the green debt side of the equation, it will always be less than our green assets.”
Renewi treasury has also just finished writing its green finance framework. Having signed off on that as an appropriate approach, Richford and his team are using it to convert their main credit facility into a green loan.
The framework can then be used for all future bond, private placement, leasing or other funding programmes.
This has enabled the company to apply the concept of its green finance framework to its revolving credit facility (RCF). Typically, an RCF is difficult to make green because it is a general corporate purposes facility.
“There is nothing stopping us doing anything with that facility – we can use it to buy something that isn’t green or we could use it to pay a dividend – it can be used for absolutely anything,” says Richford.
“However, providing that we are still in compliance with our green assets being much more than our green liabilities, the financing is still net being used for green purposes. That is a really unique element that we have had the opportunity to do.”
The other feature of Renewi’s Green Loan is that “our banking group has incentivised our continued focus on sustainability and rewards us with a slightly lower margin if we can successfully achieve some of our key environmental and safety targets over time,” says Richford.
This is a feature that has been implemented in a number of continental European deals in 2017 linked to ESG rating improvements, and links sustainability directly to loan pricing. It is one of the first implemented on the FTSE 250.
Moving beyond the merger
When Richford joined what was then Shanks in 2016, the treasury function was manually oriented, spreadsheets-based and quite decentralised.
On the other side, Van Gansewinkel had a more sophisticated treasury function, with an implemented treasury management system (TMS) and a much more centralised view of the world, with an in-house banking operation, for example.
“It was quite an easy decision around the merger to say what Van Gansewinkel had in place was fit for purpose and therefore we should use that to expand across the entire Renewi business,” explains Richford.
“The first part was to get visibility over our cash balances across the entire organisation on a daily basis. The TMS, through its connections to SWIFT, allowed us to set that up with all of our banks from the legacy Shanks’ side such that we could see our cash position on day-to-day basis.
“Most treasurers would think that is fairly basic, but that took us quite a while to get into place.”
The systems project is ongoing, and will take another couple of years to fully deploy. “We need to train the people in our divisions and configure the system to our needs,” says Richford.
“While there is still a long journey left to go in terms of how to do that, it has enabled us to see our cash position on a daily basis, which gives us a very clear steer as to where opportunities exist.”
For example, in the decentralised world of the legacy Shanks company, the different parts of the business were responsible for their cash.
Being prudent financial professionals, they all wanted to make sure they did not run out of money, so on average would hold slightly more money than needed.
With these average balances being maintained in this way, and without access to or control over that centrally, the treasury had been drawing more money on its RCF than it otherwise needed to.
This is where Renewi’s cash-transformation project has proved extremely valuable.
Richford says: “Our cash-transformation project has a systems component – which is how to use the system more effectively to prevent wasting money on excess borrowings – but it also has a culture component.
“This is to move the responsibility for managing cash from the divisional level to my team, to then manage daily. This enables us to net off the facility. If we can do that, we can save around €1m a year.”
Renewi treasury has cleared many items from its to-do list in a short space of time, but that does not mean the list is now empty, as there are a number of things that it wants do next: “We have a long list of other projects that we want to work on, particularly off the back of our green financing activities.
“We would like to start looking at our next issuance, whether that is a euro private placement or something else. We would like to look at receivables finance and leasing finance, and how we can make those green as well.
“So, there are many more exciting and innovative projects in the pipeline over the coming months.”
Adam’s words of wisdom
What I value most about the ACT is…
It is very supportive of treasury professional development across multiple channels, including:
- The ACT qualifications, which have been hugely valuable to me in my career;
- The Treasurer magazine and website, which provide topical commentary and content;
- The annual conference, which provides content and networking; and
- Advocacy and technical consideration of rule changes impacting corporates.
What I like best about treasury is…
- Treasury is at the heart of the organisation and integral to defining and delivering group strategy, its transactions and transformations;
- We provide critical advice to the organisation leadership and the board;
- There is huge variety in activities and challenges, and a strong external orientation working with banks, lawyer, advisers and vendors; plus
- We engage extensively, connecting each division with the centre, and set the tone for the cash culture of the business, as well as managing some of the key risks our businesses face.
The work challenge I would most like to fix is…
- Creating an entirely green debt funding stack for Renewi; and
- Building Renewi treasury: establishing the team, centralising cash management, increasing automation, refining our funding and facilities, in each case to support the strategic initiatives of the group.
2016-present Group treasurer, Renewi
2014-2015 Group treasurer, Gala Coral Group
2005-2014 Treasurer, GE Capital Real Estate Europe
2004-2005 Investment executive, Kelso Place
2003-2004 Working capital manager, Energis
1997-2003 Senior executive, EY
MCT prize winner (2015)
BA Economics, University of Durham (1997)
About the author
Ben Poole is a freelance writer and editor, specialising in treasury and transaction banking