Profile: Robert MacLeod, Atkins' CFO

Robert MacLeod, Atkins' CFO

As soon as you step across the threshold at Atkins’ leafy Epsom offices the illusion of suburban idyll is shattered. Not many companies ask guests to list their citizenship when they sign in and you immediately get an idea of the scope and the security procedures at the global engineering company.

CFO Robert MacLeod greets Accountancy Age with a handshake that could have easily stood in for an industrial vice on one of Atkins engineering projects before he ushers us into his office.

MacLeod is upbeat as Atkins has recently published its yearly numbers.It posted revenues of £1.3bn and an increase in pre-tax profits of 24%. The company is the largest engineering consultancy in the UK, the largest multidisciplinary consultancy in Europe and the eighth largest design business in the world, providing engineering, highways and rail services.

At a time when most of the business world is battening down the hatches, Atkins is doing a roaring trade and MacLeod sees no reason why this will not continue. ‘Margins have gone up, the profitability has gone up, revenues are up and we’re hiring more people. All these things are saying that the strategy of focusing on engineering excellence is working.’

But for all the bullish sentiment the company is far from bullet-proof, particularly when Atkins found itself in a murderous crossfire as Metronet collapsed. The company was one of five plcs with a stake in Metronet but when the underground maintenance company said it had run out of cash, Atkins, Balfour Beatty, Bombardier, EDF Energy, and RWE Thames Water’s worst nightmare came true.

‘On that particular contract we lost £120m, so it was a very significant hit for us. There’s no silver lining to losing £120m but you learn the lesson and move on.’

MacLeod says the main issue for Atkins was working with an intermediate, which handled the work on the companys behalf. Atkins had moved outside of its business model and got involved in a contracting joint venture. ‘We’re not a contractor,’ says MacLeod. ‘Now we’re working directly for the company which is now in public hands rather than the PPP.’

Atkins’ CFO recalls that there were worrying signs way before the scandal hit the headlines. Teething problems emerged from the outset but just like the other five backers Atkins was past the point of no return and fully committed to the deal. ‘After two years, the chief exec was replaced so within a fairly short period of time we could tell things weren’t going as well as we’d hoped. Sometimes when you go off on the wrong foot, you can never get back. It was not good, it distracted us and it took a lot of management time and effort and we deeply regret it and for us the biggest disappointment was that it did fail.

‘The fact that we are still working for the new Metronet and won the M25 contract (worth around £500m to Atkins) where we are preferred bidder does say that we are still trusted. And rather than stepping back from the problem, we went onto the front foot and really tried to engage.’

A combination of shrewd decision-making and good timing has helped Atkins to pre-empt fallout from the credit crunch. Last year, the company set about trimming the excess fat and sold off its Lambert Smith Hampton real estate business before the credit crunch hit.

The good times can never be guaranteed so Atkins is guarding against an ‘inevitable’ slowdown in parts of the business by thinking about how to redeploy ‘scarce resources’ into the most effective areas.

MacLeod says the Middle East part of the group is ‘growing massively’. It provides design, engineering and project management services for buildings, transportation and other infrastructure through seven offices in the Gulf, and India. In China Atkins has planning, urban design, architectural and engineering services in the mainland market and Hong Kong. Moving people to these potential cashcows is Atkins preferred direction of travel. ‘We don’t want to have a hire and fire mentality. It doesn’t work in a people-based business.’

For MacLeod, the CFO role is the perfect job, and he attributes his attraction to the role to the simple phrase: ‘I can do numbers.’

This may seem like a glaringly obvious statement, but it’s a single-minded approach
to a job with such a diverse spectrum of operations.

Due to its scale, the Atkins operates on a heavily devolved basis and he says that the company has a very good relationship with its auditors PricewaterhouseCoopers.

‘They’ve had a much deeper delve into the business than we have because it’s heavily devolved and that’s invaluable to us and the rest of the board,’ says MacLeod.

Some 85% of its trade is UK-based but Atkins provides services across the globe and plans for more work in overseas tax jurisdictions, which is why, like many other UK companies, it craves some clarity from the Treasury on the taxation of foreign profits.

‘Tell us what you’re going to do and stick with it,’ MacLeod demands. ‘At the moment, the international things in particular, there seems to be a lack of crystallisation about where they are going to go. One minute they are going to go this way and next minute they change their minds and that’s just unhelpful. What I would like is some clarity and that will make our lives easier and then we can make some reasonable decision about where things are going and invest accordingly.’

Internal communication

MacLeod adds that, for all of a CFO’s City-facing responsibilities, internal communication was just as important especially in terms of working out key performance indicators. ‘If you’re going into harder times you’ve got to spend more time talking to the business than sitting here in our ivory tower because they’re the ones who know what’s going on.

‘You have to get closer and closer to the coalface to do that. We run a heavily devolved management business so we have the right people and allow them to get on with the job. Of course, you’ve got to run a set direction and set guidelines in terms of delegation of authority and corporate governance but once you’ve done that, let them get on with it.’

Naguib Kheraj recently said that he had knocked back several finance jobs to hold out for a chief executive’s position, the job coveted by many an FD, but MacLeod was single-minded enough to not just follow the herd.

‘I don’t think I’m looking to be a chief exec. You’ve got to recognise what you’re good at and the FD role is what I’m good at. What I really enjoy is working with good people and working alongside a good and talented team and chief exec. As a CFO, you can get a lot more done if you get that dynamic right between the chief executive, the finance team and the rest of the business.’

career highlights

Being proactive has always been high on MacLeod’s agenda. A qualified chemical engineer, he followed in his father’s footsteps by taking up accountancy in order to get a good business grounding. A KPMG summer internship during his third year at Cambridge University lit the touchpaper on his accountancy career and he never looked back.

MacLeod went back to KPMG after completing his degree and embarked on a steady climb up the corporate ladder after qualifying. He won the financial controller’s position at Atkins in March 2003 and was promoted to FD barely 12 months later.

IMS stress

Companies have been landed with publishing interim management statements in addition to their other reporting requirements and MacLeod panned the extra burden.

Instead, where we were reporting four times a year, we’re now reporting six times a year with the IMS. It’s just too much.’ After reporting annual results on the 25 June, Atkins had to post an interim management statement on 6 August only six weeks later. ‘We’ve got an AGM trading statement on the third of September which is four weeks after that. Our business doesn’t change that rapidly. Talking to the analysts they actually don’t need that information because frankly I don’t know what we are going to tell them. These additional IMSs don’t help. It has just added to the burden of the work we do.

‘One would hope that the FD and management teams in our kind of business, which is more project-based rather than transactional-based like retail for example, we would be able to have a good idea of what’s happening in the market.’

MacLeod said that the finance function was now more efficient in its reporting and tax structuring, treasury management, and how it utilise its skills and drive the business forward, but still took issue with other parts of the reporting regime.

‘There’s a lot more disclosure about debtors and financial instruments. For a business like ours, financial instruments information isn’t particularly relevant for us or the shareholders. I do sometimes think that there’s this blanket application rather than doing what’s more fit-for-purpose for individual companies.’

MacLeod added that the reporting burden had increased to such an extent that Atkins’ annual report had swelled to 120 pages in 2008, from 88 in 2005. ‘We’ve added 32 pages and I’m not convinced that’s helped anybody. If you compared the two sets of accounts the extra you are giving isn’t helping the shareholder.’