THERE ARE MANY ROUTES that can be taken to reach group finance director, and Tim Haywood seems to have followed a path less trodden.
His CV twists and turns, with roles in practice, manufacturing, distribution and outsourcing before joining FTSE 250 support services and construction business Interserve in November 2010. Haywood’s rationale is that the FD role is 80% the same, regardless of whatever industry you find yourself in. “Every industry and every company tend to think that they are and their issues are unique to them,” he tells Financial Director.
Bearing in mind that Haywood says he spends more time talking to investors than anyone else, his mind-set of homogeneity might raise a few eyebrows among them. However, he must be doing something right. The company posted profit after tax of £171.7m for 2012, compared to £60.6m in 2011.
Haywood points to several acquisitions, disposals and contract wins in 2012, which goes some way towards explaining the sway, but adds that the business is brash and confident. In 2010 Interserve announced it would double earnings per share by 2015. Haywood beams when he says that the company took its “bravery tablets” and reiterated that sentiment in its latest results.
The company is on its way to achieving this. The share price was at 470.4p compared to 276.4p a year ago, with a market cap now at £598.2m at the time of writing (9 April).
Haywood attributes the company’s success to having a diversified business both geographically and services-wise. It currently offers facilities management, cleaning, and construction services, while its clientele is both UK-based and international; private sector and public.
It helps not being a “one-trick pony in this current market”, he says.
Interserve managed to boost UK revenues largely through extending its Alliance Boots contract from cleaning 320 stores, to providing facilities management services to its eight offices and cleaning services across more than 1,000 stores in the UK and Ireland. It also won a contract to supply facilities management for three years to Magnos, the operator of ten UK power stations, worth more than £80m.
In its outsourcing arm, Interserve provides fabrication, maintenance, turnaround and training services across a range of markets in the Middle East. The company also has long-term agreements and repeat business in its construction arm. However, in 2012 UK operating profit in this area dropped to £14.6m in 2012, from £18m, with the company citing increased competitive pressures.
However, 2013 looks brighter now that the company has signed an agreement with Edinburgh’s Haymarket Development, which will initially cost it £10.5m through investment, but follow-on construction work is estimated to generate about £150m.
Interserve has £250m to fund future growth opportunities, with Haywood not shying away from the sentiment that the company’s plans for world domination include both growing organically and through acquisitions.
“Absence of organic growth through some of our core markets made us think, ‘OK, the market isn’t going to help us in this one, so we’ve got to help ourselves.’ So we targeted and we invested in new markets which have got growth characteristics and which are relevant to us and yet extend our shop front a little bit,” explains Haywood.
The bravery pills must have been flowing because the company made some huge decisions about its financial future, notably tackling its pension deficit and the growing problem posed by pensions to all companies.
“It’s a key and ever-present danger to a business and we, because we’ve got such a large pension scheme, are actively engaged in lobbying government,” he says.
Haywood was part of the Confederation of Business and Industry’s (CBI) lobbying the powers that be to tackle the issue, gaining an audience with pensions minister Steve Webb.
He must have been doing something right because – according to Haywood – the CBI was successful in its attempt to bring common sense to the assessment of the pension process.
Just before the March Budget, it was announced that the government had given what was asked: additional statutory power to the Pensions Regulator to look at growth prospects of a business when accessing funding. Instead of “obsessing” about improving pension scheme funding, the regulator now has an obligation to try to balance funding with the wellbeing of the employer company, he explains. “I can claim a small percentage of a small fraction of a bit of credit for that,” he says.
Pension obligations have hit companies hard, with the high-profile collapse of mattress retailer Silent Night as a case in point. The pension obligations were a large part in that company’s administration through a pre-pack after lenders pulled back from the business, leaving a £100m pension black hole.
“It’s a key plank of your balance sheet, your P&L and your cashflows,” says Haywood. Not only that, but he also says, “When investors are looking at us, one of the negatives that they look at is your pension situation.”
Haywood and his predecessor have been chipping away at the deficit – which he labels as “sizeable” – for the past five years, considering the company employs 50,000 staff, with 33,000 in the UK. In December 2011, the pension deficit assessment showed a funding shortfall of £150m that the company hopes to eliminate by June 2019.
Haywood was heavily involved in setting an agreement with the trustee of its pension scheme to transfer the assets from its investment in the government’s Private Finance Initiative (PFI).
Interserve transferred £55m from its PFI portfolio, reducing the deficit to £95m from £150m.
The company also realised £174m from the PFI portfolio, and invested £67m into acquiring businesses in growth markets, such as frontline services, oil and gas, and then transferred £55m to the pension scheme.
This transfer has resulted in the company reducing its annual payments to the pension fund to £12m from an estimated £23m. But it isn’t all roses.
When Haywood joined in 2010, the pension deficit was £38m and now – even after the company has pumped so much money into it – the deficit remains at £33m, not including future liabilities, with a total funding shortfall of £95m.
“So what does that say? It says we have spent two years throwing assets in, throwing cash in, working our rows off to stand still? It says that the world of yields has absolutely slaughtered every pension scheme and that we have been – as corporate UK – piling money into our pension schemes to stand still, to offset the impact of quantitative easing and low returns on corporate bond yields,” he says.
“[I’ve spent] a lot of time and effort on reconfiguring our investment strategy, trying to swap out some of these things, trying to hedge against some of the yield movements, embracing active bond portfolio investments – a whole load of stuff. There’s so much we’ve done on this and if you’re talking about things FDs have ended up doing that they didn’t think they would maybe 20 or 30 years ago, pension fund management and deficit management is [up there].”
IN BLACK AND WHITE
November 2010 - present Group finance director & head of sustainability, Interserve
March 2003 - November 2010 Finance director, St Modwen Properties
September 1998 - March 2003 Finance director, Hagemeyer UK
December 1997 - September 1998 Finance director, Swiss Products
March 1995 - December 1997 Finance director, Larch Lap
November 1991 - March 1995 Divisional controller, William Holdings
September 1985 - November 1991 Manager, Arthur Andersen & Co
You may also like
If budgeting is to have any value at all, it needs a radical overhaul. In today's dynamic marketplace, budgeting can no longer serve as a company's only management system; it must integrate with and support dedicated strategy management systems, process improvement systems, and the like. In this paper, Professor Peter Horvath and Dr Ralf Sauter present what's wrong with the current approach to budgeting and how to fix it.
In this white paper CCH provide checklists to help accountants and finance professionals both in practice and in business examine these issues and make plans. Also includes a case study of a large commercial organisation working through the first year of mandatory iXBRL filing.