As the summer drew to a close this year not that it ever really began
John Nicholas sat overlooking the Thames at
& Lyle’s London headquarters, situated on the appropriately named Sugar
Quay, and pondered what he would do if he were a regulator.
As finance director of a FTSE 100 company it’s easy to criticise regulators
around the world, particularly those in the US from where much of the upheaval
in the past seven years has emanated, because they have been in the firing line
of a barrage of new rules and regulations. But Nicholas takes a measured
‘I would try to persuade my international colleagues that a principles-based
approach is preferable to a rules-based approach. I would look for ways to relax
some of the regulatory requirements. You have to be sensible about it. There
needs to be rules but they have to make sense.
‘I would hope that there would be a greater understanding of reality and
hopefully a relaxation of some of the regulatory changes.
‘What I mean by that is there has been a period where there have been some
high-profile corporate failures, and the regulators, whoever they are, were
expected, not unreasonably, to do something. I subscribe to the view that if
there are companies that are intent on breaking the rules, whatever those rules
are, then rules and regulations won’t stop them,’ says Nicholas, who became
group FD at Tate & Lyle in 2006.
Although our conversation took place just before the crisis in US money
markets sparked by the selling of high-risk mortgages to low-income families
hit the UK hard in the form of a run on Northern Rock, it’s pertinent to how the
authorities will react.
There is a better alternative to rules, says Nicholas. ‘Actually what will stop
them is what’s started to happen in America now long jail sentences. The
prospect of 20 or 25 years in jail is a real deterrent. And I think that’s what
needed rather than more rules and regulations. So I would hope that there would
be an understanding of that.’
Of course, there are stark differences between what occurred in the US in
2001 when some of the darlings of the US stock markets collapsed ignominiously
due to outright management fraud and what is happening in the US now, where it
so far seems a case of risky transactions rather than anything outside of the
rules. But the result could well be the same more regulation for everyone to
A week earlier, it had seemed very likely that regulators were ready to put
the brakes on, after a period of sustained change over the past seven years.
Now, however, those same regulators are poring over the accounts of financial
institutions trying to figure out whether more regulation is necessary to avoid
a similar crisis in the future. It’s unlikely there’ll be a stay in regulatory
change for now. But lessons hopefully have been learnt and a knee-jerk reaction,
as happened in 2001, can be avoided.
Nevertheless, the issue might push another bugbear of British FDs to the
forefront that of real-time reporting. One outcome of the current debacle is
that US authorities, already keen on the idea, might push harder and faster for
more real-time reporting from strategic businesses.
It’s an issue that Nicholas feels strongly about. ‘It’s unhelpful. Reporting
externally on a real-time basis would be quite a significant burden because by
the time you finish up explaining what the results were they would have moved
again. You’d spend a lot of time managing investor relations rather than
actually managing the company.’
If there’s one thing that Nicholas could change about his job it would be the
time he spends on external activities. Already 40% of his time is spent dealing
with non-core business issues but he, like most FDs, would rather spend more
time running the business.
‘I would like time for a greater involvement in the business activities as
that’s where finance can add real value. Clearly that’s part of the role of
managing external relations, be they banks or investors, but what I enjoy is
creating value, making money. So time doing that would be a benefit to me,’ he
You get the sense that he’s talking very much about the present, as the
company is undergoing significant change, having sold many parts of the business
to reposition itself and move T&L to ‘value added products rather than
‘It’s part of an effort to reduce our exposure to more volatile markets. We
are selling parts and buying others. It’s interesting and exciting but it brings
its own pressures.’
In the year to 31 March 2007 the group reported pre-tax profit of £295m, up 16%
on 2006 results, on sales of £3.7bn. But net debt increased by £387m to £858m.
The business isn’t in bad shape at all, but Tate & Lyle owner of the
world’s longest standing unchanged brand, Lyle’s golden syrup is a complicated
business that needs a lot of explanation.
‘Tate & Lyle is not generally well understood. It was complicated for me
when I joined and it’s complicated for people who don’t have the time every day
all day to understand it. So what we need to do is work on helping people
understand what we do and perhaps simplify the way we present the company; and
we’ve made some progress with that.’
Most of T&L’s business is done in the US with European markets coming
second and South America next but Nicholas says that Asia is where the group
is hoping to grow further.
‘We expect to develop all businesses but we expect to grow in Asia mostly. We
sold our Canadian sugar business and closed our East European sugar beet
business. We’re selling half of our European starch business, and we’re
exploring the sale of our Mexican business where we own 49% of it. We have
acquired a specialised diary product business based in Germany,’ he explains.
Nicholas is also focusing more proactively on the company’s tax management.
‘There are two areas of opportunity. In America we have a lot of activity and
the business is lowly geared there so there’s an opportunity to re-look at that
and see if we can finance it in a more tax-efficient manner.
‘Here in the UK we have a smallish sugar business and we have a UK office,
which is a lot of cost. Between the two we have tax losses here in the UK, so if
we were able to bring more income to the UK and use those losses that would be a
help to us as well. Generally it’s just a change of approach where we’re being
more proactive in managing the p&l right to the bottom.’
Naturally he thinks the government could do more to foster a more
entrepreneurial business environment. T&L recently set up a plant in
Singapore because of its attractive tax rate, as if to prove a point.
‘The chancellor could do more to attract business in the UK. One of the
challenges in the UK tax environment is its complexity following overlays of
change, such that the tax regulation now is very complex. To make it a more
attractive corporate environment some simplification would certainly help. Of
course a lower tax rate would help.’
He steps back from suggesting a rate for corporate tax, however. T&L’s
effective tax rate is 29.2%, according to its annual report.
Nicholas has his hands full helping the CEO refocus the business to ensure
its prosperity for years to come. It’s unlikely in the current business
environment that he’ll get his wish to focus less externally and more internally
on business matters.
However, his suggestion that regulators rein in the rule-making and step up
the deterrents is one that authorities around the world should pay attention to.
The sweet taste of CSR
Although Nicholas believes that a company must run its business first and
foremost in the interest of shareholders – and not jump on the latest bandwagon
to appear green – the business expends significant effort around its worldwide
operations to act responsibly and play a role in the wider community through
social initiatives. The policy is in line with the philosophy of company founder
Henry Tate, one of the UK’s more powerful industrialists and social
entrepreneurs, whose legacy flourishes today in the form of the Tate Britain.
‘Business leaders have a range of responsibilities. One of which is being
awareof their impact on the environment and managing that sensibly and
appropriately. I would say that business leaders’ principle responsibility is to
run the company in the interests of their shareholders and their stakeholders.
Not to run the environment. That’s the government’s responsibility.’
One initiative they are working on in London is developing a biomass-fuelled
boiler. By March 2009, Tate & Lyle’s sugar refinery at Silvertown will use
renewable biomass to supply 70% of the site’s energy requirements. By replacing
the use of a fossil fuel (natural gas) with a renewable resource, the aim is to
reduce manufacturing costs and the negative impact on the environment.
However, in March Tate & Lyle slipped out of the FTSE4Good index for
failing to meet its supply chain labour standards.
The index family comprises more than 450 companies that meet the FTSE4Good’s
criteria on social and environmental performance. The company said it was
working towards reentering soon.
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