Motivated by travel and the discovery of new cultures, Christophe Liaudon, has always sought an international outlook in his work. Although he has held his current position for well over a decade, his arrival in an industry that by definition is all about movement seems entirely appropriate. His approach to treasury carries a similar restlessness, always seeking out new and better ways of moving forwards.
Neopost is a France-based global leader in physical mail, digital communication, supply chain and e-commerce-based shipping solutions. It sells into more than 90 countries with a direct presence in 31. The group, which is serviced by more than 6,000 employees, posted full-year revenues for 2014 of €1.1bn, up 1.6% year-on-year. Europe is its largest market, closely followed by North America, but Asia Pacific is growing fast. In terms of group contributions, digital and shipping solutions play an increasingly important part, now accounting for 21% of all business. Neopost is not rated (except by the NAIC following a US private placement) but since 1999 has been listed in Compartment ‘A’ of Euronext Paris (indicating capitalisation of more than €1bn) and is currently part of the SBF 120 French stock market index.
Some people are driven by the urge to find and experience new cultures and ways of doing things; for them, standing still for too long is uncomfortable and is to be avoided wherever possible. It may be more challenging to translate this imperative into working life but finding an opportunity to operate on an international stage seems like the ideal basis for exploration not just of the physical and cultural world but also of the ways in which the commercial environment may be constantly reshaped to reflect its dynamism. The way in which such a notion is awakened in the individual is perhaps as surprising as some of the discoveries made on the journey.
A final year specialisation in European business processes whilst studying at the independent Parisian business school, ESLSCA (Ecole Supérieure Libre des Sciences Commerciales Appliquées), was the key to broadening the international commercial horizon of Christophe Liaudon, Group Treasurer at Neopost. Despite the realisation that this was his calling, initially the quest for a global outlook had to take a back seat as he plied his trade in Paris, building up essential knowledge and understanding of finance and treasury.
The first financial role for Liaudon came in 1993 as Credit Manager, looking after the receivables of a company that eventually merged to form the French energy services company, Dalkia. Exposure to treasury activities within this organisation subsequently saw him move roles, deciding that his interests would be best served by the proactive engagement and broader scope of internal and external contact that this position offered. Having accumulated five years of immersive treasury experience, a new environment beckoned with a move in 1998 to the treasury seat at a business unit of Valeo, a multinational automotive supplier also based in France. Here he got to grips more with reporting requirements, especially around cash positions, budgeting and forecasting.
Deeper exploration of the treasury world followed a year later, this time with an opportunity to understand the workings of the public sector, taking on treasury duties at Etablissement Français du Sang, the French national organisation for blood donors and transfusion services. His first challenge here was to set up a treasury operation, starting from scratch and building up banking and cash management structures. Despite the different objectives of the public sector, Liaudon comments that in terms of cash, indebtedness and financial results, the needs are the same: “You still have to be efficient.” Coming as an extra challenge at this time was the switch from franc to euro, his new treasury function very much at the forefront of this momentous occasion where not least of his concerns was the adaptation of existing finance and accounting software to the fledgling currency.
Having overseen the set-up and growth of one new treasury operation, Liaudon decided in May 2002 that the thrill of the new was for him. He took on the same ‘from scratch’ challenge at the larger, more complex and, importantly for him, international organisation that is Neopost. With around 80% of its business coming from outside of France, it certainly seemed to fulfil his requirements and he confirms that the welcome challenge in the early days was to adapt his own knowledge and experience to meet the demands of international trade.
Today, Liaudon reports directly to the group’s CFO and has three lines of personal responsibility. Firstly, he deals with daily liquidity matters such as cash management and loans to subsidiaries. Secondly, he handles market risk, particularly interest rate risk and foreign exchange (to date around ten different recurring ‘non-exotic’ currencies are used including US and Australian dollar, euro, sterling and yen). Thirdly, and currently consuming increasing amounts of his time, Liaudon tackles group debt management which he explains is perhaps the most interesting challenge of the moment.
Indeed, as at the end of January 2015, the group had a leverage ratio of 3.0 and net debt of €962m which is quite substantial given the size of the company (debt primarily finances a leasing portfolio of €781m and group renting activity). In reality, debt management is not tackled in isolation; it necessarily draws upon other disciplines. “When you are indebted on a group basis you must have efficient daily liquidity management in order to perfectly match available cash with that indebtedness and ensure less cost of carry,” Liaudon notes. He adds that in managing market risk, interest and FX rates too are inextricably linked with debt management.
Building a base
As a ‘greenfield’ treasury site, the first task at Neopost for Liaudon was to organise cash management. With most commercial activity being conducted beyond France, the ‘overseas’ subsidiaries had been locally organising their own daily cash in- and outflows and even had separate accounting systems. Liaudon’s plan was to increase centralisation, to minimise cost of carry, to improve cash visibility and, ultimately to facilitate the group plan to increase the strength of its acquisition strategy. The second task was the centralisation of FX risk. “At the time I joined the group, the subsidiaries were doing their own deals,” he explains. “It was not that they weren’t doing it properly, but when you ask someone who is not a treasurer to deal with FX, they do not have the same skill and knowledge to negotiate with the banks.” The desire to bring increased efficiency to every aspect of the function is clear. In fact it was no more apparent than in Liaudon’s approach to technology.
Part of the centralisation project involved the progressive development of a SaaS-based solution. With a grand plan to remove company reliance on spreadsheets, a new solution would allow HQ to manage group cash (collecting statements, processing local payments and so on) by accessing subsidiary accounts located in the main operational countries. Kicking off in 2009, the SaaS development route was taken because Liaudon “is not a fan of proprietary bank technology.” He feels it creates “too much dependency on one bank.”
Following a detailed mapping of requirements, the solution that came out of this need is based on SWIFTNet FileAct connectivity via a service bureau, a single bank and Kyriba’s SaaS TMS platform. The latter is customised at the holding company in Paris and is being rolled out across the group to allow subsidiaries to access it remotely across the web. Another vital part of the technology set-up is the Oracle Hyperion BI system used for consolidation reporting and treasury reporting. In 2014, the team set up FX risk management reporting in this system, allowing all subsidiaries to report their positions and the central management of all FX market deals. “Today we still use the telephone,” says Liaudon of his trading activity. He likes the personal contact it brings to a deal but admits that as volumes of FX increase he has an eye on developing a platform for simple deals such as spots and swaps “to help us be more time-efficient.”
A third challenge faced by Liaudon upon arrival at Neopost concerned the increasing expansion of the group and its rising indebtedness which is related, in particular, to the growth of the leasing portfolio. This required a new approach to funding efficiency, especially as the loan markets have become less reliable sources over the past few years. It just happened that Neopost did not require heavy funding during the most “restrictive” period of bank lending during the economic downturn, but Liaudon says banks “have never closed the door to us.”
Nonetheless, on the evidence of what happened to other companies during this period – particularly French companies that were seen by some overseas investors as too risky – Neopost “learnt a lesson” and now seeks just 20% of its debt from traditional bank facilities having found a means of diversification. Indeed, Neopost has become “one of the most active companies in terms of disintermediation,” a truth borne out by the realisation that the company secures the remaining 80% of its debt from private placement markets including those of the US, France and Germany. “Even if the banks are there for us we prefer to keep the bank facility as a back-up plan.”
The advantage to Neopost in having made its presence felt in the private placement market over the years is that investors – predominantly the large institutional players such as insurance and pensions companies – know the name and understand the business and its challenges. Even if an investor chooses not to subscribe to a placement on one occasion, when Neopost returns to the market at a later date, the preliminary meetings have already taken place and the awareness of and confidence in the company is raised. Despite Liaudon’s experience in handling the private placement market, he says the banks still have a role to play. They help with the introductions to new investors and in explaining Neopost’s business model to prospects. “Our P&L can sometimes be difficult to understand because we mix a traditional industrial business with a leading-edge technology business,” he says. “Similarly, to analyse our balance sheet one must understand the fact that we need to finance the equipment placed at our clients under leasing or rental contracts. A bank that has been with us for many years knows us and can explain what we do.”
A deep knowledge of how treasury works, and the capacity to explain the function to non-treasury personnel is an important part of Liaudon’s role too. Being able to relate the treasury angle to the rest of the business, especially in the midst of a volatile economic environment, is certainly appreciated within Neopost’s boardroom, he says, but then he feels treasury is very much based on teamwork and co-operation anyway. He believes that treasury is the common link that exists between everything that happens in the company and its subsidiaries, from funding production and development, to setting up new business units, to handling cash for simple payments and collections, to ensuring funding is in place for acquisitions. “Teamwork is the key to success; we must be open to everything that happens within the company, from top to bottom. We cannot work in an Ivory Tower.” The spirit of co-operation is not just about internal connections, adds Liaudon. He feels it is vital that knowledge is shared with external partners; there needs to be an open dialogue with Neopost’s banks, for example, so that each has is an acute awareness of the issues that inform the development of products and technology.
It would be fair to say that the banking community in the past few years has had a rough ride from many quarters. Contrary to popular ‘bank-bashing’ statements, Liaudon reports a good level of communication regarding practical treasury matters in recent times. If this had not been the case he most certainly would have raised the issue, being quite forthright in his expectations. “I’m not looking for silent partners. I am looking for banks that are able to propose new ideas to help us become more efficient; the proactive approach is essential for me.” The Neopost ultimatum is simple: failure to engage in two-way communication means that bank cannot be part of the group’s panel.
Preparation is the key
In the light of the favourable banking experience to date, it is interesting to note that Neopost chooses not to take its FX and interest rate cues from its banks. Instead it organises its activities – including subsequent negotiations with banks – around one independent non-bank treasury advisor, Forex Finance, which has a strong presence in the French market. “This company is really helping us to develop our strategy in terms of FX,” says Liaudon. This strategy, revisited as and when required, avoids bargaining around individual FX trades and instead focuses on deals based on a longer-term defensive position. Indeed, for more than a decade of using this firm Liaudon says he has seen “no surprises” regarding Neopost’s position at year-end. Forex Finance is retained on an annual contract and also advises on other matters such as IFRS fair value measurement of various instruments, avoiding the need in this example for Neopost to implement “expensive specialist software” to crunch the numbers.
Being prepared for duty is something that Liaudon is very clear about but sometimes external events take over. As the reporting requirement for treasury increases, especially around regulation-driven needs, such as the defence against corporate fraud, he recognises that this aspect of the job becomes ever-more time consuming. On a daily basis he receives requests from banks seeking more information on, for example, a payment request which in turn demands further communication with the beneficiary, generating yet more documentation and delays. The number of these requests is not yet sufficient to warrant development of a fully automated response, he says, but handling them is becoming an issue that is “sometimes difficult to anticipate.”
It’s all about the journey
Just as Neopost has developed into a more complex international business over the years, so treasury under Liaudon’s guidance has evolved to meet the challenges presented by such growth. The treasury office itself has necessarily expanded from a staff of one (Liaudon) to a team of three, the most recent recruit being brought on board to manage back office processing activities and the middle office link between treasury and accounting.
The way in which the company and the treasury department has progressed in that time filters through into Liaudon’s advice to any newcomer to the firm and to treasury in general. He stresses the importance of nurturing a curiosity about new processes and technologies that can deliver efficiency. Whilst this approach is evident in the current architecture of treasury tools within Neopost, he is quick to assert that this should never be about technology for the sake of it but technology as means of maintaining order and serving the role for which it is intended.
Given this insight, his personal philosophy – one that has clearly served him well in his career – is unsurprisingly based on keeping it simple. From his early days of study, Liaudon has been able to move forwards in his career, accumulating knowledge and expertise at each turn, following a clear path that was well-signposted for his interests in life. As someone who is inspired by the constant discovery of the new, he says he may well have found himself in the travel industry. In a sense, he has done just that anyway. Neopost is a business characterised by constant movement – of packages, parcels and messages – within which he has been able to stretch out in a role offering discovery and, of course, truly international scope.