Adam Richford is Group Treasurer of Renewi plc, a FTSE 250-listed market leader in European waste management. A stock in trade for him is transformation. Here he describes his post-merger treasury activities and how they reach far into the business.
What led to your programme of transformation at Renewi and how did you start it?
I joined Shanks Group at the beginning of 2016, immediately prior to its acquisition of Van Gansewinkel Groep (VGG) which created Renewi. Following the acquisition finance, which included a reconstitution of our banking group, we then focused on the renegotiation of around 30 bilateral derivative, cash management, invoice discounting and guarantee facilities, tying most of these into an innovative Global Guarantee Deed.
This year, we converted our main banking facility into a green loan and introduced a margin discount aimed at further improving our critical sustainability measures. We now have leasing funding planned for investment in a new truck fleet that will improve the group’s environmental impact.
As part of the post-merger integration, we also set about transforming our cash management approach, migrating from divisionally-led ownership, to a centralised model. This will save the Group about €1m a year in interest expense resulting from idle cash.
To help us, our level of automation and consistency across our cash processes are being increased with the roll-out of Bellin TM5 [TMS] to the four divisions. We also just increased the treasury team to four.
You have been part of two mergers (between Gala Coral and Ladbrokes, and Shanks with VGG). What did learn from the experience?
Listed company mergers and takeovers are complicated! The Gala Coral and Shanks transactions were both reverse takeovers, meaning the target was bigger than the listed entity in certain ways, so both involved CMA [Competition and Markets Authority] approvals at different levels.
Working on different sides of the equation in these transactions – Gala Coral being private and Shanks being public – has given me some valuable commercial perspectives, not least around exposure to the Equity Capital Markets (ECM) and Debt Capital Markets (DCM).
We had to work closely with the underwriting bank and more broadly with our relationship banks. Apart from needing to secure a good debt finance package we had to ensure that the debt funding workstream didn’t become an obstacle to the closing of the transaction, which meant everything had to be in place at the right time. And for that, communication is critical. I’d also say that as companies undergoing this process don’t typically expand their resourcing availability, you just have to expand the time available to fit the task. Looking back, it is very rewarding.
What were your immediate post-merger plans?
At the start of this financial year we had ten key treasury projects. These include green financing, truck leasing, cash management transformation, further funding optimisation, and the strengthening of the treasury function. We’re making good progress so far.
One of the key aims we have is to transform the EBITDA profile of the group by €40m over three years, towards a level of around €200m. A second wave will target margin expansion. We’ll follow with strategic expansion. This is a critical phase from a treasury perspective.
Does treasury have strategic value?
It does. The majority of my time is focused on ‘strategic’ aspects which transform the treasury function and the company. I have a key role in deciding how group leverage will change over time, structuring the debt package to fit. Within treasury, we are now thinking holistically in terms of our own transformation, to ensure that the support is available for the wider business.
Renewi is committed to sustainability. How is treasury helping?
In our approach to funding, for example, we are linking debt pricing to our corporate social responsibility (CSR) KPIs through green finance. The benefit of being a sustainability-focused company goes well beyond debt pricing though. It is an important discussion point with our existing and potential new equity investors, many of whom are focused on socially responsible investing. I think all businesses should consider using it wherever possible; it is a differentiator to investments that do not contribute environmentally or socially. I don’t see any real downside.