Gary Slawther has worked his way through an “okay, but not startling” educational background, via “no particular career plan”, to become a hugely experienced and successful hired gun, fixing companies with some very serious treasury problems before moving on. Having learnt the benefits of surrounding himself with the sharpest people, knowing how to get the best from them, and of taking the time to fully understand the business in which he finds himself, he is now Corporate Treasurer of the $1 billion Oman-based plastics supplier and manufacturer, Octal Petrochemicals.
“I never started off with a career plan,” admits Gary Slawther, Corporate Treasurer for Oman-based OCTAL Petrochemicals. Beyond doing “something with corporate finance”, the young Slawther was not entirely sure of the direction he might take. Starting out in 1987 with UK accountancy firm, Grant Thornton, he took and eventually passed his Chartered Accountancy exams. But it was evident that accountancy would never offer the excitement and danger of looking forward and after five years it was time move in a new direction.
But where? With an academic history that on his own admission was “okay, but not startling” and an accent that one colleague warned would cut-short any aspirations of taking up corporate finance (Slawther is from Newcastle in England’s North East, giving him a distinctive tone), it looked like he was sailing into a professional headwind. For some, that may have been the end of it; for Slawther it was game on. “When you can’t get to where you want to go directly, you look to what experience you can build up to get you there; that has characterised my entire career.”
Making the first move
His first step on the new road saw Slawther take up arms as an Insolvency Administrator for Leonard Harris & Partners. This he enjoyed: “For the first time I could make decisions that I could stand or fall by,” he recalls. “I don’t mind sticking my head above the parapet to do what seems the right thing at the time and I don’t mind occasionally being wrong or making mistakes because that’s how you learn.”
The next step was to gain industrial experience, without which he knew it would become increasingly difficult to move out of practice “and into the real world”. With sound business acumen drawn from the darker side of commerce, in 1994 he joined the internal audit function at Turner & Newall, a major automotive components manufacturer.
Being despatched one day to audit the firm’s treasury department, immediately he felt that with his accountancy experience, he was on solid ground. Knowing “everything there was to know”, coming face to face with the company’s foreign exchange contracts rapidly revealed the limitations of Slawther’s understanding. Never one to quit, he soon found himself trying to unpick some of the complexities of his new role at an Association of Corporate Treasurers (ACT) conference called ‘the Auditor and Treasury’. Inspecting the ACT’s professional examination syllabus, all became clear. It was, he states, “an epiphany”. Not only was it the direction, but he could also “get a piece of paper that said Gary Slawther can do corporate finance”, Geordie accent or not.
Examination passes over the next few years saw him progress from an Associate, to a Member, to a Fellow of the ACT. And with around 80% of study being “entirely relevant to the job”, for the first time in his life Slawther “actually enjoyed a set of exams”. Although clearly he has got a lot more out of his study, he lays claim to one particular skill that allows him to feel “remarkably smug”. If nothing else, he states, aside from his tried and tested “beer and football” revision technique, “it taught me to read the numbers pages of the Financial Times and understand what’s going on”.
Meanwhile, Slawther had been invited to join Turner & Newall’s treasury team. By 1997 he had taken voluntary redundancy, a move that proved to be a remarkable piece of foresight, the firm going into Chapter 11 not long after. Sticking with industry, he joined adhesive tape manufacturer, Scapa, as Treasury Operations Manager, holding on to the position for just one year. “My career is characterised by not staying for long, but I like to think I make an impact and that I leave behind a better place than when I started,” he comments.
Having something new and different to build upon has been the key to his success and soon he was heading off to UK retailer, Matalan. In his two-year appointment as Treasury Manager with the recently-floated firm, he gained “some fantastic experience”, creating treasury from scratch, “relying heavily” on the core ACT publication, ‘A Treasury Policy Blueprint’ by David Swann.
To an outsider, it may have seemed as if he was taking on all the elements “that no one else wanted” and that what he had in fact secured was a dead-end. In Slawther-terms, this was far from the case; more extremely valuable experience was being accrued. “I suddenly realised what all these bits were; they were all the elements of cash flow for the business.” From accounts payable, to payroll, to sales reconciliations, as a treasurer he believes it is vital to understand “the processes, the nuances and language of these functions”.
Having just implemented SAP, the international food and drink firm, Princes Group, was looking for a Group Treasurer. Facing challenges in accounting for and managing its FX positions, in January 2000 Slawther arrived.
“It certainly wasn’t the plan, but it felt like I was going into businesses, sorting out their problems and once I’d done that I wasn’t really needed any more,” Slawther muses. Although he modestly attributes the success of his schemes to establishing “strong fundamentals”, the notion of “trouble-shooter” was already forming. With Princes Group now functioning slickly, the call came through to head up treasury for the UK and Nordics operations of Michelin Tyres.
With a balance sheet showing significant negative net assets before it had even accounted for its pension scheme deficit, it was looking for a hired gun to give it direction. But what came next was, in his own words, “possibly one of my finest hours”.
As Group Treasurer for construction and engineering group, Jarvis Plc, Slawther joined right in the middle of the company’s £386m debt for equity swap. But of more immediate concern was working capital, the group struggling on a single £38m facility (subject to an interest rate peaking at Libor plus 18%). Following some deft refinancing which saw him originate, negotiate and lead a £67.5m asset-backed financing facility, including a £10m subordinated tranche, and a further £50m equity placing, the group was back on its feet once more and Slawther was on the move.
Described by one industry colleague as a “Special Situations Treasurer”, Slawther was now beginning to realise “what he did for a living”. In January 2008 he took over as Group Treasurer at Speedy Hire. The construction equipment rental firm had grown substantially through acquisition and was looking for someone to give it financial focus. Having established, once again, the need for a solid infrastructure around working capital, funding and liquidity, Slawther recognised that the company only then needed day-to-day operational treasury staff and a working capital controller, “not a one-man hit squad”. He was on his way again, not before a chance meeting with a former colleague had revealed to him the personal and pecuniary advantages of interim treasury management.
As a result, Slawther set off in the direction of logistics firm, TDG. Brought in on interim assignment as Group Treasurer, once again the task at hand was to manage financial risk through a period of restructuring. At that point TDG was under the private-equity ownership of Douglas Bay Capital. Burdale Financial (whom Slawther had first met at Jarvis’ refinancing sessions) had just put in an asset-based lend (ABL) based on receivables from TDG’s property (mostly industrial logistics yards). Coming just two weeks after the collapse of Lehman Brothers, Burdale was concerned that its loan was at risk following the departure of its treasury incumbent and had called in Slawther as ‘preferred candidate’ to pull the company into shape, prior to it subsequently being sold off to French logistics firm, Norbert Dentressangle. Slawther remained in situ through to the completion of the sale.
With considerable turnover but low margin TDG started by shedding a number of unprofitable contracts. But by reducing its turnover it risked reducing its financing. “I was back to using the Accounts Payable function as the real financing source for the group,” he explains. In fact, without support from a “superb” Accounts Payable manager he admits “we would not have succeeded”.
Getting the right people
“I’ve learnt throughout my career that if you get the right people with you, you can do almost anything. Get the wrong people and you can do nothing.” Anyone seeking advice on recruitment would do well to pay less attention to claims of experience, instead “thinking carefully about what personal qualities the role needs”. Describing in detail his own approach, Slawther says his own needs are for individuals who will question processes, display common sense and be able to “ruthlessly prioritise what needs to be done”. These are common attributes at a senior level. However, he feels some professionals overlook the ‘soft skills’ of people management. The problem is that nobody teaches you how to identify what you need in human resources, how to manage staff that aren’t performing – and how to manage those that are – and how to build good relationships with the banks”. It is, he believes, something that only comes with experience.
Despite a “tempting” offer to stay on at Douglas Bay, Slawther’s next assignment, at OCTAL, beckoned. With the firm’s American CEO describing him as a “street-fighter of a treasurer”, he certainly needed to be tough for what was to come.
Middle Eastern business culture often places major shareholders as the de facto owners of a company and therefore it is they who take responsibility to financially support that company even in difficult times. “This is not the concept of limited liability as we know it in the West; insolvency law is not well-defined in the region, even in Oman,” notes Slawther. A general unwillingness to accept failure means businesses will be kept afloat “no matter how economically unviable they are”.
With this in mind, starting a business in the region presents a number of challenges for outsiders. For a start, Slawther comments that the banks do not necessarily lend on assets, given the less developed legal framework for the taking of security in the region, but on the perceived strength of the backers of a business; the backers accepting that if the company gets into trouble they will have to shore it up and thus “seeking a massive return on equity to protect their interest”. Further, businesses are seen to fall into four categories of government owned or backed; large family group owned; owned by a large foreign multinational or listed on a stock exchange. Also, anything associated with petrochem is seen as a “project”, with a finite life and known inputs and outputs, rather than a business with product development and international growth at its heart. Hence areas such as sales, marketing, financial supply chain and market risk are less well understood. The global market exposure of the business, OCTAL sells into over 60 countries across all continents, made the subsequent re-financing of OCTAL a very challenging process. OCTAL’s more western style shareholding structure of multiple investors from different jurisdictions means it does not have the single deep-pocketed owner backing it. The banks thus exercise extreme caution, even if the company does represent about 15% of Oman’s non-oil exports and 2% of its GDP.
With OCTAL subject to “fairly restrictive financing” in an increasingly tough market, constrained working capital had seen it “go through the mill” over the past couple of years. The business became stuck within a catch-22 situation of difficult market conditions affecting profitability across the industry which led lenders to be reluctant to increase working capital facilities, which constrained procurement leading to lower production volumes which affected profitability. Also, all of its existing working capital facilities (around ten in total) were uncommitted bi-lateral arrangements, all were on different terms and conditions and pricing structures. “That’s the kind of thing that gives a treasurer sleepless nights,” Slawther comments.
Fortunately, for managing cash, he has two “incredibly good” team members whom he describes as “very astute, having a vision of what we want to create here”. His recruitment policy has clearly paid off again, and in one case enabled him to bring on board an individual for a role which Slawther describes as “in some ways, less a deputy and more a henchman – who’ll take people into an alley on a dark night and give them a thump; someone who is robust whilst at the same time having the tremendous technical and commercial skills to back that up”. His ‘henchman’ manages to “keep the wheels on the business” freeing him up to do the ongoing re-financing work. With the fundamentals taken care of, OCTAL has managed to re-finance its term loan facility (now at $285m), extend the tenor to ten years and even reduce its net interest rate. The initial re-financing programme has given it the necessary working capital injection to attract further facilities on the back of increased production and sales. The future is looking brighter already.
Know your business
In operational treasury terms, one of the main concerns for OCTAL (and the whole PET industry) is supply-chain management. For Slawther, this is where a broad-based interest in business comes to the fore. OCTAL’s pricing structure is derived from two key raw materials, both of which are oil derivatives and are thus subject to price volatility. To understand treasury’s position he monitors the upstream supply chain capacity, both in terms of utilisation of that capacity and what is being refined (gasoline or petrochemical derivatives).
Any movement at the refinery and further downstream in terms of production will thus be as much an influence on product pricing as would the cost of oil itself. With commodity prices liable to change dramatically during shipping and the industry typically working on a price-on-delivery basis, hedging is a necessary but extremely delicate balancing act. “It all comes back to treasury as a risk management function”.
For the role to be truly effective, Slawther urges all treasurers to learn their business. “If you don’t have all the information you can’t manage the risks.” Absorbing and understanding the facts beyond their own discipline may seem onerous to some finance professionals but for Slawther it presents the best of all worlds. “In fact, one of things I absolutely love about treasury is that you have to be right at the heart of the business and have to know what’s going on all around you. After all, everything eventually comes back to cash!”