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DS Smith CFO on driving an innovative business model

Finance chief Adrian Marsh reveals the key role he is playing in the rapid expansion of the FTSE-100 packaging giant.

When packaging group DS Smith approached Adrian Marsh to become its CFO in 2013, he could immediately see the potential the packaging group could offer.

Marsh’s experience in key finance roles at pharma giant AstraZeneca and grocer Tesco could provide chief executive Miles Roberts with a co-pilot skilled acquainted with building scale to challenging the sector leaders.

“I wanted to be supporting an ambitious and committed CEO, someone that you could not only learn from, but had a plan that I believed in,” says Marsh. He already knew DS Smith as it was a major provider of packaging to Tesco and was known for its innovative approach in the ‘circular economy’ approach to maximising recycling.  It was a company I was interested in, where I could add value,” he says.

When they met Roberts did not hold back on his ambition, wanting to double the size of the company within five years. “This was an industry sector that was fragmented, that was one of the last in the category to put the customer first, it hadn’t invested behind innovation, it hadn’t got behind consumers,” says Marsh.

“In his mind, there was a huge opportunity to build a business of scale, where you could invest in innovation that could win business on a large-scale basis, clearly with FMCG companies on a pan-European basis,” he adds.

The ambition to double the size of the group was delivered in four years, revenues have grown from around £1.9 billion in 2012 to more than £4.8 billion last year. The plan is now to double again, over the next five years- while offering an innovative approach that ensures competitive advantage.

Growing into the role

Following a management degree at Cardiff University, Marsh spent three years as a graduate trainee at aluminium group British Alcan, briefly dipped his toe in investment banking, before ending up as an accountant in treasury at hospitality group Grand Metropolitan.

If there’s a mainstay in his career it’s a close tie to treasury, which has ensured a close eye on the capital position of companies he’s worked for, including Inchcape when it was a conglomerate before being reduced to the car dealership group of today. From a stint in PwC’s treasury and corporate finance function he returned to Inchcape as group treasurer, still in his 20s.

The Asian financial crisis that hit Inchcape hard and the subsequent break-up of the group, proved to be a sobering experience for Marsh, before he started in the same role at glass products group Pilkington, with a mandate to re-engineer the treasury function, refinance the business.

“There was a pretty big change programme going on, so the role was about providing liquidity and financing for that. That was when I started having other roles outside mainstream finance, so from there I also took over group controller and then as divisional finance director for building products,” he adds.

The broad set of responsibilities would be key to career progression. “Few FDs have a broad experience in corporate finance, dealing with debt capital markets, foreign exchange, funding liquidity, risk management,” he says. It was experience he took to recently-merged pharma giant AstraZeneca, to re-engineer treasury and corporate finance- resulting in being made European finance director.

An environment of supporting drug pipelines in a heavily regulated space, while at the same time trying to drive through change was “was where the satisfaction came from,” he says.

All of these experiences came together in a combined role of tax, treasury and corporate finance at Tesco, which under CEO Sir Terry Leahy was being turned into one of the world’s largest grocers.

“There was a huge need to regularise the corporate finance of the business in funding, liquidity, risk management, during a time of fast growth particularly in emerging markets, that came with a lot of risk, so an interesting time,” he reveals.

An ill-fated roll out of Tesco’s Fresh & Easy format in the US he views philosophically. “In hindsight there were a couple of things that could have been done differently, but in the end a lot of it was timing. I don’t think anyone saw the credit crisis coming, just as it was being rolled out,” he says. “I can see why it was a very compelling strategy and I think CEOs should be rewarded for taking a risk,” he insists.

Defining the model

With all that experience, especially in global companies, Marsh could see how he would fit in with the DS Smith growth plan of acquiring businesses to attain critical mass. “We’d then have the scale to serve effectively the most demanding customers such as Nestle, Procter & Gamble, Unilever, Mondelez, Mars on a pan-European level by bringing costs down,” he says.

He says the opportunity became available because packaging was a fragmented market. “Cadbury in the UK might be dealing with four different packaging suppliers, that just does not make sense, as every colour will be different, every quality will be different. If you’re a branded FMCG or food and drinks company, you need to have consistency,” says Marsh.

Another area of building competitive advantage was achieved through forging new forms of relationships with customers. “You’re trying to work with your customer to reduce the amount of paper that is used in the making of a box, because if you can do that you can reduce the cost. We can say we’re working with you to reduce the amount of fibre required, which is not only better from a sustainability perspective, but equally from a value sharing perspective,” he adds.

Ultimately, it speaks to the model of the circular economy, citing the example of its work with Marsh’s former employer. “Every box used in a Tesco store gets back to a distribution centre, we collect from distribution centre and its then returned back to them as a box in 14 days,” he reveals.

His approach reflects the growing push for finance leaders to account for all the environmental and social impacts they and their customers nd suppliers are creating. “We can work with the sustainability and CSR agendas of our customers. Whatever we don’t need in our business, we will sell back to other papermakers who will use it as their raw material,” says Marsh.

Expansionist policy

Despite the group’s dramatic growth, Marsh says DS Smith has scope for further expansion in Europe, as it is can claim around 15% market share on the continent at the moment. “It doesn’t feel like we’re at the limit, although there’s certain markets where our strong market share makes significant growth more difficult,” says Marsh.

“We run a three year corporate plan process every year, and we will set ourselves a number of challenges, we will put future scenarios up, and we will work through what those scenarios mean to the business, what better opportunities could we get through additional scale,” he reveals.

On that basis, a foray into Asia is discounted, but the US has seen acquisitions giving access to a market “which was behind Europe from a retail perspective. Solutions we have in Europe that aren’t available in North America, we felt would give us competitive advantage.

“The US also has different growth opportunities, but has established retailers, branded goods companies, FMCGs, that understand how supply chains operate and where value is, so we felt we can have similar dialogues to those we have in Europe,” he says.

With all the experience of running large scale roll-outs globally, Marsh says: “The most important thing about going into America was having a paper supplier there, otherwise the big guys could have run us out of town. It meant that although North America was a big step, it was a relatively well covered risk,” he adds.


Marsh says his background in corporate finance and treasury has given him a good sense of how to understand risk and reward. “I’m rarely looking back at the past, but  always having to look into the future- thinking will happen in exchange rates? What are the impacts of movements? Therefore what does risk look like?” he says.

To the background of Brexit and raising of trade tariffs, what is his priority? “Liquidity, liquidity, liquidity. We have just signed a new £1.4bn five year revolving credit facility with our banks, because to me the most important thing as CFO is to make sure the company doesn’t run out of money, that you’ve got the liquidity to do what you need to do,” he says.

“People get very fussed about leverage. But what’s really important is liquidity, to be sure you’ve got facilities and financing to make sure that you can operate as a business, that is the most important thing.”

In the meantime, DS Smith has gained regulatory clearance to acquire Spanish rival Europac for Euro1.7bn, making it one of the group’s largest acquisitions. It’s part of an ongoing process to geographically diversify.

“Six years ago we were 85% UK and 15% non-UK, now by luck or good judgement, we’re the polar opposite of that,” says Marsh. “It’s obviously by design, as we were over-exposed to the UK, whereas continental Europe is where our customers are and where the growth is, along with North America,” he says.


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