Aggreko CFO on generating value in power equipment market

When Heath Drewett joined Aggreko, the company best known for its mobile generators, in January 2018, he was under no illusion that there was a major challenge ahead to turn around the business.

Arriving from WS Atkins, Drewett knew Aggreko well, as the engineering firm’s CEO Uwe Krüger was on the FTSE-250 group’s board. “Aggreko had a great reputation in the market as a business that had grown very fast and had been very successful,” says Drewett.

Major events requiring significant power generation are big revenue providers for Aggreko. The upcoming 2020 Olympics in Japan will be not only be commercially valuable, it will also showcase the brand to a global market.

But Drewett acknowledges the group’s share price- which had reached 2,503p in September 2012 and spiked again to 1,708p in February 2015, had halved by the time he arrived in January 2018- a level it is still at. “The business was going through a massive change due to a whole series of external circumstances.

“The market was changing, oil and gas prices had fallen, which had driven the business down, competition had come into the space Aggreko had occupied pretty much uncompeted for a number of years and that had totally changed the financial performance of the business,” he says.

Drewett and Chris Weston, who had become CEO three years earlier, are now driving forward a strategy that reflects a fast-changing environment, including a transition from diesel engines to greener hybrid solutions.

A critical aspect of the strategy for delivering greater performance required a key role for finance in ensuring greater capital discipline, a focus on cash, and reducing working capital, and “working more as one business rather than a federation of businesses,” says Drewett.

“We were a small business of global scale, we now need to be a global business of global scale, and the whole agenda of capital efficiency, of being cost focused, cash-focused, driving collaboration, were all things I had been helping put in place in my Atkins time, so I was excited by what there was to do here,” he adds.

Career path

Drewett began his career at Big Six accountancy firm Price Waterhouse after undertaking a degree in maths at Cambridge University (he was the first generation to go to university in his family) where he rowed competitively, training six day a week and becoming captain of his college boat club.

The sport not only imbued in him a strong work ethic but also team spirit that’s so important to corporate culture. “You can’t get away with just having a Ronaldo in your team as you might on a football pitch,” he advises.

Starting his work life in practice at Price Waterhouse’s office in Windsor, to the west of London, Drewett stayed a year after qualifying, but then moved into the business world. He says it was  “to engage in a more current and forward-looking conversation in my day to day role, rather than taking people back into things that happened 9-12 months ago in the world of audit”.

Drewett joined engineering group Morgan Crucible, now Morgan Advanced Materials, to work in corporate finance, despite “knowing nothing about M&A”, he admits. “It was exactly the reason he was hired”, he says, because the firm wanted someone with a broad understanding of how finances work rather than an M&A expert.

After four years he went to airline British Airways (BA), now part of International Airlines Group (IAG) in 1996, five years before the 9/11 terrorist attacks in New York threatened the future of BA and other airlines. He started at the airline in a corporate finance and strategy role before joining the finance function in 2001, just before 9/11, ultimately becoming financial controller.

The time at BA was a period in which the airline came under competitive pressure from low cost carriers, but was also challenged by lots of things “you can’t control” such as foot and mouth, SARs, volcanic ash, and “difficulties of bringing about change in a heavily-unionised workforce,” an issue that continues to this day.

As the head of business performance, as the financial controller position was called, Drewett says he learned the importance of cash. “Cash is king became the mantra after 9/11. The business could have gone bust if it hadn’t kept an eye on its cash position,” he says.

“The events of 9/11 pushed finance to the fore,” says Drewett. “That was the first time I really saw the CEO and CFO in partnership modelled really well, and I look back even now and people ask what does good look like, where have you seen it? That CEO-CFO relationship at the time of 9/11 still sticks with me,” he adds.

Spending time around the BA CFO’s table gave Drewett the confidence to take on his first finance leader role at WS Atkins, a global multi-disciplinary consultancy spanning civil engineering, design and project management. As CFO he played a key role in capturing as much value as possible from a dispersed business strructure, through deploying influencing skills.

But it also required a step up to run the finance function. “For the first time as CFO I was ultimately responsible for making sure we published results accurately and properly on the dates we were supposed to, so the buck stopped with me,” says Drewett.

His eight years as CFO was followed by a brief period as president to the business after it was sold to Canadian construction group SNC-Lavalin, a transition made easier as his position had evolved over time from a pure CFO role into a broader COO type relationship with the MDs in the various businesses.

“I would say I’m not a natural CEO, I’m a CFO with a personality, but that doesn’t make you a CEO. On first engagement people think you could be a CEO. No, that just means I can engage with you as a finance person.  I’m probably less of an ideas creator and generator, and I think there is an element about a CEO that needs to be a visionary, however you want to describe it, forward thinking, innovative, throwing ideas out, to be challenged and shaped by the business.

“The role of the CFO is more an objective critique of those ideas, sifting through them, working through those that are likely to be grounded in reality versus those that are pipe dreams, getting the right prioritisation of those ideas, making sure we do those ideas in the right order, step by step, working our way to our desired destination,” says Drewett.

Top finance role

With much of the strategic decision-making and external engagement being done in Montreal after the takeover, Drewett sought a CFO role that brought him back into the decision-making heart of an organisation. At Aggreko there was also a chance to make a difference in the area of IR, given that he says, “the story of necessary change hadn’t been as clearly communicated to the market as it could have been,” he informs.

Although he says predecessors Angus Cockburn and Carole Cran had built up a very strong finance team across the group,  “the things I was keen to embed within the team were the importance of cashflow and that the balance sheet is as important as the P&L. That wasn’t just a message for the finance team to recognise, but the business generally,”says Drewett.

“We had been very P&L and very sales-focused and less worried about the balance sheet and the efficiency with which we ran the business, which is key to sustainable growth. So, we needed to educate the finance team to help the business to understand that,” he explains.

Drewett undertook to better educate and communicate about the importance of return on capital. “I have done a number of talking head videos, to get back to the basics of what is this business about, what is return on capital, why is cash so important, to educate the business.”

He talks of a cultural shift to deliver improved performance “It’s about focusing on a few key metrics which we use to measure our performance, looking at utilisation of our equipment, the days it takes us to get invoices out to our customers, and how quickly we’re collecting cash,” he says.

Ultimately, the challenge across the group is improving the bottom line while driving growth across many locally run businesses, by getting MDs across regions to collaborate more effectively. To do so he drew on his experience at Atkins, which also operated a collection of regional businesses.

“You can’t grow a business rapidly with command and control at the centre, rapid growth is better supported by a more devolved culture, and that is what needed to change as the business was no longer growing – it was now time to work more collaboratively and leverage better the scale of the group.”

His focus on improving the workings of the global finance team is more limited and he concludes that this approach probably reflects his relatively late arrival into finance. “I never gained the right experience in my early years to know how best to drive change in these areas, having come across into the finance function at a more senior level later in my career.

“My strongest suit is all around driving business performance, influencing, less about necessarily the operational mechanics of the finance department, maybe it’s a shortcoming in my skillset but that’s just not the kind of CFO that I am,” he admits.

Drewett’s role inevitably requires him to interact with the various business heads around the world, who he will travel to see. But he insists he is not he is not on the top list of travellers in the company. “For somebody who is trying to drive cost efficiency, you won’t be surprised to hear I publish every month a top 100 travellers list. But you won’t often see me on it,” he insists.

As someone who dislikes meetings, Drewett says he prefers to have an open diary, to walk the floor, talk to people, and be able to respond when calls come in from the business. When travelling, he says he likes to “find ways to have dinner with team members, meet customers, look at operations, attend local management meetings, meet the finance folk, walk the floor.”

“I try and pre-empt issues. When I’ve got time, I try to think about what could happen. I ask myself: Am I ready for if this happens, what would we do? So, I start to think about what the future might hold and are we preparing ourselves for it.”

“As a CFO you start to realise you have start thinking further forward, you can’t drive a car looking in the rear view mirror, a finance team will tend to look backwards because of its reporting responsibilities, but that only tells you so much,” says Drewett.

“The market hates surprises, and as the CFO your role is to not surprise the market. The only way to do that is to think ahead and prepare both yourself and the market for what’s coming,” he adds.

 

 

 

 

 

 

 

 

 

 

 

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