Exploring a 30-Year Career in Treasury with Tom Milligan

Foreign.

Welcome to this week's Treasury Career Corner podcast where I interview treasury professionals about their treasury careers. Each and every week I talk to them about how they've built their careers, where they are now, where they see both themselves and the treasury profession going to next, let's get on with the show. This week's show, delighted to be joined by Tom Milligan. Tom has an amazing 30 year plus career in treasury with some amazing, well, different companies. So we've got mining, transport, logistics, anything and everything in Treasury. Tom's done it. So that's what we're going to go through. We're actually going to cover right the way from early start within finance and IBM right through to now. Tom, I'm going to shut up, let you take over the show. Sir. How did he first discover finance and then move into Treasury? Over to you.

Sure. And thank you Mike and thank you for inviting me onto your podcast.

Pleasure.

I actually enjoy listening to the series and I'm really pleased to be able to participate today. So thanks again for that pleasure. I think you're doing something that fills a gap for upcoming treasurers but for treasury professionals with lots of experience as well. I personally found that useful and I also enjoyed the humor that you've introduced.

So well I try and keep chucking in the old gag all those listening or sounded a few of my gags he's taken out but you know you can't, you can't have comedy like this. It's comedy gold. We know but anyway, but we'll take us back to the beginning. How did, how did you first ever. You know, I know it's a couple of years ago now but Ron dig into too much with dates. How did he first discover finance? Was that a drive for you or how did it work?

He originally qualified as a chartered accountant in, in Scotland and I really enjoyed that. I trained in Glasgow with a good variety of clients. It was a fairly small accounting firm at the time and the best part for me was the client interaction and me being able to lead the work processes across the spectrum, you know, that included audit, of course, financial statements preparation, tax calculations and advice, even returns to revenue and of course cash flow management. Prior to being in the profession, I had actually worked for IBM for 16 months. That was part of my honours degree in business studies from Glasgow Caledonia. When I looked back and compared both experiences, for me working in industry was more enjoyable and more fulfilling. That was really the beginning of my, what I would like to call my sector hopping journey which ultimately led to a career in Treasury Before I even realized I was there, my first role leaving the profession back in the industry was with an engineering company. I was a divisional finance manager covering the usa, Australia and Abu Dhabi. I'll come to that in a second. The second draw was in biotech. It was very similar in the role I was performing, although I was covering then the uk, Denmark, Sweden and Spain. So both of these roles did require accounting and reporting skills. Obviously that was my background. But critically, they required cash flow forecasting, cash flow management and foreign currency risk management. Toby, I'll be giving my age away.

Here, but with that, Tom. So in a way there were quasi or had elements of treasury before treasury, you know, that's when. And again this was again without marking my age away. It's when I first was starting in treasury recruitment and treasury itself was still. It was certainly adolescent, you know, teenager. Treasury was starting to become a profession. The act was starting to. Was a different kind of form. That's the UK association of Treasurers for our international guys. It was starting to develop and you were getting, as you say in those two roles, international exposure. But it wasn't actually called treasury then or was it starting to.

It was beginning to. I think by the time I got to Stagecoach they were actually looking for a designated treasurer. I left the biotech role to move into Stagecoach. And one of the key factors in obtaining that role was that when I'd been hired, one of my responsibilities was to take effectively 14 European currencies, again giving my age away. This was pre the euro and selling that surplus foreign currency into US dollars to flow back to the US for the purpose of profit repatriation, I guess. But funding the biotech R and D, which was predominantly carried out in the us so my role was to gather up the surplus spot transactions, sell that into dollars and ship it back. What I did was to develop a consolidated cash flow forecasting model and then I arranged hedging lines with close banking counterparties to sell that surplus currency forecast forward. So right away I was involved with counterparty credit risk that was on my radar right away, would those counterparties be there, be able to fulfill the transactions I was signing up. So lo and behold, my treasury career had begun not by design, but by necessity. So it wasn't called treasury, as you say, Mike. It was, though, managing cash efficiently and with trying to create a greater predictability in the outcome of those transactions.

I was gonna say when you were starting in that you were, you know, I sometimes talk to treasurers now, you know, and they're sort of, I Remember one of the guys a few years ago, he used our podcast and was listening to about five or six of them, where people had that checklist of Treasury. Now, you know, going back through, you walk in, it's a startup treasury, you're our first treasury manager. But now they can go on the Internet, they can get these checklists and look at. Right, yeah. Look at cash management, look at risk, look at this and. Or also get professional qualifications, whether that's in the uk, the us, across Europe, there are a wide range of them. You were going into it without that framework, without the strategy. Was it then you were just relying on your accounting finance sort of background to go, right, where's the cash and everything else? Or how did it work for you?

I think I was recognizing the need, trying to perform the role to the best of my abilities and obtain the best outcome and. And I was recognizing the need to. The really very critical need to involve other areas in an organization. You to be working with procurement, production, sales and marketing, et cetera, to better comprehend the cash flow requirements. It was only once I reached Stagecoach and it was. The role was stepping up by back to some extent from finance and from reporting and concentrating solely on treasury, identifying treasury risks, developing treasury strategies and on the back of those two actions, developing procedures to implement those strategies. Now, I didn't wake up one day with that ability. Some of it was learned well.

There was no magic wand and that was it. You were dancing treasurer.

Yeah, if only there was. I did in the early days with Stagecoach, sit some of the ACT AMCT exams. I sat those. That's a qualification I gained and that was useful in helping to understand the building blocks, the blueprint, if you like, on a Treasury policy. So having a supportive CFO who was understanding that it was great fun and a great challenge to come into Stagecoach and be asked to develop a Treasury policy. But you really needed those two twin pronged approach, I guess. One is understanding the business fully within that, explaining to the business what treasury can add. And then the other side of that is developing treasury skills, treasury education, to be able to address those. Those needs.

Can you just outline again, I know Stagecoach, we've known it for many years, bus and rail and everything else. What, what. What were the dynamic? Who were Stagecoach? And then we're going to. Because then we're going to step onto John Menzies. But you. Can you explain because you've got these diverse, different industries.

Sagecoach was. Was just a tremendous experience. I had six years there when I joined a FTSE 100 company, a very dynamic CFO and CEO with Brian Sutter and CFO at the time was Keith Cochrane, replaced ultimately by Martin Griffiths. Actually in my time they were performing state of the art transactions. We were issuing bonds which were essentially securitized and backed by a chain government guarantees connected to the Porter Brook train leasing Company revenue stream. I was issuing fixed rate bonds and swapping that into floating rates, issuing in different currencies, swapping that back into our functional currency. It was really looking again looking at it from two perspectives. One was what is the let's take the ACT blueprint approach suggest and then on the ground what is it that the different operations believe would be adding value and protecting the investor position as well? So I was learning, the board was learning. It was at a time when the company was growing at such a rapid pace. To put it into context, this was mid to late 1990s and we actually issued a $2.25 billion 32 bank syndicated facility. I hadn't managed anything like that before. I'd been involved in some amount of company funding, corporate funding, but nothing of that level. And then all of a sudden we had the credit ratings agencies requirements, the stock exchange reporting requirements and from there issuing dollar bonds, euro bonds, scrip issues on the equity to pay down that syndicated facility. So really one of my most important tasks was to keep a pace with the company development and keep the Treasury. I was developing with the treasury policies best able to support the company at that time.

And so you were, you know, so that was, as we say, top 100 company in the UK for bus and rail financing. And then you made a move, talk us through that next move to retail and high street. So again, yeah, interesting.

John Menzies was, was massively different as a corporate structure from Stagecoach. However, the role itself was, was quite similar. The problem I had with Stagecoach was I had taken it as far as my role as far as it could possibly go. Treasury policies and procedures were in place. The boards were satisfied with those. I'd even implemented their first commodity hedging program which generated substantial cash even in year one. I know that's not really the measure, but that protective measure that I identified and got board approval for was highly valuable to the company even for the next five years after I left Menzies, you know, it's a well known company, they're very much involved nowadays in aviation ground handling which also happened then whilst I was there, although at a smaller size. And then it was a logistics part of moving newspapers and magazines around the uk. It, if you bought a newspaper or magazine in Scotland. It's more than likely the case that John Menzies put it there. They closed their shops by that time. So it was the logistics side and it was the aviation ground handling. And what they recognized was that their future plans for growth would require additional liquidity, would require a strong balance sheet and appropriate hedging strategies in place. And they were looking for somebody who had gone through a similar process in identifying risks, designing strategies and then writing the policies and procedures to implement those. So I had just spent six years doing that for Stagecoach. It was a great fit. I did exactly that for the next six years with John Menzies.

And as all things you thought, right, so I've done a high street, I've done rail, a natural next move. Well, you've done, literally you're taking off. So talk us through.

After six years, one has to say that John Meanss were in a good place. They did have a strong balance sheet. I put in place multiple bank lending facilities, mostly bilateral. And I learned something really effective in John Menzies which was the importance of relationships with banks. Our head office was, as you say, Mike on the head office, Princes street in Edinburgh, central Edinburgh, surrounded by banks. So it was a super opportunity to begin building relationships, understanding how the banks worked, what was important to them and what of the key things I learned then was it does no harm to tell a banking counterparty what it is I'm trying to achieve. You know, I was learning as well and oftentimes they would have a very good suggestion on how to achieve that. Not, not always because I knew the business better, but they knew the product better and the banking sector better and they were able to, you know, we worked well together, I guess, but it was done by the time I left. There was nothing else to accomplish and I was looking for growth and to broaden my abilities, my field, if you like, beyond just Treasury. I'd already gone beyond finance and my first role in aviation. I spent 12 years in aviation. My first role was with BMI. I was very fortunate to achieve that role. One of the aspects of the job was that I was personally responsible for their aircraft maintenance team, which I'm sure you agree is highly linked to lots of treasury things. So that was difficult. That was a steeper learning curve than I had imagined. But the key benefit from it was I was responsible for negotiating aircraft financing and aircraft lease agreements. And in particular with the aircraft lease agreements, they have very costly, potentially costly aircraft take on and return conditions. Just one number to put it into perspective. An aircraft engine can have, if it's used up all of its flying time, so that's referred to as zero hours. If it's just left the repair shop, then it's full life. So it's ready to start using up its flying hours to take an aircraft engine from zero hours to full life. That could cost around $15 million for a maintenance event. And I was trying to understand that technical aspect of the lease agreements. Now the commercial aspects were fine, but as far as the detail engineering aspects were concerned, I needed to learn and work with my team who were doing that a day to day perspective. So that was really, really exciting. I guess you might say this is unfortunate or fortunate depending on one's perspective, but was 2008, that's when I joined aviation. And someone once told me the best way to walk away from aviation with a million dollars is to invest $11 million. At the beginning, it was a difficult time. There were commodity hedge portfolios in place. There was a large FX hedging book. Cash management was critical to get that right. For a company that was burning through a lot of cash operating in parts of the globe which they just couldn't fly anymore. It was at the same time as the. I forget the volcano's name erupted. So they're all. And aircraft were actually grounded. So there were all sorts of reasons why I suddenly found myself also micro, micro managing the accounts payable payment runs because I needed to ensure that we had appropriate liquidity, you know, this week, next week, next month, etc. I had a really good team. There was one person in particular there, I. We actually designed a whole new cash flow forecasting model to incorporate such things as when people, when you or I, anyone listening buys an airline ticket, you can generally buy those up to 12 months ahead. So we were forecasting cash flow up to 12 months ahead and trying to understand from history and from our marketing team when we could anticipate that the revenue would. The cash would come in for the revenue for the flight which had been forecast in the latest budget. So we developed something quite technical which seemed to work accurately enough to give us the ability to approve payment runs for accounts payable, to be paying pre delivery payments for aircraft, et cetera. It was a great, it was great fun but quite a stressful time as well, I guess.

And then if that wasn't stressful enough, you thought bit more aviation please, but a wider role, bigger role. What came next?

It's always been for me, growth. Where can I grow next if I can't grow in treasury or in financing, which I will always try and do. Is there somewhere else? And Aer Lingus based in Dublin, came up with this role, which was actually managing insurance and tax and treasury also. Now, I would say, I do say this, I've enjoyed all of my roles to date in the variety of sectors that you mentioned, but I always say my six years at Aer Lingus in Dublin were the most enjoyable and fulfilling. Ireland, as you know, has two very successful airlines. It also has the world's largest aircraft leasing sector. It's just a. It was just a great place to be. I loved my roles there to put aircraft leasing into perspective, which I've done quite a bit of now. Taking you right, right back here. So 1975, Guinness Pete Aviation Aircraft Leasing was formed by a gentleman called Tony Ryan of Ryanair fame, one of the first aircraft leasing companies. And it grew tremendously. Well, to a point where it was in spawning out professionals which who are still, some of whom are still working in that field today. Now here's some more numbers. Try not to give too many numbers. So as of Today, there's approximately 27,000 commercial aircraft flying in the sky. Just under 50% of those aircraft are actually leased and 40% of that 50% are leased out of Ireland. That's how important that business sector is. We're talking, I don't know, leased aircraft flying today, market value probably well over US$300 billion. Now there's multiple lessors working in Ireland today. But what that's resulted in is for me, in my role as treasurer for a Lingus, I had a business infrastructure with a historical expertise second to none. There were tax professionals, aircraft experts, and the country has a justifiable pride in its aviation sector and it does support it with tax advantages as well, I guess. But that, that's all fine. So I was hired for the role. An excellent cfo. He had a tremendous reputation. He inspired people to reach beyond their comfort zone. And that's something I've always wanted to have in my treasury career. So that was great for me. And I was continuing to try to connect with all parts of business. Some context in that would be. It manifested itself when I was part of a small team, team, team of two charged to create from scratch an aircraft leasing company. So that, that involved all of my skills, finance, treasury tax, operational learnings that I'd made over time. And we went out first of all, of course, we obtained board approval for our plans. We arranged aircraft purchase and delivery, aircraft financing. That aircraft financing did and usually would have security over the aircraft and the lease rentals and then released those aircraft. We leased them out. And then the final part, which I had some experience of then, was managing the aircraft maintenance events, trying not to lose the company's shirt from costly events that needed to be funded appropriately. That was the big reason for going. And it worked out very well that I did grow my knowledge base and my skill base beyond treasury, which allowed me to better perform my treasury role.

I've seen this with a few other treasurers, but certainly when you get to that level of expertise that you're adding value because of the. I call it, you know, I've told it sometimes treasury plus. So you do, you know, you get to your role as treasurer and then it's treasury plus. You've got these skills, plus this, plus this, and you've got these understanding these. And it becomes less of an inward role, which I think treasury buys very nature. Again, turn of the century, you and I, when we was sometimes a bit more inward, then it becomes much more outward and, you know, the linkages across the company now, certainly with you, you then, you know, stepped up another gear. You know, you'd had a. The team at Aer Lingus, you made an international move. But again, it was a sort of a step up in terms of, you know, definitely treasury plus plus plus. Can you talk us through that?

I've always taken the approach to perform treasury better. I have to understand the operations better. Lingus actually involved that. And again, I'm fairly repetitive, Mike, in my career approach, explain to people what it is I'm trying to do and how I think I can best achieve that. And it's perhaps in some way trying to sell my idea to them. But I was always. I've always been open to a different perspective, another approach which should be considered because, you know, that's why we have different areas, so we can have different experts in each of those to provide help, support in achieving the best outcome. Yes, it was treasury plus, but that makes the core treasury part performed that much better.

Yeah, but you've got to have that as it's sort of in your back pocket per se and stuff. So talk us about then the move to, you know, internationally, you know, what. What drew you to that and what happened next?

Yep. Without the takeover of a Linguser, they were now entering into the Ieg group. They are. Everything was in place. And to add some perspective, both BMI and Aer Lingus flew, at that time, 65 aircraft. Qatar Airways made the approach and they were flying 250 aircraft with the respective financing needs and balance sheet control requirements. And then they were adding on to that. Here we go again, Mike. An additional growth opportunity to manage their fuel procurement program. At that time, they were spending just over US$5 billion on fuel per annum and I was responsible for managing that. And a team of 50.

Just relax, put your feet up, it's great fun.

I never knew how interesting the annual RFP for fuel procurement could be. It's a challenge, there's value to be lost or won there. Again, they're really good team. It's a really well run company and it was a good learning curve for me and that was my largest team with 50 people overall, you know, improving my, always improving, improving my, my management skills, my networking within Qatar Airways, locally. Also, you know, meeting with the Ministry of Finance, I actually had the good fortune to join the aviation body, Treasury Committee as well, which was, which was great fun. Iata, sorry, I couldn't remember the acronym. The ata Treasury Committee. And then, you know, interacting with other treasurers from other airlines who, lo and behold, are experiencing very similar issues to what I was experiencing. And within the realms of allowability, sharing our solutions and trying to get your best practice spread throughout the industry. That was a great one.

And you did that. And what was it like? I talked before about treasury can take you around the world. You know, you'd, you'd made the moves from the uk, then you'd, you know, headed out to Ireland and then this was a move to Qatar. What was it like for you, embodying that Treasury? Because I know that you loved it as well, didn't you?

Yeah, we had, we had a great time. It's very different. I found working in treasury in the UK was quite different from working in treasury in Ireland, was quite different from working in treasury in the Middle East. So one has to take time and understand local cultures and be polite towards that and work within whichever boundaries are being set. Ways of raising finance in the Middle east can be quite different from raising finance in, in the UK or us. And that's fine. It's no better or worse, it's just different. I'd highly recommend to anyone, if they have the opportunity, treasury is a very transportable skill. If people are prepared to grow their knowledge base, be open to understanding different industries, then they should definitely take that and take it to travel with as well.

And then you returned to the uk. Talk us through the next move.

So three and a half years with Cantar Airways, the peak of COVID family reasons. It just wasn't Tenable to stay away so far any longer. So I resigned there and returned. I was again fortunate. I joined First Quantum Minerals, the sixth largest copper mining company on the planet. Some smaller mines which they're running down, but three main mines, two in Zambia and one in Panama the most, the youngest is Panama and that costs somewhere between 6 billion and 7 billion US dollars. It took several years to complete and has been running fully since September 2019. I think it is. There was a Covid interruption but other than that it's one of the best run, if not the best run copper mines on the planet. So what did I know about copper mining or any kind of mining before joining First Quantum? That's correct. Your assumption is quite correct. Nothing. I'm never slow to admit that when I joined aviation after one week, when with bmi, I went on a week long aviation finance course. When I joined First Quantum I went and took an online mining course which I passed well, and then started speaking with people. Everything we need as treasurers is out there. It's just taking the time to work out how best to achieve it. Some of that taking an online mining course, you have to put in the hours yourself. It's hard, it's cold, it's dark, it needs to be done. The other part of that is getting out, visiting the mine sites. I've been very fortunate to be in Panama multiple times, Zambia multiple times, touring the mines, talking to people locally, trying to understand better their processes, where their hotspots are. Always with our mind to how can I make this run better? What could we be doing here? Do we need to change the banking service provider? Do we need to manage this liquidity more strictly or what cash requirement is around the corner that I can be planning for, my team can be planning for to enable this mine to run to its best without any interruptions.

And then, you know, look into the future and you know, some of the things that coming along in the way of treasury, if you like. And we were just talking before the show that there's the UK conference, I'm heading off to Chicago for Windy City. You know, we'll, we'll see each other at various conferences. What are the things you're keeping an eye on? You're looking over your shoulder, you're not nervous, you're a treasurer, you're very, very experienced treasurer. But the things that you're thinking about in treasury terms or world terms, you know, sometimes it's about staffing, sometimes about cyber, sometimes it's about different, any multitude of things. What are the things that are on your mind if you like. We're not. Well not at the end of the show but not far off. But you know, what is each of you thinking?

I guess there's a couple for me. Yes. I come on to ESG in a moment but before then the last few years I believe has seen a shift in then treasurers and CFOs concern on where liquidity comfort is coming from. In the past we could rely on cash in the bank of course so long as you're ensuring appropriateness of the counterparty credit risk and things like revolving credit facility. Now I think if you were to look across all industry sectors and ask what did they do when Covid hit hard in 2019 if they had an RCF, they probably drew that RCF down fully and put the money in the bank. Better to have it to hand. But is that exchanging one concern for another? The concern of would the RCF funds be available for or would it be prepared to be made available for is that cash going to be secure with the counterparties it's been placed with? So I think there's a definite shift there in how corporates will be providing their liquidity over the over the coming years. I'm not saying I have the answer to it. I just think depending on circumstance there might be a different approach taken. I also, you know, with First Quantum I keep using the word treasury can be a great career and it has been and is being for me. In my three years with First Quantum, you know we had two years of consecutive credit ratings upgrades. I managed to successfully work with a team there to issue a $1.5 billion fixed rate bond. I also arranged a $2.9 billion 15 bank syndicated loan facility plus some other loan financings looking on that. I think it's just being ready and being open for new experiences. Just because it was different doesn't mean that I couldn't go in and be successful. I was fortunate to get to quite a few fixed income investor conferences for First Quantum representing the company. Even amongst this year I attended an equity conference with our CEO and the IR team representing the company there. And this is a good segue I guess into ESG over the last couple of years that's been a very. It moves from not really being discussed to a hot topic to yes, now it's discussed. But investors are becoming more sophisticated than their understanding of what corporates can do. We're talking about First Quantum at the moment. Copper is a critical mineral. We can't have a greener environment without companies like First Quantum producing copper. It's just necessary. A battery operated car uses three to four times as much copper as a combustion engine car. For instance wind power needs a lot more copper. So what corporates will be doing is to the best of their abilities reducing their carbon footprint. But I think there's limits. I think we're learning there are limits to what can be achieved on the S and the G side. First Quantum again we're very forward looking. CFO who hired me put in place an ESG manager does a tremendous role and it's having the time and resource to understand the corporate footprint for environmental, social and governance and then be explaining to investors and to banks what the company is doing about that. It's a great area, it's going to grow and quite certain of it. Will we ever get to the point where investors will only invest in zero or net zero carbon emitting companies? I don't believe personally that's possible but certainly not the technology isn't there to provide that today. But it is important corporates recognize that. And guess what? That also impacts Treasury. The treasury will need to understand it as best they can.

And so as we wrap up the show as we do each and every week, we'll put your LinkedIn details in the show notes so people can expand your LinkedIn network if you like. What takeaways are going to give to the audience listening today? What sort of what are things they should be thinking about if you're earliest stages of your career maybe mid or late or what are the takeaways that you would give someone you've heard the show a few times you said had this closing piece. What are you going to give for.

Me I might be being repetitive but it's critical for anyone working in treasury just entering as a newbie or having been here for two or three decades not to see treasury as a standalone discipline. It cannot be successful if it doesn't fully integrate with the other parts of any organization. Always consider business need first and then try to understand how treasury could add value. It's a process with that understanding of added value potential socializing a proposal to the impacted areas for their input. It's not going to happen until the positions are aligned and agreed upon. And then education. I think education is important but that doesn't need to be of Justin Treasury. I think I've demonstrated, you know I've taken education in my name in aviation financing. It all helps. It all helps perform one's role that much better.

Thank you sir. So yeah, not standalone adding value and we've got other bits there as well about education. So, yeah, just. You'll get loads of value. You guys listening today? Thank you very much, sir. And we'll put your LinkedIn details in the show notes and as I say, look forward to catching up with you in real life, not just virtually over audio, over everything else very soon. Thanks very much.

Thank you very much, Mike. Great talking to you, Thanks.