How AI & Automation are Revolutionizing Treasury with James Kelly

Foreign.

To this week's Treasury Career Corner podcast or interview treasury professionals about their treasury careers. Each and every week I talk to treasurers about how they built their careers, where they are now, where they see both themselves and the treasury profession going to next and I want to give a shout out to our sponsors flywire if you've ever wondered if there is a way as a Treasury professional to ease your international transaction flows, then these are the people to talk to. There is a link in the show notes to my interview with my good mate Greg Levin, their Senior VP of Sales. Greg explains who Flywire are and how they can help you and your treasury team with any of your cross border payment headaches. The link to the interview is in the show notes so check it out and I also want to share some more exciting news. We have partnered with Euro Finance for their 33rd International Treasury Management Conference in Copenhagen, Denmark. It takes place from October 2nd to 4th, 2024. Looking forward to it. I've gone to the Euro Finance conferences now for the well over the past 20 years. If you're an international treasury professional then it's the place to be. Not only because I'm going to be there, but you'll get to meet as well as hopefully myself, over 2,200 senior treasury professionals from over 60 countries. You'll meet me we can talk about on my upcoming special feature podcast about the current state of the global treasury recruitment market, live and in person from Copenhagen. And I'm looking forward to meeting many treasury folk from clients such as Bose, eBay, Lego, FedEx. It's just going to be amazing. I hope you'll be there. Great opportunity to exchange experiences, meet leading financial and technology providers as well. It's going to be a great show. Now our LinkedIn audience. I've already offered a 10 discount too, so you can get access to that. But you. Yes, you. As a podcast listener, I have an even bigger surprise for you. Yes, included in today's episode and some of our future episodes, there is a secret extra discount code that will save you even more than the 10. Just have to listen out for it and you can save even more. Listen out for the code. Have a pen ready or you can just, I don't know, bookmark it. Listen back to the podcast. Why wouldn't you want to listen to it twice? But anyway, if you listen out for it, you can save even more to find out what it is and save you listen to today's episode and I can't wait to see you in Copenhagen. And as I say each and every week. Let's get on with the show.

In this week's show I'm joined by James Kelly, the SVP treasury and Enterprise Risk Management at FTSE 100 learning company Pearson. During his time at Pearson, James's team have established a reputation as leading innovators, winning awards at the ACT's deal of the Year awards for Pearson's debut social bond issuance, as well as establishing comprehensive in house bank structure employing high levels of automation to drive efficiency. Pearson also uses TIS Cashforce, which is a leading AI enabled Cashforce deal asking solution which James will explain a little.

Bit more about lots of words.

I'm trying to say this all at once but we're going to go back to the beginning of James's career, how he first discovered finance treasury and then bring it up today and then we're going to talk about some of the passions that he shares as well for AI and technology a bit later in the show. James, over to you. Enough of my voice.

Over to you, sir.

Sure. Thank you, Mike. So I started out as a bit of a finance geek. I did economics and French at Unique, went did a couple of stints at investment banks in my summer holidays as internships and then was looking for a job in September 2001, which wasn't a great time to be looking for jobs. I started thinking what else could I do? And applied for a whole range of things, one of which was Auto Sting. So I joined as Rent recently, firm called Morph Stevens, did three years with them, took on some interesting tasks. So I had clients like Caterham Cars, Formula one team, one or two others. And then I moved to KPMG and did sort of 18 months at KPMG as an auditor there where I had clients like Action Aid and Children in need, which was quite fun from the charity sector and a variety of others, say a paper manufacturer, various other people. And I then got a call, would I be interested in joining Kingfisher PLC as a group accountant. They were looking for someone who could speak French and at that point I'd had four years where I hadn't used my French. Left Unique having thought, okay, French is going to be a big part of my life. And so jumped at that opportunity. Thought I just got to the stage where I was like, I'm going into clients for three weeks at a time, getting to know them a little bit and then you move on and you go to the next one. And I quite like to get my teeth into something and really be able to add a bit more long term. Value. So that came at a really good time. Joined and just at the point that I joined, my then boss got an internal promotion, moved to investor relations. And so it was me and the person I was taking oath from had to run the half year from a group perspective. So that was quite fun. Threw him in at the deep end, meant that I got lots of exposure to lots of things. And so the normal kind of rotation cycle of you'll get to do balance sheet and you'll do that for six, eight months and then you'll do a bit of P and L and then you'll do the next thing that got crunched quite significantly. And, you know, within about six months I tried almost everything. And within about a year I was working on the cash flow, which was considered the most technically challenging of the tasks. And through that I was asked to help the treasury team with a few things, particularly transition to ifrs. And I was helping them with some work on derivatives and things, largely because I was seen as this sort of slightly geeky guy who could probably get my head around what was going on and teach people how to do sort of balance sheet reconciliations and that kind of stuff. So I did that and around that point the then treasury accountant decided to move on and I was asked if I'd like to move across. And so, having been thinking I'd quite like to specialize in something, I'd actually been thinking tax probably, I thought, why not? I don't have any particular ties to anything. And I was incredibly lucky. I had two really top treasurers in the team in Linda Hayward and Nick Favier. And actually that team is amazing. You've got Granier who's at Walgreens, Gary Burton who's gone on and done some really great things. So it was a really excellent team. Really thoughtful, competent people, really looked out for each other, but were also really clear about what they could and couldn't do. It was a really great grounding. And I think one of the things that I think two things I took from that, the first was just how incredibly generous Linda was with her time and helping upskill me. And they joke that 6 year old asks 75 questions a day. And I was very much in that camp. It's like treasury is completely new to me. I'm trying to get through year end. I had two brand new green people when I started, both pretty much out of uni at that point. My first instinct was to try and go it alone and then get them to do little bits. And I tried that for about half a week and realized that's never going to work. I've got three people in my team. I'm going to have to make sure that everyone's carrying something, otherwise I'm going to fall over. So that was a really good lesson. And it doesn't matter, you know, who you think you are. The reality is you need to work with others to get things done. And I think Nick was brilliant, just never closing anything down. Everything was. Everything's always possible. It's just you've got to find a way of getting there. And I think the fact that he'd made group treasurer really young was. Was really inspirational for me, actually, because at that point, and to be honest, it's a little bit the same now, if I go to, you go to treasury events, that there aren't too many group treasurers in their early 30s. And so it was one of those things that there was me, 27, thinking right here, it's going to be a long old road to get to that kind of level.

I will say I'll jump in there. And we will put a link in the show notes to previous podcasts I did with Linda. Yeah, so we have Linda on the podcast, Wonderful Lady. She was also mentioned recently by Andy Henley at Tesco. He took over and actually, funny enough, I placed Granya with Linda back in the day. So, yeah, it was a great place to be at Kingfisher. So, yeah, great team and great people. And then what happened next? Or talk us through because you made some moves.

So I moved to. Moved to sky and I moved primarily to get more front office exposure. So the front office team at Kingfisher were pretty well set. It didn't really feel like there was going to be an opportunity to move across and I wanted. I knew that if I wanted to move up than I needed both front and back office experience. So sky was a kind of midpoint in that at the point that I joined Mike Hazell, who was deputy treasurer, Alison Dolan was treasurer. And the model effectively was that Mike did the dealing and myself and Mark Palmer, who's my colleague, the two of us did everything else, including the analysis and the prep, et cetera. So that gave me more exposure to doing the risk management side. Thinking about, in that case, we were working with a shared service center who were doing cash management and things, but just making sure that we were on top of things, et cetera. I stayed at sky for about a year. I think I had amazing experience. I got really heavily involved in a couple of M and A pieces. It's a really intense place to work that year. Honestly, in. In my kind of mental timeline feels like it's about four, because I met so many people, I had so many experiences and some of them funny, meeting Ross Kemp in the toilets, some of them more serious. But actually I've. I look back on that time incredibly fondly and Alison is now on our board of directors, so I. I sometimes see her audit committee meetings and things. So it's funny how things work out, but, yeah, so I. And around that time my. My first child was born, Willow. And it quite quickly became clear two things. One was. So Mike moved on, was replaced by Simon Morley, who's amazing and was incredibly thoughtful and generous with his advice and guidance. But that. But Simon's experience was on the front office side. They decided they were going to bring in a designated treasury manager, Mark and I would become back office. Now, given that the number one reason that I moved to that role was to get front office experience that wasn't.

That blocked it.

So it was time for me and it was. It was a long commute and everything else, so it felt like it was the right time to try and find another role. And I had a couple of offers, but the most interesting was with Rent A Kill in. In Crawley. And I remember like sweating on that decision because I had an offer come in and then I had this Rent A Kill thing, which looked like it was probably going to happen, but I was a bit earlier stage in that process and trying to decide do I go for the known or do I gamble? And I'm incredibly glad that I gambled. I joined as deputy treasurer to Nigel Roberts, who, I think we had a really good working relationship, who's incredibly structured, very good at prioritizing and has a really clear idea of strategy and communication.

And can you explain for our international business, Rentakil, you and I know them, the household names in the uk, but if you're in the us, you might not know them.

So Rentokil and actually, amusingly, Rentokil are quite large in the us, but they go under a variety of different brand names. So Rentakil are effectively pest control and hygiene. So effectively you may see the initial brand sometimes then in washrooms. So if you go into a public restroom, often there are Rentokil hand dryers or soap dispensers, things. Some of that's been sold since I left, but a lot of that's there. But they're very large and in pest control. And so in the US they're. They're Terminex and various other brands. So Western pest control and various other things. Yeah, so I was there five years. It's a pretty decentralized business, very innovative in terms of the way that people work together. There's a real culture of how do we make things better? So it's Sky. At the point that I was there, the Dave Brailsford sky cycling team was just being set up. The marginal gains theory. And you were starting to see some of that same type of philosophy come through at Rentokil, where one team would come up with an idea that would increase efficiency for route planning. For example, ultimately you've got people who are out in vans who go to a site performance service and then move on to the next place. So you want as little time traveling as possible. And actually one of the things that we found was that FaceTime is incredibly important. If you go around and do a great job, but no one knows who you are, you're unlikely to be re repositioned next time the, the RFP comes around or whatever. So actually in order to make sure that you get those renewals, you need to make sure that you've got good relationships with people. But there's a real kind of culture of okay, they've had this idea, I'm going to take that and how do I make it a little bit better? Which was really interesting. And I was lucky enough that my financial modeling skills are quite good. And being the keeper of the rating agency purse strings, I was often asked, can we afford such an M and A deal? And so we built an M and A model. And I built the, the sort of equity M and A model. And that was designed to say if we do 10 deals of 20 million a year, how long does it take before we start seeing meaningful progress on the share price? How long does it take before the cash flows from those M and A deals start to pay for the next year's M and A deals? And how fast does the ramp up happen? So if you want to get to a point where you can do a billion dollar M and A deal, how do you, in say five years time, how do you get there and how fast does the ramp up happen to be? So that was really great experience. I got to work closely with the head of M And A, the CFO, CEO, etc, got really great FaceTime. And again I tried to make sure that I was in the right place at the right time. And so anything that came up I was volunteering for. So I know that, for example, one of the last things I was doing was assessing the management LTIPs and monitoring how was the share price going versus the different targets and how likely were different payout levels? Likely to be so quite good fun. Not massively challenging, but also one of those things that it meant you got FaceTime every day.

I was going to say they want to talk to you, you're a man in demand, which is great.

Exactly, exactly. So it's one of those things. Just trying to make sure that I really got involved in things. And we did some really fun stuff. I think we did three or four financings on the bond side, we did a couple of bank deals, started to put in a new tms. So lots of kind of process changes, lots of financing, et cetera, lots of M and A. So lots of interesting treasury view technical pieces. And I stayed there for about five years and I reached the stage where I felt I, I wanted to work in a slightly different environment somewhere that was a little bit more centralized. And also given the experience I'd had in dcm, I wanted to major on that a little bit. Yeah. And so I moved to Associated British Ports, which at that point was the, the third biggest issuer of US private placements in the UK. So they own, I think it's 21 ports around the UK. It includes Southampton, which is the biggest cruise terminal, Immingham and Hartlep in the northeast. There's effectively four across. Yeah. Port Talbot all over the place. And interesting model, it's infrastructure, pretty highly levered. So six and three quarter times EBITDA and the model basically is you add 15 million of EBITDA every year, that generates another 120 million of debt, capacity or whatever, go out, raise the USPP, pay that to shareholders. Nice, relatively easy model. Unfortunately, I joined just at the point where that EBITDA came under a bit of pressure and that was because new taxes came in on coal imports. Coal imports had been between 20 and 25% of EBITDA. And effectively the first three months that I was there, I hadn't realized, but they were the honeymoon period because what had happened was everyone had got their coal imports in during that period. From an ABP perspective, it was slightly unfortunate because that marked what was really going on. So there'd actually been a colossal drop off in demand, that drop off in demand and then the kind of bringing forward of orders actually, broadly speaking, came to what normal looked like. And so you looked at the trend and it looked like everything was normal. And then suddenly in the April, the new tax came in and the numbers just dropped away almost to nothing. And so suddenly you go back and you speak to customers and you go, what's been going on? And they say, look, we've been stockpiling this for the last three months and you' really. It hadn't been apparent, but then subsequently it became clear that the underlying use of coal had been declining for a little while. And in preparation for this, and so I, rather than being busy on debt issuance, as I thought I was going to be, I was busy on ratings and working capital, so trying to make sure that the rating was shored up. There was a little bit of buffer in the capital structure to make sure that the company didn't lock up. But it was one of these things that it was going to be a bit tighter than we would have wanted. The dividend was cut, but clearly that meant that the shareholders were somewhat anxious. And so I did a bit of work, particularly around receivables, to make sure that we were able to generate some leverage that could then be paid to shareholders. So it was interesting. And I was there just a year. Again, really interesting formative experience. I did quite a lot on the insurance side there as well, so got some really good experience there. And then this role at Pearson came up and it was a. We're pretty heavily decentralized. We want to build a centralized model. We're looking for someone with multinational experience. And, you know. Yeah.

What was Pearson like when you joined as a company? What was the situation there? That was seven and a half years ago.

Yeah. So there is still a little bit of a legacy from. We'd had a previous chief exec, Marjorie Scardino, who had effectively delivered relentless performance, you know, 20% growth year on year for goodness knows how long. And we got to a point where, you know, and so it meant that a lot of the businesses were very highly cash generative, very high margin. And when you're in that situation, sometimes there's only one way to go. And so her successor, John Fallon, had a rather harder job to try and follow that. And he was unfortunate enough to come in at a point where Amazon was really reshaping the world of retail, in particular the world of kind of book selling and student life and everything else. And we had some pretty ambitious growth plans. And unfortunately, we had a number of profits warnings within the first few years that iris were with Pearson, as we tried to continue to meet expectations in a market that was changing quite significantly. And John had a pretty tough job because he had to try and take what had been a largely print business with a variety of businesses. Including Financial Times and the Economist, that were hugely loved within the within the organization. And so when they were sold, understandably, there were a number of people who really felt strongly and let down that these businesses were leaving. And so I think at the point that I joined, there was a lot of optimism and a lot of hope and a lot of.