Gayle Mulvaney joined Britain’s largest coal production, trading and distribution business in 2009, having persuaded the AIM-listed company that it needed a fully fledged treasury function and not just a solitary treasury specialist.
For her, the move represented opportunity – a chance to create a centralised treasury operation from the ground up. For Hargreaves, employing Mulvaney was a no less fortuitous move. The fast-growing business was complex and had just procured its first syndicated facilities.
And although it would continue on its impressive growth trajectory for the next five years, more turbulent times were ahead that would bring with them pressures for existing pricing and financing arrangements.
Mulvaney’s treasury career began in 2003, when she joined Arriva as treasury clerk/analyst. At the time she had little idea what the profession entailed, she says. Working at Arriva gave her wide experience of both the workings of treasury and operating within a large organisation, with upscale systems and infrastructure.
The group knew that coal burn in the UK would reduce and, as a result, had started to increase exposure to specialised coal markets
While at the transport company, she also studied for and gained her AMCT, completing her studies in 2008. At the time she was there, Arriva operated across Europe with a syndicate of 13 banks, cross-border cash pooling and a large transport fleet for asset-backed finance. “I enjoyed the diversity at Arriva, but was looking for the next step up into a treasurer role,” she says.
The role at Hargreaves had been advertised as a treasury accountant reporting to Iain Cockburn, the group’s FD. Mulvaney’s degree was in financial services and she is not an accountant, so she was clear at the interview to set out what she could offer.
“As the interview progressed,” she says, “we got into a detailed discussion on hedging policy, hedge accounting, setting up ISDA agreements and trading lines with the relationship banks, consolidating asset finance, opportunities to improve the bank account structure and reduce pricing, and managing counterparty and credit risk across the group.
“Two and a half hours later, I already felt I was part of the team and was offered the job on the spot.”
Despite that comprehensive discussion and a suitably widened remit, Hargreaves proved to be a shock to the system, Mulvaney admits. The pace and growth were rapid and the ethos entrepreneurial. Hargreaves’ management likes to move on projects and initiatives in weeks, not months, and the business enjoyed growth figures year-on-year of 20-30%.
In spite of its relatively small size, the business has participated in complex international supply chains across the US, Colombia and Russia. When Mulvaney joined, it had the UK’s largest bulk haulage fleet, a £500m coal-trading and distribution business, and an industrial services business 1,200 strong.
The company’s goal was to build on its foundations as a supplier of solid fuels and also provide logistical and industrial support services. Over her first five years at the company, revenues grew from £459.8m in 2010 to £869.2m in 2014, with underlying profits before tax growing from £34.3m to £55.1m over the same period.
The coal business can be unpredictable, however, and projected revenues don’t always materialise, whether due to volatile commodity prices or geological mishap.
Mulvaney saw something of the latter in 2012, when a deep mine at Maltby, South Yorkshire, faltered. Before mining companies come close to the point of exhausting one seam or face, they begin preparations to excavate the next.
At Maltby, Hargreaves discovered pockets of gas and water within the next coal face it was due to mine, so work could not proceed. Eight weeks of investigation soon stretched to 12, with fixed costs continuing all the while. In the end, Hargreaves had to close the site and begin restoration work, with significant provisioning.
Hargreaves’ management team also understood that government policy was moving against coal use, putting diversification firmly on the agenda. “The group knew that coal burn in the UK would reduce and, as a result, had started to increase exposure to specialised coal markets, such as Pulverised Coal Injection [PCI], which is used in the steel markets,” says Mulvaney.
In 2012, she refinanced the group’s facilities, increasing them to £175m from £115m. She also worked to set up a trading arrangement so that the company could provide Redcar Steelworks with coke and PCI from the US. The arrangement made Hargreaves’ shipping more cost-effective in terms of freight and purchase prices.
Importing a bulk cargo, but allowing the steel operator to pay as it consumed, enabled a substantial deal to go through. Had the steelworks defaulted, Hargreaves would have been able to leverage the coal collateral and mitigate risk by supplying other customers.
In the meantime, the company had used its financing facilities to good effect. Stock remained on the balance sheet, strengthening Hargreaves’ position, and the careful management of the collateral business allowed the group to continue to support the site services.
Mulvaney was able to leverage better credit terms, since the proposition was less risky than coke and PCI supplies alone.
By 2013, the broader coal sector was beginning to take a hit; however, Hargreaves acquired the assets of two surface-mining companies, ATH Group, via the purchase of its secured bank debt followed by a restructuring, and Scottish Resources Group, following its liquidation.
“Both transactions were complex,” Mulvaney says, “and treasury played an active part in helping explain and articulate these to the banking group to obtain the necessary consents – and in helping manage the integration of these operations and assets into the banking and treasury system after the transaction.”
Coal production remained under pressure, however, and a doubling of the UK carbon tax in 2015, combined with falls in oil and gas products, contributed to a collapse in demand. Coal’s bankability and the solidity of the sector took an enormous hit when the coal price fell to a level at which no established UK coal business could produce profitably.
The combination of heavier taxes with collapsing prices and demand saw many UK coal producers shut down. Hargreaves saw these pressures coming and its strategy had been to simplify the business, so Mulvaney was already looking at ways to renegotiate facilities and help reposition the business.
“We’d already started talking with our banks, saying we wanted a new borrowing-based structure on our facilities.” Looking to European banking facilities and engaging existing banks on a borrowing base structure of commodity stocks and receivables, she migrated facilities from a £125m revolving credit facility (RCF) plus £50m in invoice discounting to a £70m borrowing base facility and £40m RCF.
The structure was not only a cost saving for the business in terms of both a reduced margin and commitment fee, but it also brought increased flexibility.
“Given our circumstances, we negotiated that the debt-to-EBITDA covenant tied to the RCF would not include the debt under the borrowing base facility, allowing us to hold and finance the level of stocks without having to sell in a distressed situation,” she says.
Mulvaney also reduced the bank group from five to three, giving the remaining banks ancillary business commensurate with the reduced facilities.
“The banks are our most important stakeholders and we engage with them on every aspect of our business model and strategy,” she says. “If I had not briefed the banks on every step of our simplification and strategic change, I think it would have been difficult for them to sign off.”
Hargreaves had seen its turnover drop from £869m in 2014 to £341m in 2016. But the renegotiation of facilities – one of the achievements that helped Mulvaney and her treasury analyst, Andrew Beamson, to a special commendation in 2016’s Deals of the Year Awards – consolidated the group’s position. Hargreaves was able to finance high coal stocks, holding them until the markets began to recover.
“It’s what a good treasury department does. It needs to be in synch with its business operation. They need to talk to one another,” she says.
With the coal operation on sounder foundations, Mulvaney turned her attention to the business’s future strategy. In 2016, Hargreaves acquired construction company CA Blackwell Group in Essex, a move that broadens its UK base and enables it to operate in construction, quarrying and civil engineering projects.
The group has also moved into new territories and now has a presence in Europe, Hong Kong, Malaysia, India and South Africa. Treasury has been at the forefront of funding these moves, and each new territory has drawn Mulvaney into the housekeeping issues of setting up facilities overseas, working with local banks – and not forgetting to comply with KYC requirements – to ensure new initiatives get off the ground securely.
In her time at Hargreaves, Mulvaney has twice refinanced syndicated facilities, and been part of project teams on four acquisitions and one disposal – Imperial Tankers in 2014 sold for £26.9m. During the past year, she has overseen the move of the UK clearing facilities.
She has set up treasury and hedging policies, and introduced fuel hedging to the group. “The new business activities in construction have brought a demand for bonds and guarantees, so I feel during my time with Hargreaves I am always learning new skills or putting theoretical learning from AMCT into practice,” she says.
In 2016, she was also asked to take over payroll as well as treasury. “So our small treasury team expanded from two to three to allow me to delegate more and take on the responsibility of a payroll team of six covering 1,800 employees [international payroll is outsourced].
"I know traditionally treasury teams are small, but I am very proud of what our two-person team has accomplished over the past six years and am excited about what three of us can accomplish in the future,” she says.
With a large and growing social housing portfolio, borne out of its construction business and activities restoring brownfield former mining sites, Hargreaves’ diversification policy looks well established.
Hargreaves recently received planning permission for 1,600 houses at its 392-acre Blindwells site in East Lothian, formerly an open-cast mining site.
The group is looking towards its property and energy divisions to add significant value, she says, and looks unlikely to dim its growth ambitions any time soon.
£341m Group revenue for 2016
£35-50m Projected target value from the group’s property interests over the next five years
1,900 Employees
18,500 Amount of acres of development land and property
£11m International revenue from industrial services
2009-present Group treasurer, Hargreaves Services
2005-2009 Assistant treasurer, Arriva
2003-2005 Clerk/analyst, Arriva
2000-2003 Relief manager, Scottish & Newcastle Retail
Qualifications BA Hons in Financial Services (2000), AMCT (2008)
When you support and add value, people come to you proactively to engage. When they engage, not only does our job become easier, but we can help them make their jobs easier – cooperation and trust are a virtuous circle.
The AMCT gave me the foundation of my treasury knowledge. It is fundamental to my day-to-day job and provided the theoretical platform for my practical knowledge to grow from. There is not one subject that I covered with AMCT that I have not dealt with in my role, and it is rare for a professional qualification to cover so much specific scope of a role.
I would be lost without my iPhone. It allows me to carry on the job while I am off-site and in meetings without impacting the treasury department operations. I must have gone through several laptops and tablets in my time at Hargreaves, but my iPhone has lasted.
There isn’t really a secret to career success, just hard work. I enjoy being the first one in and the last one out. Within our business, treasury is at the forefront of everything, which can mean long days dealing with operations, executives, banks and internal departments. I get my head down and get the work done. When a task is delivered, it speaks for itself as to the work put into it.
My FD is always challenging me on finding ways to support the strategy. There are a lot of conversations around: “We would like to do this; practically, how can we do this? How would funding work? Would the banks support it?” It comes down to understanding the strategy and the direction of the company, and being able to support and drive it forward.
The best way to wind down after a stressful day is to watch a movie or binge on box sets. I love watching films, so most nights when I get in, I watch one. It doesn’t matter if it’s new or one I have seen a hundred times, both can bring me joy. I did an MA in Film Studies and it opened my eyes to all the different genres of film through the years, and I take great pleasure in discovering a new favourite.
Liz Loxton is editor of The Treasurer.
This article was taken from the Jul/Aug 2017 issue of The Treasurer magazine. For more great insights, log in to view the full issue or sign up for eAffiliate membership